Skip to content

December 8, 2013

Republican Health Care Reform

One of the more important features of Republican proposals for health care reform is providing access to health insurance across state lines. Why? They observe health care insurance costs vary across states. They conclude that if people could buy insurance across state lines then people would buy from low cost states.

Why is it that insurance costs vary across states? There are a couple of answers to this question. First, health care costs vary across states. This is primarily because the legal environment varies across states. This is because the state of tort reform varies across states. So malpractice insurance costs vary across states and defensive medicine varies across states. Second, every state has its own insurance regulations. Well, Obamacare steps on the toes of state insurance commissioners, so it is not impossible for Republicans to do it too.

The big question is how to price insurance sold across states given that states have different legal and regulatory systems. The answer to this big question is that you can’t have 70-30 or 80-20 type plans. That is, you cannot have plans that specify cost sharing or deductibles in terms of percentages. Instead, you can have lists of procedures and the absolute amount the insurance company will pay.

While buying and selling insurance across state lines is a part of my health care reform proposal, my purpose is to create natural groups and not primarily to play off of interstate cost differentials. I would hope that the Republicans could come up with something somewhat more comprehensive, like my proposal.

Read more from Uncategorized

Comments are closed.