Health provision gives insurers a bonus

A stethoscope wrapped around a roll of $20 bills represents the costs of health care.


Kai Ryssdal: As of today there are just seven shopping days 'til Christmas. Also, just seven days left for the Senate to meet its self-imposed deadline of having a health-care deal by then.

Now that a public option in any form is off the table, the insurance industry is set to get about 30 million brand new paying customers without having to worry about price competition from the government. Marketplace's Gregory Warner reports there is another part of the bill that's going to work out well for insurers.

GREGORY WARNER: The provision would allow insurance companies to sell policies across state lines without having to tailor them to the regulations of individual states. Instead, they could follow the rules in the state where the insurer is based.

Deborah Chollet is a senior fellow with Mathematica Policy Research in Princeton, N.J.

DEBORAH CHOLLET: If a state requires that health-insurance plans cover fertility treatments or cover mental health to a minimum level, a small carrier coming in from another state might strip those benefits out because those benefits are not required.

Chollet says that would set off a price war among insurers who could compete for customers by offering cheaper plans with fewer benefits.

John Arensmeyer is CEO of the Small Business Majority in Washington. He says more choice is a good thing.

JOHN ARENSMEYER: Right now the only choice in small states are insurance companies who are regulated in that state to sell insurance. There's no opportunity to get any economies of scale.

Robert Zirkelbach is a lobbyist for the insurance industry.

ROBERT Zirkelbach: Every state imposes different regulations, requirements and benefit mandates that vary across the country. And so for health plans to be able to provide coverage in all of these states adds complexity, and it adds costs for patients.

But opponents say the provision reduces state protections for consumers, and puts more of the burden on people to know what they're buying.

In Los Angeles, I'm Gregory Warner for Marketplace.

About the author

Gregory Warner is a senior reporter covering the economics and business of healthcare for the entire Marketplace portfolio.
Log in to post5 Comments

A major cost factor in US health care is the enormous amount of money wasted on administrative overhead. Most of that is caused by the arbitrary actions of insurance companies. The interstate 'competition' of insurance companies without effective regulation will aggravate that problem and make it easier for unscrupulous operators to continue cheating consumers.

This is utterly ridiculous. State regulation of varying degrees of rigor are just about the only tools keeping insurers (moderately) in line. We can forget about consumer protection that's worth anything if this bill, with this provision, gets passed. Insurers will pull a Delaware or South Dakota (where weak credit card laws are in place) in a heartbeat and start denying more coverage and making more money. Unacceptable and unfair.

This is probably the only sensible provision in the bill. Allowing consumers to purchase insurance across state lines is one of two things that could reduce costs without rationing; the other, malpractice reform, is politically impossible for the lawyer-funded, and for that matter lawyer-heavy, Democrats. But even if this bill included malpractice reform, with an individual mandate there's absolutely no way this can possibly end in a net cost reduction without rationing. And the American people cannot afford this kind of an increase in costs, and neither can the government.

One has only to look at the Credit Card industry to understand how the companies will leverage the right to operate across state lines in their own favor... so... Why can't the mandate be that the insurance companies can compete against state lines.... PROVIDED.... that insurance company meets the requirements of the target state....?? Just a thought...

If you think it's hard for doctors to keep track of insurance carriers and coverage now, wait till they meet the new roster of companies that will be allowed to do business in their state.
You think it's hard to get a doctor to accept your insurance for an office visit or a particular procedure, wait till you have insurance from another state your doctor doesn't know a thing about.
This may be the poison pill in the health-care bill that will finally break the will of complacent defenders of the present archaic system. The only way this provision can be helpful is if it is tied to eliminating insurance companies' anti-trust exemption. Otherwise the staggering administrative costs will become monumental.

With Generous Support From...