Yet one of the “small ideas” that Republicans will offer at today’s “summit” really would vastly expand Americans’ choice — and let about 11 million people go on the insurance rolls at no cost to the taxpayers.
First, the Obama idea: It’s actually puny compared to the federal employees’ plan, because the “exchange” that would offer the new policies would plainly be constrained by the price controls (on premiums that insurers can charge, and on reimbursments to providers) with which Democrats have festooned all of their “reform” proposals.
But the Federal Employees Health Benefits Program is quite instructive. All civilian federal workers can select from a wide array of private plans — Kaiser, Aetna, Cigna, United and others. Yet 60 percent of them choose a standard option from Blue Cross Blue Shield (“the Blues”) — a fact that disproves Democrats’ loud complaints about some companies’ high market share.
Consider: Forty “Blues” “control” more than half this market — yet federal employees plainly don’t lack sufficient choices. If the Blues’ high market share meant “the price of insurance goes up and quality goes down,” as the president suggested to Congress last September, then federal employees would have switched to other plans.
The president especially complained about the high market share of Alabama’s nonprofit Blue Cross Blue Shield plan, which has about 75 percent of the state’s group market. He imagined that high market share demonstrated a shortage of insurance alternatives — when Alabama in fact has 39 licensed health insurers.
Has a high market share made it easier for that insurer to “treat their customers badly,” as Obama suggested? On the contrary, ConsumerReportsHealth.org ranks the Alabama BCBS as one of the two best PPOs (preferred provider organizations) of 41 it examined nationwide, tied with a for-profit Anthem BCBS in Connecticut.
You might want to follow Consumer Reports’ advice and buy a policy in Alabama or Connecticut. Unfortunately, that’s illegal unless you live in those states.
Which brings us to the idea of letting consumers buy insurance across state lines — which a New York Times editorial sniffs at as one of the “small ideas the Republicans are championing.” In fact, it’s huge.
Why? Because the main barrier to choice and competition has nothing to do with “market dominance” or the health insurers’ anti-trust exemption that Congress is targeting as this week’s scapegoat.
Rather, much of the “national” access-to-insurance problem is that states like New York, New Jersey, Massachusetts and West Virginia impose burdensome mandates and regulations that push premiums sky-high.
Healthy young people rightly regard such mandate-laden insurance as a bad deal — so many refuse to buy insurance in these states. Opening the market to interstate commerce gives them meaningful choice — so many would leave the ranks of the uninsured.
In a 2008 study for the Department of Health and Human Services, Stephen T. Parente and three other health economists from the University of Minnesota carefully estimated the “Consumer Response to a National Marketplace for Individual Insurance.”
If markets were just opened up to regional competition, they found, many folks would opt for the better value and move their individual policies to a nearby state. And, because of the savings, many consumers would select better, more comprehensive plans than they now have.
By region, the states with the least costly insurance mandates were New Hampshire in the Northeast, Nebraska in the Midwest, Arizona in the West and Alabama in the South.
If those looking for individual policies were allowed to shop in any state, the number of uninsured would drop by 11.1 million in the Parente study’s mid-range scenario, and possibly much more. Huge numbers would pick health insurance from Alabama, where minimal state interference means maximum consumer choice and low prices.
In other words, the state President Obama once singled out as least competitive turns out to be the most competitive of all.
