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Thursday, February 25, 2010

Selling Insurance Across State Lines Bad for Everyone (Except South Dakota?)

One of the few ideas Republicans have bothered to float amidst their health care obstructionism is allowing people to buy insurance across state lines. Ezra Klein explains why that idea would lead to worse health insurance... by comparing it to South Dakota's Faustian embrace of the credit card industry:

Conservatives... want insurers to be able to cluster in one state, follow that state's regulations and sell the product to everyone in the country. In practice, that means we will have a single national insurance standard. But that standard will be decided by South Dakota. Or, if South Dakota doesn't give the insurers the freedom they want, it'll be decided by Wyoming. Or whoever.

This is exactly what happened in the credit card industry, which is regulated in accordance with conservative wishes. In 1980, Bill Janklow, the governor of South Dakota, made a deal with Citibank: If Citibank would move its credit card business to South Dakota, the governor would literally let Citibank write South Dakota's credit card regulations. You can read Janklow's recollections of the pact here.

Citibank wrote an absurdly pro-credit card law, the legislature passed it, and soon all the credit card companies were heading to South Dakota. And that's exactly what would happen with health-care insurance. The industry would put its money into buying the legislature of a small, conservative, economically depressed state. The deal would be simple: Let us write the regulations and we'll bring thousands of jobs and lots of tax dollars to you. Someone will take it. The result will be an uncommonly tiny legislature in an uncommonly small state that answers to an uncommonly conservative electorate that will decide what insurance will look like for the rest of the nation [Ezra Klein, "Selling Insurance Across State Lines: A Terrible, No Good, Very Bad Health Care Idea," Washington Post, 2010.02.17].

So I guess if we would like to bring a few thousand new health insurance jobs to South Dakota at the low, low price of weakening our insurance laws even further and screwing policyholders across the country, we South Dakotans should be all over this idea. But if we really want to live by our vaunted Midwestern ethos and take care of people... well, I hope the Republicans bring something better than interstate insurance purchase to the table at their Blair House meeting today.

1 comment:

  1. The rejection of interstate commerce in health insurance is one of the many reasons bipartisanship from the republicans is impossible. It is insulting to the American consumer to imply we are too stupid to choose adequate insurance. It is arrogant to place restrictions on every aspect of a business and then claim it isn't a government takeover. It is ignorant to say increasing competition creates a weaker product.
    I don't know of any state with such weak laws that the insurance provided there is leaving everyone to suffer in the streets. If all of the insurance gravitated to one state, even believing the insult that people are too stupid to understand and want coverage beyond statutory minimums, coverage would still be fine...or are we buying derivatives?


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