• About

Sacred Cow Chips

Sacred Cow Chips

Tag Archives: Teresa Miller

Benefit Mandates Bar Interstate Competition

30 Thursday Mar 2017

Posted by pnoetx in competition, Health Care

≈ 1 Comment

Tags

Benefit Mandates, Cherry-Picking, Commerce Clause, Federalism, Foundation for Economic Education, Health Insurance, Interstate Competition, John Seiler, Legacy Carriers, McCarran-Ferguson Act, Restraint of Trade, Robert Laszewski, Steve Esack, Teresa Miller

The lack of interstate competition in health insurance does not benefit consumers, but promoting that kind of competition requires steps that are not widely appreciated. Most of those steps must take place at the state level. In fact, it is not well known that it is already legal for states to jointly create interstate “compacts” under Obamacare, though none have done so.

The chief problem is that states regulate insurance carriers and the policies they offer in a variety of ways. Coverage mandates vary from state to state, as do rules governing the coverage of pre-existing conditions, renewability, dependents, costs, and risk rating. John Seiler, writing at the Foundation for Economic Education, offers a great perspective on the fractured character of state regulations. Incumbent insurers within a state have natural advantages due to their existing relationships with local providers. Between the difficulty of forming a new network and the costs of customizing policies and obtaining approval in multiple states, there are significant barriers to entry at state lines.

Federalism is a principle I often support, but state benefit mandates and other regulations are perverse examples because they restrict the otherwise voluntary and victimless choices available to a state’s consumers. Well, victimless except perhaps for in-state monopolists and their cronyist protectors in state government. Many powers are reserved to states under the Constitution, while the powers of the federal government are strictly limited. That’s well and good unless state governments infringe on the rights of individuals protected by the Constitution. In particular, the Commerce Clause prohibits state governments from obstructing the flow of interstate commerce.

Here is a bit of history surrounding the evolution of state versus federal control over insurance markets, as told by Pennsylvania Insurance Commissioner Teresa Miller (as quoted by reporter Steve Esack):

“Since the 1800s, the U.S. Supreme Court held individual states, not Congress, had the power to regulate insurance companies. The high court overturned that precedent, however, in a 1944 ruling, United States v. South-Eastern Underwriters, that said insurance sales constituted interstate trade and Congress could regulate insurance under the U.S. Constitution’s Commerce Clause.

But states cried foul. In response, Congress passed and President Harry S. Truman in 1945 signed the McCarran-Ferguson Act to grant a limited anti-trust provision so states could keep regulating insurance carriers. The law does not preclude cross-border sales. It means insurance companies must abide by different sets of rules and regulations and laws in 50 states.“

Congress obviously recognized that state regulation of health insurance would create monopoly power and restrain trade, even if states place bridles on insurers and impose ostensible consumer protections. The solution was to exempt health insurers from broad federal regulation and anti-trust prosecution by the Department of Justice.

Last week, the House of Representatives passed a bill that would repeal McCarran-Ferguson for health insurers. However, that would do little to encourage cross-border competition as long as the tangle of state mandates and other regulations remain in place. The regulatory landscape would have to change under this kind of federal legislation, but how that would happen is an open question. Could court challenges be brought against state regulators and coverage mandates as anti-competitive? Would anti-trust actions be brought against incumbent carriers?

Robert Laszewski has strong objections to any new law that would allow interstate sales of health insurance as long as state benefit mandates remain in place for “local legacy” carriers. In particular, he believes it would encourage “cherry picking” of the best risks by market entrants who would be free of the mandates. Many of the healthiest individuals would jump at the chance to purchase stripped down, catastrophic coverage. That would leave the legacy carriers under the burden of mandates and deteriorating risk pools. Would states do this to their incumbent insurers without prodding by the courts? Would they simply drop the mandates? I doubt it.

No matter the end-state, there is likely to be a contentious transition. Promoting interstate competition in the health insurance market is a laudable goal, but it is not as simple as some health-care reformers would have us believe. Real competition requires action by states to eliminate or liberalize regulations on benefit mandates, risk-rating and pre-existing conditions. Ultimately, the cost of coverage for high-risk individuals might have to be subsidized, whether means-tested or not, through a combination of support from the states, the federal government, and private charities. And of course, interstate competition really does requires repeal of the health insurance provisions of McCarran-Ferguson.

Governments at any level can act against the well-being of consumers, despite the acknowledged benefits of decentralized governance over central control. Benefit mandates, whether imposed at the federal or state levels, are inimical to consumer choice, competition, efficient pricing, and often to the very concept of insurance. Those aren’t the sort of purposes federalism was intended to serve.

Follow Sacred Cow Chips on WordPress.com

Recent Posts

  • Medicare For All … and Tax Hikes, Long Waits, Inferior Care
  • A Fiscal Real-Bills Doctrine? No Such Thing As Painless Inflation Tax
  • Honeybees Are and Have Been Thriving
  • New Theory: Great Woke Filter Conceals Life In the Cosmos
  • Dobbs, Roe, and the Freakout Over Federalism

Archives

  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014

Blogs I Follow

  • Passive Income Kickstart
  • OnlyFinance.net
  • TLC Cholesterol
  • Nintil
  • kendunning.net
  • DCWhispers.com
  • Hoong-Wai in the UK
  • Marginal REVOLUTION
  • CBS St. Louis
  • Watts Up With That?
  • Aussie Nationalist Blog
  • American Elephants
  • The View from Alexandria
  • The Gymnasium
  • A Force for Good
  • ARLIN REPORT...................walking this path together
  • Notes On Liberty
  • troymo
  • SUNDAY BLOG Stephanie Sievers
  • Miss Lou Acquiring Lore
  • Your Well Wisher Program
  • Objectivism In Depth
  • RobotEnomics
  • Orderstatistic
  • Paradigm Library

Blog at WordPress.com.

Passive Income Kickstart

OnlyFinance.net

Financial Matters!

TLC Cholesterol

Nintil

To estimate, compare, distinguish, discuss, and trace to its principal sources everything

kendunning.net

The future is ours to create.

DCWhispers.com

Hoong-Wai in the UK

A Commonwealth immigrant's perspective on the UK's public arena.

Marginal REVOLUTION

Small Steps Toward A Much Better World

CBS St. Louis

News, Sports, Weather, Traffic and St. Louis' Top Spots

Watts Up With That?

The world's most viewed site on global warming and climate change

Aussie Nationalist Blog

Commentary from a Paleoconservative and Nationalist perspective

American Elephants

Defending Life, Liberty and the Pursuit of Happiness

The View from Alexandria

In advanced civilizations the period loosely called Alexandrian is usually associated with flexible morals, perfunctory religion, populist standards and cosmopolitan tastes, feminism, exotic cults, and the rapid turnover of high and low fads---in short, a falling away (which is all that decadence means) from the strictness of traditional rules, embodied in character and inforced from within. -- Jacques Barzun

The Gymnasium

A place for reason, politics, economics, and faith steeped in the classical liberal tradition

A Force for Good

How economics, morality, and markets combine

ARLIN REPORT...................walking this path together

PERSPECTIVE FROM AN AGING SENIOR CITIZEN

Notes On Liberty

Spontaneous thoughts on a humble creed

troymo

SUNDAY BLOG Stephanie Sievers

Escaping the everyday life with photographs from my travels

Miss Lou Acquiring Lore

Gallery of Life...

Your Well Wisher Program

Attempt to solve commonly known problems…

Objectivism In Depth

Exploring Ayn Rand's revolutionary philosophy.

RobotEnomics

(A)n (I)ntelligent Future

Orderstatistic

Economics, chess and anything else on my mind.

Paradigm Library

OODA Looping

  • Follow Following
    • Sacred Cow Chips
    • Join 120 other followers
    • Already have a WordPress.com account? Log in now.
    • Sacred Cow Chips
    • Customize
    • Follow Following
    • Sign up
    • Log in
    • Report this content
    • View site in Reader
    • Manage subscriptions
    • Collapse this bar
 

Loading Comments...