Interstate competition

Today's Los Angeles Times has an article on the possible introduction of interstate competition in health care insurance. A quick read reveals opponents of competition to be an unholy trifecta of politicians, self-proclaimed consumer advocates and dominant players in health insurance. In short, the establishment, which always hates competition:

Healthcare overhaul bills working their way through Congress could jeopardize laws in California and other states that require insurers to pay for treatments such as AIDS testing, second surgical opinions and reconstructive surgery for breast cancer patients.

...Allowing insurers to sell across state lines is a key tenet of the Republican healthcare platform, and Sen. John McCain (R-Ariz.) made it a centerpiece of his presidential campaign. Proponents argue that interstate sales would enable insurers to customize policies to individual customers' needs, ignoring state benefit mandates they view as overly burdensome.

Democrats, on the other hand, generally oppose interstate sales and have defeated earlier efforts in Congress to allow them. Opponents fear that allowing insurers to sell across state lines would trigger a "race to the bottom," in which insurers compete to sell bare-bones policies at the lowest price, lacking benefits such as maternity care.

Interstate sales "is insurance code for picking their rules," said Jerry Flanagan, patient advocate for Santa Monica-based Consumer Watchdog. "The insurance companies will all run to Wyoming to issue policies, and Wyoming laws would rule in California."

Whereas some insurers want to be able to sell policies across state lines, the Blue Cross Blue Shield Assn. opposes the idea. It argues that such permission would result in inexpensive, watered-down policies.

A couple points:

• Yes, the introduction of interstate competition would inevitably result in plans being made available which do not cover breast reconstruction. However, if consumers desire such plans they can still purchase them, they will just have to pay more. Every mandate imposed by politicians increases costs. If politicians mandated all restaurants had to serve filet mignon, and prices went up, would that really be a home run for consumers?

• Of course Blue Cross loves the current system -- it means consumers are forced to purchase more expensive plans which makes more money for the company. Funny they are being supported by Consumer Watchdog, but then again politics makes for strange bedfellows.