Giving people more options to purchase coverage across state lines would generate a much more competitive market so people are not trapped by the expensive mandates and regulations in their states.

University of Minnesota economist Steve Parente and colleagues have shown (pdf) that opening up competition among the states for health insurance would mean an additional 12 million people could get health insurance without any new spending by the federal government (an important consideration in the current fiscal climate). This would allow people trapped in states with community rating, guaranteed issue, and excessive mandates to shop for policies in other states where premiums are more affordable and policy options are more flexible. Some may select a high-deductible plan, but people should have a range of options to find the ones that best suit their needs.

Critics charge, however, that this would open up the Wild West of unregulated health insurance where people would be faced with policies that don't cover even the most basic medical needs. But every state regulates its health insurance markets to assure, not only the solvency of companies offering the coverage, but that the policies actually offer responsible insurance coverage.

Allowing interstate commerce in health insurance would lead to larger pools and more competition among companies offering coverage, spreading risk and reducing costs. Health insurance companies are worried about disrupting their current books of business if healthy individuals can opt out of their current pools to find more affordable coverage elsewhere. But bringing millions more people into the market will expand their pools. Further, new programs to give those with higher-health risks better options for coverage will further stabilize the market.