Thursday, September 18, 2008

What the Lack of a National Insurance Market is Costing You

By Grace-Marie Turner

Categories: Insurance Regulation, New Jersey, Wisconsin

Public officials and health care experts have suggested a number of reforms to reduce the cost of individual health insurance, but most of the proposals fail to address the contribution of mandated benefits to the high cost of insurance in many states, write Devon Herrick and Ariel House.

Although most insurers operate in multiple states, their plans must be tailored to each state's specific requirements, resulting in fragmented markets and large price differences. For example, a family purchasing a health insurance policy in Wisconsin would pay about $3,087, but that policy would cost $10,398 in New Jersey. The difference in premiums is largely the result of state mandates that inhibit the creation of a national market, not regional variations in health care costs.

Allowing residents to purchase coverage across state lines would create more competitive insurance markets, write Herrick and House. In addition, letting insurers experiment with different designs to create innovative and cost-effective health plans will decrease the number of people who cannot afford care