Why allowing insurance companies to cross state lines will not make a big difference.
In addition to the rivalry among current competitors, there are four other components of competition in business. First is the threat of new entrants. Second is the power of the customer. Third is the power of the supplier. Fourth is the threat of substitute products and services.
There are two problems with the health insurance competition equation. One is that in the doctor, patient and insurance company relationship, arguably the insurance company is the most powerful. They have the money and control the access that the patient has in the system. The other, is that there are no substitutes for health insurance.
One reason to move to a catastrophic-only insurance system is to break the power that the insurance company has in the relationship. Then the price the doctor charges a patient can be based upon the laws of supply and demand. This will also help the doctor become more responsive to the needs of the patient. Whereas now, the insurance company has too much say.
Lifting the state boundaries will improve the quality of the product that the insurance company provides, but competition alone does not, in and of itself, guarantee a lower price. There are many, many things that are very expensive in-spite of the competition. Examples include such items like houses, cars and energy. The threat of new entrants is only a part of the equation and not the entire story. First, break the power that the insurance companies have in the doctor-patient relationship and then competition can make the price fall.
There are no substitutes for health insurance or insurance in general. For auto insurance, in some states you can have a lawyer notarize a document stating that you have enough liquid assets to cover the minimum state requirements. So, there is a substitute for auto insurance--of sorts. Operating an automobile is also not a requirement. If you do not want auto insurance, you have the option of parking your car. You can avoid directly paying for home owners insurance by renting. You can avoid the need for life insurance by purchasing your casket, tombstone and grave site in advance. How can you avoid the need for health insurance?
So, no substitutes with power over the customer and supplier relationship. Therefore, opening the state boundaries is not much of a threat.
Eight Points:
1. Catastrophic-only insurance. Government as a last-resort safety-net. Pay out of pocket for simple and common doctor visits and meds.
2. Diffuse the risk. Bring low-risk populations that are not currently covered into insurance plans. These populations include immigrants, college students and younger workers. Reward those who take steps to lower their personal risk by joining gyms, loosing weight, etc.
3. Tort reform to end unneeded CYA-type tests.
4. Realistic end-of-life care that focuses on extending a quality of life instead of simply delaying death.
5. Train more providers of all types. Introduce more competition into the system by ending the shortage or doctors, nurses, physician assistants and pharmacists.
6. End the use of the Emergency Room when an unplanned medical problem arises. Have more insta-care type facilities.
7. Alternative payment methods. Patients who can not pay for their medical bills should work them off through community service in lieu of forcing them into bankruptcy. No one gets a free ride. End the practice of just writing-off unpaid bills. End the expectation of a free ride.
8. Aggressively prosecute medical fraud. Recovering from criminal losses adds to everyone's costs in one way or another.
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