Across state lines

ACROSS STATE LINES…. When it comes to the Republican approach to health care reform, the single most popular idea is encouraging consumer to purchase coverage across state lines. It appears that major news outlets tend to do a very bad job of explaining how this would work, and why the GOP plan, taken at face value, is a truly awful idea.

And that’s a shame, because folks really should understand this. Ezra Klein had a helpful item on this the other day.

Insurance is currently regulated by states. California, for instance, says all insurers have to cover treatments for lead poisoning, while other states let insurers decide whether to cover lead poisoning, and leaves lead poisoning coverage — or its absence — as a surprise for customers who find that they have lead poisoning. […]

The result of this is that an Alabama plan can’t be sold in, say, Oregon, because the Alabama plan doesn’t conform to Oregon’s regulations. A lot of liberals want that to change: It makes more sense, they say, for insurance to be regulated by the federal government. That way the product is standard across all the states.

Conservatives want the opposite: They want insurers to be able to cluster in one state, follow that state’s regulations and sell the product to everyone in the country. In practice, that means we will have a single national insurance standard. But that standard will be decided by South Dakota. Or, if South Dakota doesn’t give the insurers the freedom they want, it’ll be decided by Wyoming. Or whoever.

It’s why this idea is generally characterized as promoting a “race to the bottom.” The plan would effectively lead state policymakers to tell insurers that if they can set up shop in their state and write the rules in the industry’s favor. The industry would go with the state that offered the sweetest deal — which is to say, the most lax oversight with the fewest restrictions — and before long, it would be consumers’ only choice. Why? Because every insurer would move to that state, leaving Americans — lacking a public option — with no other coverage to buy.

That’s exactly what happened with the credit card industry, and it’s a model to be avoided, not followed.

President Obama has said he’s willing to work with Republicans on allowing consumers to buy across state lines, just so long as there are minimum standards to prevent the race to the bottom. The GOP balks at the compromise, because minimum standards would mean … federal regulations. And we can’t have that because it would mean government looking out for consumers, which is, you know, bad. Or something.

It gets worse. The Congressional Budget Office did an analysis of the idea in 2005 (Republican Congress and Republican White House). Ezra noted the results of the CBO’s research.

The legislation “would reduce the price of individual health insurance coverage for people expected to have relatively low health care costs, while increasing the price of coverage for those expected to have relatively high health care costs,” CBO said. “Therefore, CBO expects that there would be an increase in the number of relatively healthy individuals, and a decrease in the number of individuals expected to have relatively high cost, who buy individual coverage.”

That is to say, the legislation would not change the number of insured Americans or save much money, but it would make insurance more expensive for the sick and cheaper for the healthy, and lead to more healthy people with insurance and fewer sick people with insurance. It’s a great proposal if you don’t ever plan to be sick, and if you don’t mind finding out that your insurer doesn’t cover your illness. And it’s the Republican plan for health-care reform.

I’m reminded that anyone who seriously believes Republicans are credible on this issue just isn’t paying attention. I’m also reminded that most of the country isn’t paying attention.