Wednesday, October 14, 2009

Insurance regulation

New discussion today in Congress about ending limited anti-trust exemption that the insurance industry has operated under since 1945 (the McCarran-Ferguson Act). This Act allowed states to regulate insurance. This issue of state regulation has come up in several ways during the reform discussion:

*Here, democrats in the Senate and saying this law has allowed insurers to be anti-competitive because they could work out deals with state regulators. Of course the insurance industry denies this and notes that they are regulated by states.
*An oft-noted panacea in response to reform bills offered by Republican lawmakers has been to 'allow people to buy insurance across state lines using the internet'. A reason this is limited now is presumably the same state regulation approach that Democrats are saying should be ended above. [Baucus bill allows states to enter into compacts or cross state agreements to allow for insurance to be sold across state lines]. This is of course an odd policy approach for Republicans, because they are essentially calling for federalization of insurance regulation in lieu of continued state regulation.

And, of course companies are often licensed in many states. So, Company X can sell policies in whatever states they choose to do so in.

I think the biggest problem with the notion that allowing purchase of policies across state lines is no panacea goes like this. If I call up a company in Kansas and say will you write me a policy, I th ink they will say fine, so long as you come to Kansas to get your health care. Because they wouldn't have provider networks in North Carolina. And one reason rates may be lower in one state compared to another is that practice patterns and cost variations are large and difficult to explain.

Of couse, the same insurance company may well be selling insurance in my state and I can buy from them. Just probably not at the same premium, again because of differences in use patterns and the like in different states.

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