- Yes, i just did a search for insurance quotes and the cheapest plan available in North Dakota for a 30 year old woman is $64.57 a month. In Massachusetts the cheapest plan for a 30 year old woman is $238 a month. In most states the difference is not that extreme but the difference is significant.
- Each state requires different things be included in each plan sold and regulates how the insurance is sold. To use the aforementioned computer analogy if your state mandated that every computer sold must have a 2TB harddrive, a 23 inch monitor, Microsoft Office installed, and Adobe photoshop installed, what would that do to the price of computers sold in your state?
3.The insurance companies can issue in any state but they must sell what and how the state tells them to sell in that state.
4.Most consevatives don’t care where the companies are located, just that they provide a good service. - The most recent number I heard is $2k savings per average family. The numbers are speculative because obviously the situation is totally different and markets can be unpredictable.
- You are mistaken in the cost driver. It is not monopoly profits that are making the difference, profits are about 3% in every state. The cost driver is rent seeking. A company offering therapeutic massages goes to the state legislature and asks that all insurance policies cover massages. This costs the state legislature nothing so they approve and get to tell their constituents they now are entitled to free massages.The insurance companies do some complicated math and raise everyone in that state’s premiums by 100 bucks a year. The state legislature then condemns the greed of the insurance companies. Do this a couple times a year for twenty years and the insurance premiums skyrocket. Some states are better at resisting this than others and the insurance rates are then different in each state.
The liberal rejoinder to this idea is that insurance is different in that computers are less complicated than health insurance so that while it is possible to decide what kind of computer you want for the price you are willing to pay, it is impossible in the insurance market. Only the solons in the state capital are smart enough to decide what kind of health insurance you need and how much you should pay for it.
That’s a number that is not supported by the Congressional Budget Office analysis.
You have offered no evidence that the difference in premiums is a result of the requirements in the state. Massachusetts is about as different as can be from North Dakota, rent is more expensive, taxes are higher, salaries are higher, the range of medical services available is staggeringly different, and the people on average are less healthy. Also, rates vary within a state, where they have the same regulations.
There are 6 main insurance companies (Aetna, Wellpoint, UHC, Humana, Coventry, Healthnet). Because of all of the state regulations, they each have regional subsidies to focus on their specific markets which makes it seem like there are more health insurance companies than there really are. If you were to do what these folks are suggesting, the insurance industry would quickly consolidate down to the prime 6 big players all based in the same state (oddly, they seem to think that this is a good idea). I think we have all witnessed how states compete for jobs. It is not unrealistic to assume that states would continue to do so amidst the health-insurance company consolidation. They would quickly repeal regulations to lure jobs to their state and there would be a race to the bottom - the least regulated state would get the jobs and the rest of the country would be stuck with the regulations in place in that state (exhibit A: the credit card industry, North Carolina). Unless there is a national base-line in place of course. So you’re giving 1 state the power to set a national baseline.
Maybe that is precisely what conservatives mean when they refer to state’s rights and the power of the states to legislate, but I was under a different impression. I thought they meant that each state should be allowed to set their own standards and look after the best interests of their own citizens. Which is where this little exercise runs into problems with conservative ideology - and so far - no one’s been able explain that to me (without falling back on that old big business trope). This proposal undermines a serious plank of conservative ideology, yet it seems to be at the forefront of their health care policy. The only reasonable explanation I can come up with is that they care more about business and profits than they care about their core values - but that’s a very cynical and stereotypical response from someone like me, so I don’t really care for it. Can someone hash out this ideological contradiction without claiming that conservatives care more about business than they do about a states ability to govern itself?
Casinos make something like 0.5% on blackjack, and a few percent on slot machines. Do you think their profit is low? Given decent statisticians and a large enough risk pool, insurance is just like gambling, since it is all based on probability. That is not a criticism because creating a larger risk pool is good for everyone, and I don’t mind paying 3% for it. As mentioned, savings can come from overhead reduction, not profit reduction, which is one of the reasons UHC systems are a lot cheaper.
The problem we’ve had is not the profitability of insurance companies, but rather them trying to trim their risk pool. Imagine a casino where a blackjack dealer could refuse your bet if you had an Ace showing. They’d make a lot more money, that’s for sure. We don’t have to gamble, so they’d lose business, but we do have to get health care.
The states rights arguement is a specious one. The constitution is about enumerated powers. All powers that are not given to the federal government are reserved for the states. The constitution gives exclusive right to the Congress to regulate interstate commerce. Someone in Florida buying a insurance policy from South Carolina is engaging in interstate commerce. Restricting the ability of one state to bar interstate commerce does not interfere with states rights because under the constitution states have never had that right.
The race to the bottom only occurs if consumers desire it. Consumers would have the ability to to buy the Yugo plan from Connecticut, the Honda plan from Tennesee, or the Cadillac plan from California. Legalizing low cost health insurance does not force people off more expensive plans, it only gives people more choice.
Veeger: What would happen to casinos if they customers could change their bets after they found out what they were dealt?
Not that it matters, but they can. It’s called “doubling down”.
Except the Cadillac plan from California wouldn’t exist because no insurance company in their right mind would be stupid enough to base itself in California, on california’s regulations.
I just did a similar search on Aetna’s website where you can actually find published rates. I checked 3 states semi-ramdomly
First, the state where my family lives (NC) As a single female age 54 I can choose from between 10 different policies ranging from $123 a month to $473 a month.
Then I decided to try a state closer to my home state (CT). Again, I can choose between 10 or so different policies. The cost ranges from $196 per month to $511 per month.
Then I go to the state where I actually live and have to buy my insurance. Aetna offers 3 policies, the first of which is subsidized and available to low income families only. That would cost me $368 a month with drugs or $325 a month without. Too bad I’m not poor.
The two remaing policies qualify as crappy HMO and not quite as crappy POS. My monthly charge for the HMO would be $1204 and the POS would be $1766.
This is why the ability to buy insurance across state lines is of paramount importance to me.
You’re making several assumptions here. One is that the coverage in each one of the quoted prices is equal. (You’ve already acknowledged they are not.) The second is that the quotes provided online are accurate. The third is that looking at Aetna website represents a fair market survey. (Other companies will offer different policies at different prices, no doubt.)
Also, why do you suppose that the Aetna rate in your state is so much higher? Do you believe the Aetna division in your state has arbitrarily decided to soak the residents of your state, but Carolinians and Nutmeggers just by chance get better rates?
And my final point is that you assume that prices would remain the same if competition between states is enacted. If there is a reason why insurance costs more in your state (maybe you have more arsenic in your water, or high rates of heart disease, or whatever) then no insurance company in its right mind would offer the same policy at the same price to you as they would in a “healthy” state. The cost of a plan in a “healthy” state would go up, and the cost of an plan in a “unhealthy” state would go down.
However, this is pretty much one of the reasons why everyone will be required to have health insurance, so that the risk in the policy will be more evenly spread over the whole population.
Just to follow up on this… If Aetna were allowed to sell across state lines, there wouldn’t be all those different state policies. Aetna would consolidate to 1 state and offer 1 tier of policies that reflected the regulations in that home state.
You do realize that even if that were possible, the rates would be different to reflect the costs associated with where you live.
- Does the cost of health insurance really vary that much from state to state?
Yes.
- What causes this price difference?
The majority of the difference has to do with differences in cost of living but some of it has to do with state regulations. There are a handful of health insurance providers that provide most of the health insurance in this country and they are present in all 50 states and the district of columbia, if there is a lack of competition in health insurance in any state, then that same lack of compeition would exist at a national level.
- Even if Geico isn’t offering national health insurance, what’s to stop them from simply working in all states, is United Health not allowed to work in certain states?
Outfits like United and Wellpoint operate in all jurisdictions.
- What kind of a price reduction could we reasonably expect if insurance companies are competing nationally.
Comparing apples to apples, you would have no reduction in prices but a national market (as envisioned by Coulter) would allow companies to operate under very light regulations and allow them to offer barebones plans that don’t actually cover anything for very very low prices.
- The idea that increasing competition will reduce costs seems to imply that right now the insurance companies in my state are raking in massive amounts of profits thanks to their monopoly. I was under the impression that they aren’t making much profit, so where are the price reductions going to come from?
They won’t come from increasing competition if they come at all.
Liberals/Democrats, as a special favour to me, try to avoid pouncing. You have a nice win, enjoy it. I really am curious to understand how all this is supposed to play out. What I’d love to know from Democrats is why they are against this form of legislation.
Mostly because it either strips out consumer protections for people buying health insurance, if it simply did nothing then they would just let the Republicans have it and claim to be bipartisan but it undercuts some very important consumer protections in many states.
I don’t care if they sell across state borders or not, but if they do I want it regulated by the Federal govt. I don’t want my health insurance regulated by a state I do not live in, and I don’t trust insurers to play fair.
I was just using the Aetna site to illustrate the vast differences from state to state and I understand the plans are different. In fact, one of my biggest insurance frustrations is the complete inavailability of high deductible and HSA compatible plans in my area…I have no need to “insure” myself against the cost of a doctor’s visit or prescription drugs, I can afford these even if I might rather use the money for better things.
And I am currently on a company health insurance plan so I haven’t had to insurance shop in 2-3 years or so, but I was buying my own insurance up until then and I expect to have to buy it again in the future…
No, I never thought that for a second…I assume that my state is regulating the insurance industry (placing restrictions on risk pools, etc) in some way that makes it almost impossible for Aetna and the other insurers to offer private insurance. I remember when none of them did.
However, since it is ( I think) now mandated that they offer insurance to private individuals the insurance companies came out with some “FU Pricing”.
I didn’t assume prices would remain the same. Services cost more in New York City because everyone’s cost of doing business is higher. However, I would like more selection in policies and rates that aren’t 10x what everyone else pays.
I understand how this should stabilize the insurance rates and I hope it does. However my major concern about the legislation was that it didn’t do enough to address insurance rates, at least at first. I was showing the rates for an individual female in my earlier post, but the NY rates for families are really astounding which has lead to lots of families that would be considered well off in other parts of the country to be too poor for insurance.
The family rate if you are keeping adult children on your policy is $5800 a month, kick the grown ones out of the nest and it drops to $5200. That’s 63K a year, about the entire take home pay of an 88K salary, the level at which one is ineligble for insurance subsidies.
OK, though, you’re right, these are published rates only. OK, let’;s say with careful shopping you cut your rate in half. Then you are only spending half your take home pay on insurance and you have half left to house, feed and cloth your family. I’d probably pay the fine and take my chances.
But the reason that rates are so high for individuals is that you are not sharing risk across a group. They way the cost of adding one additional person against the potential outlay of millions of dollars. Since you are buying as an individual, you may also have some reason to think that you are likely to need the care. That also makes rates higher. None of those are affected by selling across state boundaries.
puddleglum, you sir are a gentleman and a scholar. That was the single best post I’ve read in over 3 years. I didn’t agree with a single word you said, but the entire thing was written concisely, eloquently, and right to the point. Kudos to **Damuri Ajashi as well, also extremely informative.
Having said that, I have a couple of followups:
I must say that I am shocked at the difference from one state to another. But I’m not entirely convinced we’re comparing apples to apples. One of my personal problems is that my wife, if given the option, will choose the cheapest option every time. I don’t really see a benefit to being offered a non-cancer policy.
The blindly ignorant and naive answer would be to scream loudly, “I WOULD COST ME MORE” in unison with the rest of the crowd. But the point is obviously that there is better value in my states required computer, value which I lose when all policies fall to the lowest common denominator. Obviously a computer without a harddrive would cost less, but it wouldn’t be much use to me.
So they are actually free to compete within the state, against other companies.
I assume they’ll move to the state where they can get away with providing the worst service they can. In theory, like the hotel without bed scenario the consumer would vote with their wallets, except ALL of the hotels will be in the same state and all providing the option of a room without a bed. A fact I’m sure they’ll happily fail to mention until you try to go to sleep. Forgive me, I’ve been screwed around my a lot of hotels lately.
Yup, I’m not so sure about that number, seems kind of high. But it’s a good point to start from.
Isn’t it entirely possible that with this change, all of the companies will move to one state, making a MUCH larger incentive for the very process you’ve described. Right now, the insurance lobbies have to spread out their wealth over 50 legislatures. After the change, they’ll all focus on one. And it won’t be your state, so you’ll have no say.
We also seem to assume they’ll move where the regulation is lowest, but I don’t believe that. I think they’ll all move where the profit margin is best. It’s not about offering a good product, it’s about making money. If they pay 50% income tax in New York, but get a massive income tax credit Alaska, where do you think they’ll move. Insurance mandates will be the least of their concern, it will all be bottom line.
But the potential for each state is larger, what I think you’ll actually see is competition between the states themselves, not between the companies, they don’t give a fun where their PO Box is. It would come down to health insurance mandates, it will all be decided by who creates the first tax haven for insurance companies.
I’ve met a lot of stupid people over the past couple of years. Just this afternoon I had to listen to 4 geniuses talk about the lottery. If you aren’t smart enough to understand the odds when gambling, are you really capable of understanding your likelihood of developing cancer vs Parkinsons vs heart disease?
Think about how much you actually know about your auto insurance, and then ask yourself if sifting through a medical version is going to be easier.
Shouldn’t it be more important to you to be able to TRAVEL across state lines? Why not move to where you get the most favorable insurance rate? If it mean the difference of $10,000 a year I’d move in a heartbeat.
Okay, so you have one type of insurance you prefer over another. Isn’t it just as likely that when they all move to one state they won’t bother offering the kind you like.
Some times I feel like the conservative vision includes a lot of these wishful ideas. You pointed out how companies will offer a high deductible plan in one state but not another. If they all move to that state you still won’t get high deductible plans.
There is a common theme here to assume that if state A has a plan for $100 and state B has a plan for $200, after all the companies move to state A we’ll all get a $100 plan. Hey, that would be great.
But it’s just as likely that state B will offer a $100 incentive to insurance companies, encouraging them to all move there, sell the $200 plan, and increase their shareholder value.
Try not to forget that last point. The company will move where the shareholders and board members think is most desirable. It is going to be entirely based on the bottom line, most sales at the highest profit margin. And most certainly NOT in your best interest, or where will let them create the best plan.
Ann Coulter thought she was being cleaver when she suggested a hotel room without a bed, but I have no doubt they’d do it if it meant a higher revenue stream. And once one does it, they all follow.
How is that a personal problem? If you want to buy a cancer policy, what matters is that you get offered that option. If someone else wants to be offered a non-cancer policy, what matters is that they get offered that option. If your wife truly wants to “choose the cheapest option every time”, then I certainly don’t feel like stepping in to stop her; I also don’t feel like stepping in to stop you from choosing a (pricier) cancer policy.
So what’s your ideal? A system where folks are offered both the policy you want and the super-cheap package that appeals to the IT WOULD COST ME MORE crowd? Or a system where folks only get offered the policy you want?
Ah, I see; you think the poor ignorant masses are too stupid to make their own decisions on the matter, and I – don’t see people that way, and so don’t want to interfere with the right of consenting adults to voluntarily enter into contracts as they see fit.