Mark Kirk's Big Health Care Reform Idea is to Create Huge National Insurance Monopolies That Are Fully Deregulated

Illinois Tenth District Representative, Mark Kirk, held a health care town hall meeting on Monday August 24, 2009 to unveil his own plan for reform. This blog post debunks the centerpiece of Kirk's scheme, the creation of a national, private market for insurance plans by preempting state laws that regulate insurance plans in order to allow plan purchases across state lines. This is not Kirk's brilliant new idea, but an old idea from the right wing Heritage Foundation and it would be harmful to consumers and is unlikely to create the competition Kirk promises.

Under current law, the states regulate private insurers. State regulatory bodies register companies offering plans within the state and such plans must comply with state insurance laws. These state laws are generally for consumer protection. States require insurers to hold reserves to make sure money is available to pay claims. State regulators may force compliance or fine insurers that fail to comply with state regulation or the terms of their own policies. If non-compliance is bad and frequent enough, it could cost the insurer its license to do business in the state.

In addition to consumer assistance, another benefit of state regulation of health insurance is mandated coverage. Insurers do not like to insure certain conditions or cover certain tests. For example, insurers don't like mammograms. After years of women's organizations fighting for mandated coverage of mammograms, several states have mandated that coverage. Ironically, Kirk touted the high incidence of mammography in the U.S. as proving that our health care status quo is fine, but failed to mention that most of those mammograms would not have happened without the state coverage mandates. Another popular mandated coverage is coverage for post-college children under 26 years of age. These and other mandated coverages are marked for the trash heap under Kirk's plan.

Under Kirk's plan, state insurance regulations would be federally preempted, but not replaced with new federal regulations. An audience member at Kirk's town hall asked the congressman if he support federal regulation to replace the state regulation he would have us eliminate, and he said no. Kirk wants to replace the entire body of state regulatory law with some minimum plan standards that will not be enforced, as there will be no enforcement body to do it. He is also against the enforcement of plan standards in the current version of the House health care bill.

Without state limits as they now exist, insurers would be allowed to consolidate their plans and offer them nationwide. Kirk sells his idea by describing a lack of competition in the industry. That part is true. In 2006, the GAO found a trend toward consolidation of insurers. A few corporate insurers control most of the market share. However, Kirk's own reasoning explains why his idea will not create more competition. Even in a fully national market, there is little chance of finding a Joe's Insurance Shack of Southeast Minneapolis being offered in Rogers Park in Chicago, or a Mom and Pop's Insurance Emporium of Wilshire and Harbor Parkway in LA being sold near the 5 Way Chili Company in Cincinnati. We're talking about Blue Cross of Michigan offering policies in Ohio and United Healthcare offering its Colorado plan in Phoenix. It will be the same large companies, the ones that are already over-consolidated, consolidating even more by providing insurance nationwide. There will be even less competition because the few smaller insurers that are left will get crushed by the big plans crossing into their territories. Worse, these huge national health insurance monopolies will be fully de-regulated. They will be able to set prices how they want and do business how they want, and the consumer will have no place to turn for relief because the state regulatory bodies will be dismantled. We are likely to end up with more insurance companies that are too big to fail, like AIG and they'll be health insurers, so their demise will affect your health.

The real question here is why republicans like Kirk, who claims to be for state's rights, want to eliminate state control over health insurance. I think the answer is apparent. Kirk's plan to deregulate the insurance industry is no different from previous Republican initiatives to deregulate banking, agriculture and food and drug safety that brought us near depression and gave us poisonous food and dangerous medicines. It's about corporate profits over the good of the country. I also think that eliminating state regulation of health care insurance is so important to Republicans because, absent federal reform, which they have been able to block for so long, many states have taken it upon themselves to create reform. In my state of Illinois, there is a movement to create a state single payer. They want that stopped.

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Comments

[Ellen Gill - Huffpost Blogger]

Mr. Quinn,
I don't think we are saying anything different factually. I fully acknowledged that Kirk answered that he'd replace the entire body of 50 states worth of insurance regulations and the enforcing agencies that took decades to build with "some minimum standards.­" He did not go beyond that, so the rest of your comment is embellishment on his actual answer. It is dangerous to interpret his further silence as interest in new regulations. Kirk has already said we have no money for health care at all, so I don't see him asking for money for sweeping federal insurance regulation and an enforcement agency to implement it. Nonetheless, the proof will be in the pudding. If Kirk amends his bill to add sweeping federal insurance regulation that firmly replaces state law and adds an enforcement mechanism to rival what the states already have in place, I will have to eat my words. In the meantime, your comments indicate to me that you are not familiar with the vast body of state insurance laws, regulations and enforcement mechanisms. I suggest you take some time to study at least one or two of the states' insurance regulations, and the cases that interpret and enforce them. Then call around to state regulatory agencies and ask them what they do on a daily basis. You have to have at least a basic understanding of what is already out there before you can judge if Kirk's suggestions are a fitting replacement.
Ellen Beth Gill

[Andy Quinn]

(Con't from above)

In summary, (1) Kirk simply did not deny "support" for a new national regulator, as you claim, but simply stated that his current draft of the legislation doesn't provide for it AND (2) while the regulation issues with creating a national insurance market would make things a bit sticky, those complications don't cancel out the greater economic realities that would appear to support such a move.

Thanks for the ability to respond here on the site: these are important conversations to have, and I think it's extra-important to make sure we don't misquote our elected officials or obfuscate their positions to score political points. Sorry for taking up so much space!

[Andy Quinn]

(Con't from above)

Finally, as a supporter in general of the idea of interstate insurance competition to create a national market, I take major issue with the enormous leaps of logic upon which you embark elsewhere in the above post. Your scare-tactics-laden message that insurance companies operating on a nationwide scale would wreak havoc with the economy of healthcare runs contrary to simple economic reality. In any other industry you or I could name, I can not think of a single example where consumers would benefit from companies being split into fifty divisions, only able to operate state-by-state and being subject to different regulation anywhere.

Would we be better off if Dell and Apple and Microsoft were forced to divide into fifty subsidiaries--each offering slightly different products? Would consumers be offered better choices or more affordable options? Of course not! For the same reason that European nations have experienced an explosion in business after streamlining regulation and markets across all EU member states, the broadening of this huge sector of the American economy would likely result in wider availability and productivity within the health insurance industry. Computers are, of course, not a perfect analogy for the healthcare industry, but national markets already do a fine job with many industries far more necessary in daily life than health insurance (i.e. agriculture and food production)!

(Con't below, sorry!!)

[Andy Quinn]

Ms. Gill:

I was present at the Arlington Heights forum, and I actually am the eighteen-year old student you describe who asked Congressman Kirk about a replacement federal regulator. You have accurately summarized my question, but I feel you have twisted somewhat Kirk's response.

He replied that, while his current bill does not provide for any brand-new federal regulatory bodies, he would fully endorse--and in fact, cites as plusses of the plan--both mandatory minimum coverage standards and full national authority from the federal Dept. of Justice, et al, to break up monopolies and ensure the same standard of trust-busting, competitive practices that federal law guarantees any other industry.

Additionally, and perhaps most importantly, Kirk *did not* rule out or even express an iota of distaste for the hypothetical notion of new, national, and industry-specific regulator that has interested both you and I. Our Congressman simply answered honestly that no, the current bill he is promoting doesn't contain that language.

(Con't)