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.