Fraser Forum

Republicans rely on red herring in U.S. health care debate

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My previous blog entry congratulated Wisconsin Governor Scott Walker for making a serious health reform proposal in his presidential campaign. Well, it looks like I wasted your time because Gov. Walker, performing well below expectations, has already dropped out of the Republican presidential primary.

Of the remaining candidates, only Senator Marco Rubio and Louisiana Governor Bobby Jindal have released health reform proposals—and Senator Rubio’s is just an op-ed. Instead, most have offered a “red herring” way to lower health-care costs: allow insurers to sell their policies across state lines.

As well as Rubio and Jindal, Donald Trump, Ted Cruz, Rand Paul and Rick Santorum have all rolled out this easily digestible and meaningless sound bite. Further, it has been a feature of congressional Republican proposals since at least 2010.

The only problem is that it would have no effect. If a health plan wants to offer health insurance in a state, it can easily do so. Health insurers enter and exit markets all the time. Aetna and Cigna are domiciled in Connecticut. That does not prevent them from offering plans in other states.

Solving nothing, the proposal ignores the original sin of private U.S. health insurance: Americans’ health insurance is chosen by their employers, not themselves.

No act of Congress mandates selling auto insurance across state lines. Nevertheless, if I move to a new state, I call my insurer, tell the customer-service rep my new ZIP code, and that is that—just like in Canada.

Yet, auto insurance is regulated by states (as it is by provinces in Canada).

The main difference between auto insurance and health insurance is that individuals own their own auto insurance. Obviously, states would not attract residents if they impeded a national market for auto insurance. Similarly, if we owned our own health insurance, states would quickly harmonize their laws to facilitate a national market.

Which brings us to a legitimate act of Congress: erasing the discrimination against individually owned health insurance in the income tax code. Current tax law excludes premiums for employer-based health insurance from taxable income, but not premiums for individual insurance, which employed people might prefer. This is what prevents Americans from buying individual, portable, guaranteed renewable, health insurance.

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