By Evan Falchuk
One of the less talked about reasons why health insurance is so expensive in America is our system of insurance regulation. It’s a system that dates back to the 19th century, and hasn’t changed very much since.
Here’s how it works. There are 50 insurance commissioners. They set the rules for insurance in their states, and they have a major impact.
What it means is that if you want to sell an insurance product in the United States, you have to pick a state in which to start. You would have to comply with that state’s rules about financial stability and management. Then, you would have to comply with the state’s mandates as to what needs to be in the product, and, depending on the state, you may have to change your price to fit what the state says you have to charge. Its a process that can take many months or years.
Now, if you wanted to sell your product across the country, you have to go through this process 50 different times. It’s why when you see a brochure for an insurance product you can read on the back of the brochure all kinds of notes about how the product differs in different states. It’s a process that adds significant administrative cost to any insurer who wants to sell a new product. And it’s an important contributor to why the US insurance market is much less dynamic and competitive than perhaps any other market in America.
Imagine if our market for cell phones worked this way. We’d have 50 different cell phone networks, and 50 wireless device commissioners who would decide who can sell phones, and at what price. They would mandate what features a phone had to have and couldn’t have in their state. Apple could design an iPhone, but why bother – they would have to make 50 different versions of it. They could only sell it in one state at a time, and they would have to change features and price every time they went into a new market.
So when you hear people talking about health “insurance” reform, think that maybe it shouldn’t be about trying to curtail specific bad things that some insurers do. Instead, think that maybe we should be talking about having a regulatory system that meets the needs of a modern economy. We should be thinking of opening up our insurance markets to actual competition – not one new, giant, lumbering government insurer, but rather dozens of new, dynamic entrants into the insurance market.
[...] state, it has to go through an extensive process in order to do it, and be subject to all kinds of mandates and other requirements that make it very impractical to do so. It makes for a market that is much [...]
[...] may not like that the states are primarily responsible for insurance regulation – I have issues with it, too – but it is simply false to suggest that its existence is something [...]
The very idea that each state can add mandates for health insurance coverage is nuts, such mandates have driven up costs by about 25% depending on the state. The idea that anyone selling insurance has to apploy to each state and meet all its various rules is nuts too. If we wanat to reform health care (or insurance) do away with 50 variations.
In addition, what we are calling reform now has serious consequences, espeidclaly for people who already have coverage. See my assessment at:
http://quinnscommentary.com/category/healthcarehealthcare-reform/
So it means that the organization has a big factor or effect why a health insurance is expensive. They also said that it hasn't change a lot.
Now that we are in the 21st century is the government don't have any plans to change the policies on health insurance?! Maybe if the health insurance policy will be well organized, health insurance officials will find a way to lessen its cost.
[...] public policy reasons to not only get rid of the antitrust exemption, but also to create a national market for insurance. Pique over a political disagreement shouldn’t be one of them. But [...]
[...] problem is this: the way states regulate insurance is one of the major reasons why health insurance is so expensive. Heavily laden with thousands of rules dictating what they have to cover, how much they can [...]
Great post, Evan Falchuk. I’ve actually just started using #1 on one of my personal blogs, with the intent to do it on my business blog. I’ve found that prompting or asking for readers’ input is getting them to actually take the time to leave a comment. In essence, you’re inviting them to provide their thoughts and expertise, thus making them feel valued…it’s an ego thing
health insurance
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The fact is that 17.6 million of that number has an annual income of $50,000 or more, and 9.1 million had an annual income of $75,000 or more. Sally Pipes reports in the Top Ten Myths of American Health Care: A Citizen’s Guide that the $75,000 per year group are among the fastest growing portion of our population that is uninsured.
Sounds a little bit like a conspiracy theory to me. Nevertheless, you do have a point, most people can't afford the basic Term Life Insurance, not to mention health coverage. Most of us just have car insurance and we're good to go. Hopefully the new reform, as unstable it may seem right now, will set the record straight.