Ezra Klein Trots Out The Left’s Best Argument Against Cross-State Insurance

18 Feb, 2010 by William Teach

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By best, what is meant is a sad, lame, ridiculous, pathetic, weak, and grasping at straws argument

The big Republican idea to bring down health-care costs is to “let families and businesses buy health insurance across state lines.” Jon Chait has some commentary here, but I want to simplify a little bit.

Insurance is currently regulated by states. California, for instance, says all insurers have to cover treatments for lead poisoning, while other states let insurers decide whether to cover lead poisoning, and leaves lead poisoning coverage — or its absence — as a surprise for customers who find that they have lead poisoning. Here’s a list (pdf) of which states mandate which treatments.

The result of this is that an Alabama plan can’t be sold in, say, Oregon, because the Alabama plan doesn’t conform to Oregon’s regulations. A lot of liberals want that to change: It makes more sense, they say, for insurance to be regulated by the federal government. That way the product is standard across all the states.

Interestingly, Klein is actually making the argument FOR cross-state insurance sales. Consider this from a Wall Street Journal editorial from 2009

Devon Herrick, a senior fellow with the National Center for Policy Analysis who has written extensively on this subject, notes that insurance companies operating nationally would compete nationally. The reason a Kentucky plan written for an individual from New Jersey would save the New Jerseyan money is that New Jersey is highly regulated, with costly mandated benefits and guaranteed access to insurance.

Affordability would improve if consumers could escape states where each policy is loaded with mandates. “If consumers do not want expensive ‘Cadillac’ health plans that pay for acupuncture, fertility treatments or hairpieces, they could buy from insurers in a state that does not mandate such benefits,” Mr. Herrick has written.

But, but, but, that person from California would no longer be covered for lead poisoning! Who cares if they save several thousand dollars per year! Bob from San Diego might be able to go out of state and not be covered for “other infertility services” or a maternity stay! The upshot is that the insurance companies would lobby the state legislatures to remove certain mandates in order to bring money to that state through sales of insurance. Let people pick what they want covered. Health insurance costs would decrease, and, isn’t that a big part of what the Democrats have been clamoring for?

Ezra then goes down strange lines linking credit cards and their nationwide expansion, which fails miserably, and

As it happens, the Congressional Budget Office looked at a bill along these lines back in 2005. They found that the legislation wouldn’t change the number of the uninsured and would save the federal government about $12 billion between 2007 and 2015. That is to say, it would do very little in the aggregate.

Ezra misses the point that it is not about saving the federal government money (funny that he is such a big stimulus supporter, yet, is worried about $12 billion dollars), but, about saving actual real people money, ones who cannot borrow hundreds of billions of dollars out of the wind.

Crossed at Pirate’s Cove