Current Insurance Restrictions

We’ve all heard people say (or have said ourselves, upon occasion) that insurance companies should be allowed to sell health insurance policies across state lines to increase competition and lower costs for the consumers. W.E. Heasley (who has more than 30 years in the insurance business) addresses that issue and related ones:

The idea of selling health insurance across state lines is not a new idea. The idea can be traced back to a 2005 proposal by Representative John Shadegg of Arizona. (10)

One of many items that drive up cost in health care and consequently health insurance are state mandates. (11) State mandates basically broaden coverage beyond the basic intended coverage under an insurance policy form.

As mentioned above basic coverage afforded by an insurance policy form is rather constant in the fifty states. That is to say, the basic language of a major medical policy does not vary widely. However, state mandated coverage varies widely. Currently 1,823 mandates exist among the several and many states. (12) The state with the most mandates is Minnesota with 62 mandates and the state with the least mandates is Idaho with 13.

Did you get that? State mandates (legal requirements for certain coverages) differ widely from state to state. Therefore:

The mandated coverage also drives out insurers and hence competition within particular states. (15) The more and stricter the mandates, the fewer insurers that want to provide insurance. For example, New Jersey with many mandates and strict mandates only has a handful of insurers willing to participate. Hence the mandates create insurance oligopolies offering coverage rather than a wide spectrum of insurers competing in a free market.

Go and read the whole piece–and look up the number of mandates for particular states. I checked on South Dakota and found that we have 31 separate mandates for health insurance policies, putting us squarely in the middle of the pack in comparison with other states.

HT: Betsy’s Page