McCain Is Right On Interstate Health Insurance

It's time to modernize our market

Let's hope Democratic presidential candidate Barack Obama understands more about financial markets than he does about health-insurance markets. But the initial evidence isn't promising.

A recent kerfuffle between Mr. Obama and Republican presidential candidate John McCain concerned the interstate purchase of health insurance. Mr. McCain wants to allow people to buy health insurance across state lines. Mr. Obama, on the other hand, opposes the idea and seems to believe it would create an unsafe, unregulated health-insurance market.

Mr. McCain backs legislation sponsored by Arizona Rep. John Shadegg. Known as the Health Care Choice Act, it would allow individuals living in one state to purchase health insurance being sold to people living in other states. The policy would still have to meet the regulations of the state in which it is being sold, and would be subject to additional federal oversight.

In other words, the McCain-Shadegg reform would allow a person living in New Jersey or New York to buy health insurance that is being sold in and regulated by Pennsylvania or Connecticut. That's hardly the Wild West of health insurance.

About 18 million Americans today buy health insurance in the individual market because they don't have access to employer coverage or they aren't in a government-sponsored program (Medicare, Medicaid, etc.).

Many people in the employer-provided group market -- about 160 million Americans -- can already get health insurance across state lines. As a senator Mr. Obama, for example, lives in Illinois, but can get his health insurance through the Federal Employees Health Benefits Program, which is not located in Illinois. In addition, lots of small employers who offer health insurance through state-regulated insurers have employees who live in other states. And when my youngest daughter moved from Texas to New Jersey to go to graduate school, she remained on our family's Texas-regulated health insurance. In fact, people living in one state who buy health insurance in the individual market often move to other states, carrying their insurance policy across state lines.

Almost no problems have arisen from all of these interstate coverage options. So why are the two presidential candidates fighting about expanding interstate health-insurance options?

Mr. McCain recognizes that millions of Americans, many of them uninsured, live in states that impose numerous mandates -- there are about 1,900 mandates nationwide -- and restrictions that make health insurance unaffordable. Mr. McCain's proposal would simply let individuals faced with high prices and few options in their own state buy a regulated policy in another state. That's how other industries work. People buy just about everything across state lines, with very few problems.

Mr. Obama ignited the latest feud by telling an audience, "So let me get this straight -- he wants to run health care like they've been running Wall Street," according to the Washington Post, implying that Mr. McCain would relax insurance regulations.

Mr. Obama opposes interstate sales for two reasons. First, he doesn't believe a market can work in health insurance. He believes it is necessary for the government to look over everybody's shoulder to make sure patients are getting the care and coverage the government thinks is appropriate at a price the government considers affordable.

Second, Mr. Obama likes benefit-rich policies that cover virtually everything, but are also very expensive. He wants people to have the types of health-insurance plans that the uninsured can't afford. He will "solve" the affordability issue by imposing price controls and regulations on insurers and drug companies, and force taxpayers to subsidize the rest of the cost.

Creating an interstate option for individuals to purchase health insurance doesn't solve every problem faced by the 45 million Americans who are uninsured. But the choice isn't between a regulated or unregulated health-insurance market. The choice is between an overregulated market favored by Mr. Obama and a regulated market favored by Mr. McCain that provides more options to help individuals afford health coverage.

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