The Market Center Blog

Center for Freedom and Prosperity Foundation

For Immediate Release
Monday, June 19, 2006
202-285-0244
www.freedomandprosperity.org

Study Finds that Mandates Drive up Cost of Health Insurance, Jurisdictional Competition Will Fix Problem
Competition Between States will Lower Costs and Make
Health Care More Affordable

 (Washington, DC, Monday, June 19, 2006) -- Today, the Center for Freedom and Prosperity Foundation released a study examining how jurisdictional competition can lower health insurance costs in the individual market. The study, entitled "The Health Care Choice Act: Restoring Competition in the Individual Insurance Market," is authored by Dr. Sven Larson, a research fellow with CF&P Foundation.  Dr. Larson finds that government regulations and restrictions are artificially boosting premiums and making it more difficult for families to get health insurance. State governments deserve most of the blame, particularly since they have imposed protectionist barriers preventing consumers from buying insurance policies issued in other states. Combined with expensive coverage mandates that states impose on health plans offered within their jurisdiction, the result is less competition and higher premium costs. These problems could be solved if consumers were free to purchase policies issued in other states, as proposed by Congressman John Shadegg's Health Care Choice Act (H.R. 2355).

Link: The Health Care Choice Act: Restoring Competition in the Individual Insurance Market
http://www.freedomandprosperity.org/Papers/hc-choice/hc-choice.shtml

Andrew Quinlan, CF&P Foundation ~ "Dr. Larson finds a direct correlation between the number of health care insurance mandates a state has and the number of uninsured.  Since state lawmakers frequently are controlled by the special interests who benefit from mandates, jurisdictional competition is the only real solution."

Daniel Mitchell, The Heritage Foundation ~ "Individuals should have the freedom to contract with insurers based in other states. Not only will this break the power of interest groups and politicians to impose costly mandates, as shown by Dr. Larson, it also will resuscitate the Founding Fathers' goal of no protectionism between states."

Veronique de Rugy, American Enterprise Institute ~ "Protectionism is a bad idea, whether it is between nations or between states. Dr. Larson's paper demonstrates how competition across state lines will lower health insurance premiums for families."

Executive Summary and Key Observations

America's health care system has state-of-the-art technology, highly skilled medical professionals and access to cutting edge medical research. However, government regulations and restrictions are artificially boosting premiums and making it more difficult for families to get health insurance. Regulatory intervention by state governments is the problem, particularly protectionist barriers preventing consumers from buying insurance policies issued in other states. Combined with expensive coverage mandates that states impose on health plans offered within their jurisdiction, the result is less competition and higher premium costs.

The problem with uninsured families is alarming - and largely the result of state coverage mandates.

• Sixteen states have 40 or more coverage mandates - their average rate of uninsured residents is 15.4 percent;
   
• In the 19 states with 30-39 mandates, the average uninsured rate is 14.8 percent;
   
• States with less than 30 mandates - 16 including the District of Columbia - average 13.1 percent uninsured.

Congressman John Shadegg (R-AZ) has introduced a bill, the Health Care Choice Act, which would help reduce the uninsured problem. The idea is to restore unfettered interstate commerce and let insurance buyers shop for a plan on a national market. This would cut insurance premiums through:

• Consumer choice. Competition brings better products to the market at lower prices.
   
• Lower costs. State mandates increase fixed cost in creating and offering health plans. A national market lets insurance providers enroll more people in one plan. Fixed costs and risks are spread on a larger pool of insurance buyers.
   
• Jurisdictional competition. State governments will be encouraged to reduce or eliminate expensive mandates once consumers start buying health insurance policies from sellers in states with lower levels of regulation.

According to one estimate, freedom to purchase insurance policies issued in other states could save some families as much as 30 percent on their health policies. A family in Minnesota, the state with the most coverage mandates, could save $236 off a $800 monthly premium.

State-created cartels and expensive mandates are artificially boosting health insurance premiums. Restoring the Constitution's promise of unlimited interstate commerce is the most effective way of breaking up these inefficient oligopolistic structures.

Link to paper:
http://www.freedomandprosperity.org/Papers/hc-choice/hc-choice.shtml

PDF version of paper:
http://www.freedomandprosperity.org/Papers/hc-choice/hc-choice.pdf

For additional comments:

Sven Larson can be reached at 518-581-8528, valfardresearch@yahoo.com
Andrew Quinlan can be reached at 202-285-0244,
quinlan@freedomandprosperity.org
Dan Mitchell can be reached at 202-608-6224, dan.mitchell@heritage.org
Veronique de Rugy can be reached at 202-862-7165, VdeRugy@aei.org

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