Across State Lines

Nestled within the framework for health care reform that emerged Wednesday from the Senate Finance Committee is a provision that at first glance seems like a no-brainer: Allow the interstate sale of health insurance policies.

Chairman Max Baucus, a Montana Democrat, envisions creation of "health care choice compacts" that would allow such purchases.

Free-market thinkers long have argued that lifting the ban on interstate sale of health insurance would drive premiums down and service up. Look at the vibrant competition in the auto insurance market, they say.

Sales across state lines of national health insurance plans might have benefits. We've all seen what has happened in other industries when competition was unleashed. But insuring people is different than buying a cell phone plan. Without careful regulation, the interstate sale of health insurance might lead to a harvest of cherry-picking by insurers who sign up only the healthiest people for their plans and set up shop in states with the least regulation and fewest mandates.

For this to work, a regime of national licensure might be needed, along with minimum rating rules and other safeguards, to ensure consumers are protected.

The Baucus proposal leaves formation of the compacts to the states, which could allow for some experimentation in different regions of the country.

As President Barack Obama noted in his speech before a joint session of Congress last week, many states have precious little competition for health insurance. Even in states that do have competition, it's not the vigorous kind that drives down prices and drives up service. Increasing competition for consumers' insurance business should be a goal of any plan that emerges from Congress.

Allowing interstate sale of insurance is worth a look. But lawmakers must think this idea through carefully to ensure that consumers are protected. Insuring cars isn't quite the same thing as insuring people.

REPRINTED FROM THE MILWAUKEE JOURNAL SENTINEL.

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