Answering the GOP on Health Insurance.

Feeling the need to pretend they actually have a desire to reform health care, Republicans have seized on two things they can repeat: 1) We should have "tort reform," which when Republicans design it means making it almost impossible to recover reasonable damages for medical errors, and 2) We should "let people buy insurance across state lines."

As with many arguments they make, this sounds perfectly sensible, so long as you don't know anything about how things actually work. In practice, letting people buy insurance from any state would result in an immediate race to the bottom, of the kind we've seen in the credit card industry. Ever wonder why all your credit card bills go to South Dakota? The reason is that unlike most states, South Dakota has a virtually limitless "usury" law, meaning businesses located there can charge as much interest as they like. Their law was literally written by Citibank in 1980. In short order, credit card companies moved their operations there (and to other states like Delaware that passed similar laws), so they can charge you 25 percent interest on your card. If everyone were allowed to buy insurance from any state, we would see something similar: Companies in states with the weakest regulations would be able to lure customers with low rates that look like a bargain, until you get sick and realize your insurance doesn't cover anything.

But here's a way the Republican argument can be answered: You don't want to be forced to buy insurance in your state? Well we've got the ticket for you. It's called the national insurance exchange. It'll allow you to buy insurance from companies headquartered anywhere! As long as they meet the requirements of the exchange -- which ensure that they can't screw their customers -- they'll be available to you no matter where you live. Your concern has been addressed.

The bill that passed the House contained a national exchange, while the bill that passed the Senate had 50 state exchanges. Since in order to move forward, the House is going to have to pass the Senate's bill, the national exchange would have to be part of a corrective passed through the Senate in reconciliation. A national exchange will be more efficient and better for consumers. It ought to be one of the first things they fix.

-- Paul Waldman

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