A Republican proposal to replace Obamacare with a system allowing insurers to sell out-of-state health plans has taken on a life of its own. The GOP theory holds that by opening restricted geographic markets to competition from out-of-state insurers, consumers would benefit from lower prices. The invisible hand of the marketplace would reach out to make insurance affordable, the thinking goes.
As everyone who believes in empirical evidence knows, things just don’t work that neatly in real life. In te only real-life test of this theory, it’s failed miserably.
Last year, Georgia became the first state the allow insurance plans approved by other states to be sold in Georgia, essentially opening up the market to all comers. Any health insurance plan approved by any state, including states with lower standards and regulatory requirements than Georgia, could be sold in Georgia. Consumer advocates have long warned that this would set off a race to the bottom among state regulators.
It was more than a little amusing to read in the Atlanta Journal Constitution that Georgia’s unfettered market got no lover from health insurers:
“Nobody has even asked to be approved to sell across state lines,” Georgia Insurance Commissioner Ralph Hudgens said. “We’re dumbfounded. We are absolutely dumbfounded…”
“I’m really surprised because it was such a bumper sticker issue by Republicans saying if we could get across state line selling, we could reduce the cost of health care,” he said.
Everyone was using this line. McCain used it (to the approval of the Wall Street Journal). House Republicans have pushed it every chance they get. It is kinda the GOP’s Holy Grail when it comes to Ayn Rand-style unfettered free market health care reform.
And now we know: it doesn’t work.