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Idaho should OK insurance sales across state lines

Idaho should OK insurance sales across state lines

Wayne Hoffman
November 2, 2011
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November 2, 2011

If I decide to go online and buy the DVD collection of a stranger from New Jersey, I’m allowed to do it. No one questions the usefulness and brazen free-market nature of this transaction. Indeed, everyone acknowledges that in buying DVDs from some dude across the country, I’ll probably end up with some awesome movies at a good price.

Conversely, there’s a small chance I’ll end up with boxes of scratched and unusable discs. Knowing this, no one seeks to outlaw DVD sales online in order to protect me from what appears to be a good buying decision that could turn out to be foolish.

Cars, land, precious metals — virtually every commodity you can name — are sold across state lines, and most of us acknowledge that’s a good thing. Health insurance, however, can’t be sold across state lines. Why?

Some people, especially state lawmakers, mistakenly believe that insurance isn’t sold across state lines because Congress forbids it. That’s not the case. Decades ago, Congress declared that insurance should be regulated by each individual state.

That prompted the states — in fact, all states — to pass legislation restricting the buying and selling of health insurance to each state’s borders. Under this framework, which the insurance industry lobbied to put in place and lobbies to maintain, residents in the states have almost no access the free market. This has resulted in mini-monopolies that have driven up the cost of insurance throughout the country.

State lawmakers are starting to figure out that their own anti-competitive regulations aren’t helping consumers. Georgia, for example, has passed a statute allowing Georgians to buy insurance in other states. Georgia’s new law isn’t entirely free market, but it is freer than, shall we say, Idaho’s law.

Opponents of the sale of insurance across state lines — mostly in the insurance industry — argue that interstate insurance sales may expose insurance buyers to a product that isn’t bound by all the mandated coverages dictated by lawmakers. Opponents will also argue that premiums might go up should savvy consumers in one state begin fleeing to others — an odd argument that could conceivably be applied to just about every commodity on the planet. Let’s just seal the borders now.

The latest argument is this one: “But healthcare is different. A person buying insurance across state lines might get hurt, and then what?” Were this argument to hold any weight, Idahoans would have to be banned from seeing doctors in other states.

But that would be silly, now, wouldn’t it? In truth, an aggrieved insurance consumer has the same civil and criminal remedies available to him or her that have always existed. That doesn’t change with the availability of insurance being made available on the open market.

The real reason insurance isn’t sold across state lines is because the insurance industry likes things the way they are. It’s market protectionism in the guise of consumer protection. Insurance companies detest competition, and lawmakers have bought the insurance industry’s argument that Idahoans benefit by being told that they are forbidden from buying a legally-recognized commodity in another state.

If Idaho lawmakers are serious about free markets, the first thing they should do in 2012 is advocate for and permit the buying and selling of insurance across Idaho’s borders.

- Wayne Hoffman is the executive director of the Idaho Freedom Foundation. Email him at[email protected].

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