Sunday, August 23, 2009

Crossing State Lines

Several Republican leaders have suggested that the best way to reform healthcare would be to allow people to buy health insurance across state lines.

I believe that this would be a very bad direction to take reform.

The reason for my position is that insurance is a contract for care. To ensure that a customer receives care, they have to be able to sue the insurance company in their local district.

Anyone looking at the dirty workings of insurance discovers that the industry is an ugly nexus of lawsuits with insurance companies and care providers in ongoing battles of claims and counter claims.

The very terminology of the game gives this away. When the insured visits a doctor, they do not pay a bill. The insured issues a claim against their insurer. There is a later settlement between the doctor's lawyers and the insurance company's lawyers.

Allowing people to purchase insurance from across stateliness introduces jurisdiction problems into the dance of issuing and settling claims.

Of course, the state boundary issue is far less of an issue for the Medical Savings and Loan. The policy holders negotiate and pay their bills in cash eliminating the need for the complex claim structure of insurance.

Since insurance involves a complex claims process between multiple parties, I think it is unadvisable to allow people to buy insurance from different states.

I believe the difficulties of portability simply show that pooled insurance was a bad idea from the beginning. Rather than coming up with increasingly complex regulations and tax breaks designed to make a bad idea work, I think we would be better of scrapping insurance as the primary means of funding health care and return to a more civil day of direct negotiations between doctor and patient.


reybluefox said...

That would be fine if doctors brought their cost down to the rates that they should be instead of what the insurance companies have driven them to.

y-intercept said...

About 8 million people have moved to HSAs. The response is a growing number of private practices that do negotiate directly with customers. These doctors give out prices and prices for visits have fallen into the reasonable territory. In Salt Lake prices are as low as $80 for a half hour doctor visit.

James Morgan - Puritan Financial Advisor said...

Allowing people to purchase insurance from across stateliness introduces jurisdiction problems into the dance of issuing and settling claims.

y-intercept said...

Mr. Morgan,

Thanks for the comment.

After discussing why people shouldn't buy health insurance over state lines, I wish people would ask the next obvious question:

Why did we create this insane system where every medical purchase is a lawsuit?

There's absolutely no problems with having a Health Savings Account in a different state because people are buying their care with cash and direct doctor/patient negotiations.