Pfeiffer Touts Interstate Insurance And National Health Plans Like They’re Good Things

Dan Pfeiffer has become something of a blogger/communications director at the White House, often posting rebuttals to various commentaries or news items. Today he took aim at a Charles Krauthammer column which criticized the health care reform bills, and in so doing touted some really pernicious elements of them.

Seeking to defuse Krauthammer’s argument, Pfeiffer noted that key pieces of the Republican plan for health reform already exist in the Congressional bills:

Krauthammer describes a “better choice” for health reform as having three elements: tort reform, interstate purchasing and taxing employee benefits. All three elements are part of the current effort.

President Obama issued a Presidential Memorandum directing the Secretary of HHS to move forward with an initiative to give states and health systems the opportunity to apply for medical liability demonstration projects. Section 2531 of the House bill also includes a voluntary state incentive grants program to encourage states to develop alternatives to traditional malpractice litigation.

Section 9001 of the Senate bill does impose a fee on high-cost health care plans. (A PDF of the Senate bill is available here.) To clarify: This is a fee on insurance companies that offer high-cost plans that drive up the cost of health care for all Americans, not a tax on individuals.

Section 1333 of the Senate bill allows for interstate health care choice compacts. Coupled with insurance market reforms to ensure individuals are not discriminated against, this policy will expand health care choices to millions of Americans.

The tort reform memorandum is pretty weak tea, and in general tort reform has had no success whatsoever in holding down costs (the state with the most stringent medical liability laws, Texas, also has the most uninsured in the nation and their premium rates have increased 91.6% in a decade). The excise tax on high-end health insurance plans has been well-discussed.

But the interstate health care choice compacts have not, and they are potentially very dangerous. I wrote about them in my pre-FDL days:

This is something that conservatives have been begging to do for years. Even the most outgunned conservative on a talking head debate can vomit up “let people take their insurance across state lines to increase competition!” It sounds reasonable. But there’s a very good reason why it would quickly turn into a nightmare, and you can see it in the examples of Delaware and South Dakota.

Both of those states have essentially no regulations on credit card companies. When legislation passed allowing banks to issue credit cards across state lines, some states started wildly deregulating their credit card markets in a race to the bottom. South Dakota and Delaware won. And now practically all credit cards are issued from those two states.

This would be precisely what would happen to the health insurance market under these “health care choice compacts,” which could go national, based on this language. Right now, insurance companies can sell their coverage “across state lines,” they just have to be accountable to the laws of the state where they sell it. Under this plan, insurers would be allowed to ignore the regulations in the state where individuals purchase insurance, and only subject to the laws where they issue it. Insurance regulations vary widely in the states, and would do so more under this compact. Anti-government legislatures could gut insurance regulation to entice insurers into setting up their corporate HQs there. States with regulations in place might prefer to lighten their regulatory case load, in this era of budget struggles, and let some other state deal with it. The insurance exchanges would presumably put a stop to this practice, but crucially, they only have a state-level framework and not a national one.

Pfeiffer says that the interstate compacts would be “coupled with insurance market reforms” that would ensure non-discrimination, but there are many more laws and regulations enforced by the states which could be pre-empted under this system. The Congressional bills have generally been reluctant to create a federal bureaucracy to regulate insurance, preferring to hand the rulemaking process over to the National Association of Insurance Commissioners, an informal body of state Insurance Commissioners often described as in hock to the insurance industry. Therefore, relying on the federal reforms to save us from unscrupulous practices seems like cold comfort.

The question is how prevalent these compacts would become, given that they would have to compete with exchanges. But if they can get a foothold in the employer market and sell insurance to employers, they may have a business. And over time, that race to the bottom would commence.

It’s not exactly pleasing to see a Democratic Administration continually defend themselves with phrases like “see, we included your Republican ideas!” That was how we got a stimulus package with 40% tax cuts, which was too small for the job. And that’s how we’re getting a health care bill which includes one of the most long-sought conservative policies, one destined to enrich insurance companies and screw consumers.

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