GOP, Trump must pull down state barriers in ObamaCare replacement

Speaker of the House Paul Ryan’s plan for reforming the Affordable Care Act suffers from at least one grievous flaw:  It does not allow interstate competition among health insurers, which President Donald Trump repeatedly promised to create during his long campaign for the presidency.  President Trump has tweeted that interstate competition will be part of Phase 2 or 3 of health care reform, but it should be done immediately.

Right now, health consumers can only buy health insurance from instate licensed health insurers.  This is why we have 50 Blue Cross/Blue Shield health insurance plans in each of the 50 states instead of one national plan.  In-state licensing of health insurers means that in the 50 states there is an oligopoly market in health insurance and in some states only one health insurer is licensed, creating a monopoly market.  

{mosads}The absence of interstate competition in health insurance has led to oligopoly and monopoly markets in health insurance, which has led to much higher prices for health insurance and to much lower quality health insurance plans than would exist if there was national competition.

Imagine how badly grocery stores would function if you could only buy groceries from in-state licensed grocery stores and if there was no national market in chains of grocery stores like Whole Foods.  Prices would skyrocket and the quality of service would go down.  This is exactly what we are seeing in the health insurance markets.  Health insurance spending accounts for 17 percent of GDP, and doctors are trained in different states from the ones they practice in while medicines and treatment plans constantly cross state lines.  

Health insurance is a national market and it’s high time for federal law to be amended to allow interstate competition in health insurance!

Don’t worry, getting rid of state lines, which will promote competition, will be in phase 2 & 3 of healthcare rollout. @foxandfriends

— Donald J. Trump (@realDonaldTrump) March 7, 2017

The reason we do not now allow interstate competition in health insurance is because Congress foolishly, in the McCarran–Ferguson Act, forbade interstate competition in response to a New Deal Supreme Court decision, which held that the buying and selling of health insurance is commerce, which it surely is.  

Congress, at the time, was concerned about the New Deal Supreme Court’s expansion of the commerce clause to cover the insurance industry.  The McCarran-Ferguson was bad public policy when it was passed in 1945, but today it is disastrous public policy that has led to much higher costs for health insurance and much lower coverage than would be available if there was interstate competition.

President Trump repeatedly promised that his healthcare reform would offer interstate competition in health insurance, and the president has an excellent record of keeping his campaign promises so far.  This is one of the most important promises the president made on the campaign trail, and he needs to keep it.  

Congress should make sure that this promise is kept by legalizing interstate commerce in health insurance.  Just as airplane deregulation in the late 1970’s led to a huge shake out in the airline industry and to much lower costs and higher quality of service so too would interstate competition in health insurance do the same thing.

The health insurance industry is very powerful politically because they like the oligopoly and monopoly markets they function in at the state level, and they are willing to spend millions of dollars in campaign contributions to try to defeat interstate competition in health insurance.  

Congress needs to ignore the health insurance industry’s plea for special benefits and to do what is best for American consumers.  The way to do that is to legalize interstate competition in health insurance.

Steven G. Calabresi is the Clayton J. and Henry R. Barber Professor of Law at Northwestern University. Mr. Calabresi served as a Law Clerk to Justice Antonin Scalia of the United States Supreme Court, and he also clerked for U.S. Court of Appeals Judges Robert H. Bork and Ralph K. Winter.

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