Wednesday, May 21, 2008

John McCain's Health Insurance Scam

[Welcome Kaiser Network readers!]

This is not a political blog.

Well, maybe.


But not really.

However, we received a "heads up" from Michelle Lange about Prez hopeful John McCain and his secret plan to change the way health insurance is bought and sold.

This article seeks to tie the future of McCain Health Insurance to the credit card industry.

Frankly, not only do they make a strong case, but a scary one as well.

Why do most of us send our credit-card bills to South Dakota or Delaware? The answer to that seemingly arcane question illustrates the dangers of replacing state regulation with no regulation at all. It also offers a cautionary tale about a little-understood provision at the center of John McCain's health care plan.

The details about the credit card industry are in the link, so I won't bore you with that portion of their argument. Let's just say the reason why banks prefer to offer credit cards from Delaware or South Dakota is because they can make more money by ripping off anyone with less than perfect credit.

So what does that have to do with health insurance?

Apparently Mr. McCain's proposal includes a provision whereby "families should be able to purchase health insurance nationwide, across state lines."

That is also a proposal put forth by NFIB.

How do I know?

I was contacted by two individuals who are high up in the organization a few months back. They wanted my feedback on their proposal to lower health insurance rates by making it possible for anyone to purchase across state lines.

Let's just say they were not pleased with my response, and decided I would not be a good mouthpiece for their misinformed proposal.

So why is it bad to allow individuals to purchase health insurance from another state, particularly if rates are lower than in their home state?

An insurance company that chose to be regulated under Arizona law could sell policies in New York without following New York rules. Arizona, like most states, lets companies charge what they want to people who are sick—or simply deny them coverage altogether. Under Shadegg's bill, insurers wouldn't even need to pick up and move their operations; it would be enough to file some paperwork with a state insurance commissioner and pay that state's relevant taxes.

New York requires carriers to cover anyone, including their pre-existing medical conditions.

Arizona does not.

The result is, NY residents pay much higher rates for similar coverage than those in AZ.

Why is that bad?

This is a zero sum game.

If all the healthy NY residents buy from AZ then only the sick ones are left in the NY pool. The result would be, fewer carriers in NY and much higher rates than they have now.

How is this a positive?

John McCain may know about the military and his wife knows beer, but that does not make either of them an expert on health insurance.

This is a dumb idea.
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