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Testimony on HB 2977 – Allowing purchase of health insurance across state lines

UPDATE – Listen to Steve’s testimony by clicking here!

Steve BucksteinCascade Commentary
Testimony before the House Committee on Health Care on HB 2977, allowing purchase of health insurance across state lines

by Steve Buckstein
Co-Chair Greenlick, Co-Chair Thompson and members of the Committee, my name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute, a non-partisan, non-profit public policy research organization based in Portland. Our mission is to promote policies that enhance individual liberty, personal responsibility and economic opportunity in Oregon.

I’m here today to support HB 2977. I believe that allowing Oregonians to purchase health insurance across state lines is a good thing. I want to focus my testimony on one concern often raised about this concept.

Contrary to the claim that allowing Oregonians to purchase insurance from other states would result in a “race to the bottom”, the opposite is more likely true.

As you add mandate after mandate to the only policies Oregonians can buy, those policies get less affordable. Each mandate comes at some cost; if it didn’t, there’d be no reason for insurance companies not to add them to their policies.

As of February this year, we now have 42 mandates* in Oregon, with more proposed in this legislative session. Thus, the real race to the bottom is the race to wipe out everyone’s ability to afford private insurance. The state can then come to our rescue with one-size-fits-all “free” health insurance that covers everyone.  It sounds good, but it will quickly become unaffordable both for individuals and for the state. The only way to keep such a system affordable will be through rationing and waiting lines; the way so-called national health plans work in other countries.

The National Center for Policy Analysis recently asked three questions about the race to the bottom theory. Quoting from its October 27, 2010 commentary:

  1. Since most products are sold across state lines, why isn’t there a “race to the bottom” in every market?
  2. Since consumers often buy warranties — paying extra for reduced risk, why would they be indifferent to consumer protections in health insurance?
  3. What states actually are near the bottom?

Idaho has only 13 benefits that must be included in insurance sold within the state. This compares to an average of 42 mandated benefits for all states, and 70 mandates in the state of Rhode Island.

Another low-mandate state (with 26) is Chuck Grassley’s home state of Iowa.  Like Idaho, Iowa has a below-average uninsurance rate and health insurance premiums that are well below the national average. According to America’s Health Insurance Plans (AHIP), a health insurance company trade group, the average premium in Iowa for 2008/2009 was $2,606 for individuals and $5,609 for families — less than half the premium charged in such states as Massachusetts and New York.

Source: http://www.ncpa.org/commentaries/interstate-insurance-sales-questioning-the-race-to-the-bottom-

So, in conclusion, I submit that competition and choice work in every other sector of our economy. We should try them in health insurance. Please support HB 2977.
Thank you, and I’d be happy to take any questions.

* 29 Disease, condition and services mandates; 13 provider mandates
Source: http://insurance.oregon.gov/sehi/mandated_health_provisions.pdf

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