Making the Case for Selling Health Insurance Across State Lines

The federalist makes a good case in rebutting one of its own. The case for competition across state lines between insurers is not between different companies, who will always compete on prices and services but in state regulations. Laws and regs will always cause price and quality to vary and allow for states to compete just as the insurers do. 

Clancy argues – correctly – that what Republicans really want is not so much competition among insurers, but competition among regulatory regimes; undoubtedly more insurers would already offer a wider array of policy options if not for governmental mandates requiring, say, “mandatory maternity services for single men“. He also notes that such competition is mostly unnecessary in the life and auto insurance markets because states don’t regulate those policies as heavily and just let people transfer their policies from their prior state of residence. (On the other hand, it’s hardly unknown for people to keep cars registered, often illegally, in a state other than where they live in order to evade taxes and fees).

Where they clash is on taxation of these services:

But Clancy goes astray in analogizing to taxation: 

Imagine if we let people pick their “governing state” with respect to taxes instead of insurance. I could, for example, opt to pay South Dakota’s dirt-cheap tax rates while still living, and using the roads and police, in high-tax New York. Why would New York stand for that? Why should it? Under our Constitution, state sovereignty isn't a suggestion, it’s the law. 

The problem here is that taxation exists to benefit the state, and to finance the services it provides to its citizens. It is for that reason that New York has plenary power to require New Yorkers to fork over a portion of their income or property to support our government. It is also for that reason that the Constitution denies New York the power to tax persons and business activities outside its borders and requires that taxes be “fairly apportioned” to the taxpayer’s presence and conduct in the state; other states will tax who and what appears within their own borders. If New York taxpayers are allowed to pay South Dakota, New York cannot retaliate by taxing South Dakotans. 

But voluntary health insurance transactions are for the benefit of the insured, not the State. New York suffers no injury to its sovereign power if I buy an insurance policy offered in Delaware, any more than if I order a computer manufactured in Texas. Indeed, if you assume insurance is commerce (more on this below), New York would be prohibited under the Dormant Commerce Clause – on grounds of discrimination against interstate commerce – from barring me from buying an out-of-state insurance policy were it not for the fact that Congress, in the McCarran-Ferguson Act of 1945, specifically permitted individual states to have exclusive control over the regulation of the insurance business within their borders (a statute passed in response to a Supreme Court decision that had permitted insurers to be subject to the federal antitrust laws). Changing any of that remains within Congress’ power.

This is an idea that the left adopts and mystifies me: Taxes are there for the state. The state is not the same as the people who reside in that state. While I may benefit from things like roads and bridges, I do not get money handed to me, I pay money to the state in exchange for these services. When I buy something in another state, they act like I'm stealing from the state I live in. While I do want to support local business, I honestly could care less if I am supporting local taxes. Indeed I want to pay as little tax as possible, no matter where I live.

If a state wants revenue, it will make it attractive to people to do commerce in that state by lowering it's taxes and simplifying the regulations. This will bring economic activity and the sheer volume of that will more than overcome any reduction in rates. Until guys like Krugtron can understand that, we will continue to be slaves to the state, rather than cooperatively working together to have the state provide basic services and a level playing field. Otherwise, it should leave us and our choices of health insurance alone.

Good pair of articles.