Let insurance companies compete across U.S.

A simple idea for the health-care debate:
Let insurance companies compete across U.S.

With public support draining away from a comprehensive health-care overhaul, it is time to consider modest changes such as encouraging more private competition in health insurance. This doesn't require another big-government program. It only requires junking laws that prevent health insurers from selling across state lines.

Right now, the U.S. does not have a national market for health insurance. It has 50 separate state markets. Erecting walls around each state means less competition and higher prices for consumers. There's not even one market for the Chicago area. If you live in South Holland or Calumet City, your insurance options could be completely different from your Indiana neighbors in Hammond or Merrillville. What sense does that make?

The easiest way to see how insurance competition benefits consumers is to look at auto insurance. That's a huge, nationwide market and companies compete intensively for a share of it. Some stress their low prices, others customer service, whatever gives them an edge in the marketplace. Geico and Progressive have been especially aggressive in touting cost savings. State Farm and Allstate certainly compete on price, but they stress service after an accident. That's why Allstate says "you're in good hands," and State Farm says it will be there "like a good neighbor." Other companies, like SafeAuto, focus on drivers who want only minimum coverage to meet state license requirements. In short, auto insurance companies compete vigorously to provide what different consumers want, and they tell them so in national advertisements. Life insurance companies do the same thing. There are even companies that specialize in comparing policies for customers. Competition drives down excess profits and means better, cheaper options for consumers.

Ever see an ad touting health insurance? They are rare because the markets are small and companies don't need to compete aggressively on price or service. Introducing such competition would be good for consumers, wouldn't require another Washington bureaucracy and could be done quickly.

Obviously, small changes like this wouldn't solve the myriad problems with America's health-care system. But modesty can be a virtue. In fact, Americans typically favor incremental steps to solve big problems rather than top-down, technocratic plans, which are far more common in France or Germany.

Twice now, comprehensive government plans to change health care have faced withering criticism. First Lady Hillary Clinton's plan, formulated secretly in the Clinton White House, was dead on arrival in Congress. Barack Obama and his advisers tried the opposite approach, giving Congress general guidelines and letting them work out the details. Several plans are still on the table, but voters are clearly anxious about what they are hearing.

Although Obama and Clinton tried different legislative tactics, their plans shared the same fatal flaws. They tried to do too much at once, and they centralized too much control in Washington. Now is a good time to reboot, isolate specific problems and focus on them. Introducing more market competition in health-care insurance is a good place to start.

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