Competition the cure for state's ailing health-care policies

A new report by the Heritage Foundation finds that competition is the best remedy for sickly health-insurance markets in states that, like Kentucky, have sent carriers scurrying away. The report recognizes that incentives matter in the health-care market just as they do in every market.

Too many state health-insurance markets have become highly regulated leaving only a few insurance carriers to choose from and often the only remaining companies tend to offer one-size-fits-all products that are unaffordable and lack innovation.

Such an exodus occurred following implementation of the ill-fated Kentucky Kare program in the 1990s. Since then, the commonwealth's health-insurance climate has deteriorated.

Changes in the form of incentives and competition are needed to restore the vibrancy of Kentucky's health-insurance market. For example, Heritage's report advises Congress to allow individuals to purchase health insurance in other states.

This would require changing the federal tax code, which currently does not allow customers to purchase insurance outside of the state in which they are employed. Legislation has been introduced in Congress that would allow people to buy health insurance from any company they wish.

Such open competition would force states to compete by removing burdensome and unnecessary regulations, which often prohibits flexible and affordable coverage options, and making insurance less costly and more accessible.

As Heritage's report points out, allowing individuals to cross state lines to purchase coverage would encourage more consumer-friendly health-insurance markets. This would likely result in healthier citizens and greatly improve the condition of health-care systems in Kentucky and many other states.

Sources:

Competition and Federalism: The Right Remedy for Excessive Health Insurance Regulation by Nina Owcharenko, Edmund Haislmaier and Robert E. Moffit, Ph.D, Heritage Foundation, May 5, 2006

Health Care: Why Incentives Matter by Kelly McCutchen, Georgia Public Policy Foundation, May 5, 2006.