Congress should liberate interstate insurance market after replacing ObamaCare
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In their zeal to repeal and replace ObamaCare, President Trump and the Republican Congress must not neglect one important feature of responsible health care reform: Addressing the difficulty of buying private health insurance policies across state lines and the lack of competition in the U.S. health insurance market. As others have argued in the past, this mostly—though not always—overlooked problem is well within Congress’ constitutional power to tackle.

One of the American healthcare system’s biggest flaws is the fragmentation of the private health insurance market by state licensing laws, which block consumers from purchasing out-of-state health insurance plans, force insurers to offer policies state-by-state, and prevent these affiliate insurance companies from competing with each other across state lines. Studies by organizations like the American Medical Association have found that many U.S. insurance markets are dominated by too few firms, giving insurance companies enough market leverage to charge higher premiums, to reduce payments to doctors, and to undermine health care quality.

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Unsurprisingly, this lack of competition kills the market discipline whereby consumers could otherwise keep insurers honest by taking their business elsewhere when they don’t get the best possible bang for their bucks.



This is where Washington comes in. The Commerce and Supremacy Clauses of the U.S. Constitution empower Congress to regulate interstate commerce and to “preempt” state health insurance laws. The inflationary effect that state barriers to  competition have on health insurance costs nationwide substantially affects interstate commerce in a way that empowers Congress to regulate it.

Meanwhile, the Supremacy Clause holds that when constitutionally valid federal laws conflict with state laws, federal law prevails. Accordingly, Congress could expressly preempt state health insurance licensing schemes by passing a new federal law that explicitly aims to cancel out its state-level counterparts.

Even the federal McCarran-Ferguson Act of 1945, through which Congress chose to allow states to regulate insurance in general, needn’t be an insurmountable obstacle. It instructs the courts not to interpret federal insurance laws as preempting state ones “unless such Act specifically relates to the business of insurance.” So even under McCarran-Ferguson, Washington could still regulate the national health insurance market as long as it clearly states its purpose to do so.

Conservative believers in state autonomy may understandably balk at such a proposal as yet another federal usurpation of state power. Yet that reaction would be quite mistaken. First, as outlined above, the text of the Constitution expressly delegates this power to Congress. Indeed, the Framers of the U.S. Constitution included the Commerce Clause in the Constitution partly to empower the federal government to stop the states from imposing protectionist policies that strangle interstate commerce. Second, Republicans in Washington generally don’t hesitate to jettison their stated belief in states’ rights and intervene in state jurisdiction when it suits them, from raising the drinking age to criminalizing marijuana to banning partial-birth abortion.

Finally, it’s important to remember that state and local governments can violate individual freedom just as easily as a central government can. Blocking Americans from voluntarily doing business with each other across the country is just such a violation of personal liberty. Most areas of public policy should generally be left to the states; but health insurance regulation is one notable exception to that rule.

Leaving health insurance licensing to the states brings about less competition, less consumer choice and higher costs. As they search for alternatives to ObamaCare, then, Trump and congressional Republicans should consider restoring federal regulation of this particular industry—for the sake of economic freedom, competition, affordability, and fairness.

Akil Alleyne (@Akalleyne) is a graduate of Princeton University and the Benjamin N. Cardozo School of Law, and a former program associate at the Foundation for Individual Rights in Education.


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