Mail Order Health Insurance: Why Not?

In 1893, when Sears, Roebuck & Co. sent its first mail-order catalog, it revolutionized retail purchasing, promising a "Book of Bargains: A Money Saver for Everyone," and the "Cheapest Supply House on Earth." More importantly, it opened a nationwide market for household goods. Out of its Illinois headquarters, Sears could sell goods to customers in New York, Georgia, the burgeoning American West, and beyond. In today's internet age of Amazon and other online retailer giants, we hardly know, and rarely care, the state (or country) out of which the purveyor of our goods operates. If I don't like the style of the running shoes available in my local sporting goods store in Lawrence, Kansas (and, in fact, I don't), I can drive to Kansas City, Missouri, or, even more easily, order from a mail-order catalog or online site to have the exact running shoes that I prefer delivered to my door.

Indeed, what could be wrong with expanding the same marketing approach and consumer choice to health insurance? In last Wednesday's Presidential Debate, amid a detailed exchange on the candidates' health care reform proposals, Senator McCain slipped in this little zinger: "I want to give every American a $5,000 refundable tax credit. They can take it anywhere, across state lines. Why not? Don't we go across state lines when we purchase other things in America? Of course it's OK to go across state lines because in Arizona they may offer a better plan that suits you best than it does here in Tennessee."

Senator McCain's plan includes dismantling employer-based health insurance and shifting to individual health insurance policies on a nationwide market, as discussed in his recent "Contingencies" article. McCain's Arizona colleague, Representative John Shadegg, introduced the Health Care Choice Act, which would expressly allow health insurers to charter in one state (the "Primary State") and sell policies in any of the other 49 states ("Secondary States"). Insurers would be exempt from state coverage mandates, advertising, underwriting requirements, and rate-setting rules in secondary states.

But what works for running shoes, may not work for health insurance. Or banking. Or mortgages. Or credit cards, as Senator Obama's campaign advertisement counters. The primary concern with allowing purchase of health insurance across state lines is the "race to the bottom" problem. States would dismantle consumer protection laws in order to attract health insurance business and jobs to the state, much as Delaware and North Dakota have become havens for credit card companies by lifting consumer credit interest-rate caps. Many states currently require health insurers to cover certain medical services, such as mental health and maternity, and restrict insurers' ability to refuse to sell policies or charge more to patients with preexisiting conditions or other high risks. Critics (and here) charge that onerous state mandates limit consumer choice by requiring people to purchase products they don't want or won't use, drive up the cost of health insurance, and unfairly force healthy individuals to subsidize unhealthy people.

True, when I purchase running shoes, I don't want to pay more for my shoes because some other runner can't afford his, or pay for extra features, like stability control or space-age fabrics, that I don't want or need. But health care isn't like running shoes. And no one is suggesting a goal of universal coverage for running. I can walk, run, and maybe even win marathons without running shoes. But I won't get very far without affordable health insurance. Our current health care delivery system is far from perfect, but the solution requires more careful thought than the glossy layout of a mail-order catalog.