What if state regulation, not federal law, is the leading impediment to setting up interstate insurance markets, coverage, and sales? Would that be a win for Republicans, Democrats, or simply up for grabs by the best spin artists?

While Republican-backed lawsuits challenge the ability of states using the federally-maintained insurance marketplace to receive subsidies, the real problem is the state exchanges, which put up federally-encouraged walls to stop interstate healthcare commerce.

 

The Party of Two Minds

America’s health insurance system creates some complex tension among Republicans who simultaneously advocate free market principles and states' rights.

On the one hand, the state exchanges preserve the ability of states to establish their own minimums and regulations on health coverage, and allow providers to operate and sell insurance within those rules. That has not stopped some big GOP players from putting their weight behind

opening up markets that cross state lines—something Democrats committed to making Obamacare work have shown less enthusiasm for.

But health insurance is ultimately a consumer good, under almost universal demand without particular respect to location. And depending on the size, economy, and other peculiar demographics within a given state, risk pools are not necessarily homogenous, meaning statewide regulations and minimums for acceptable coverage aren’t particularly well-suited across all populations with the state.

Obamacare took a lot of hits (and not just from the right) for burdening businesses big and small with new, expensive obligations; for raising insurance costs right alongside average deductibles, meaning that getting more people covered didn’t yield savings for many; and of course, for making federal overtures toward a nationalized or single-payer system.

But rather than federalizing coverage and expanding existing federal programs like Medicare and Medicaid, why not pave the way for nationalizing the market?

 

Family Values

Most other consumer products and services are transacted without respect to state boundaries -- the patchwork of state alcohol laws notwithstanding. One of the main disincentives to insurance companies trying to take advantage of the limited existing state-to-state or regional compacts on health coverage is navigating the bureaucratic nuances, with all their associated fees, obstacles, and re-negotiations with new providers.

Yet demand and consumption of healthcare is not subject to any such questions of location or residency: medical need travels through the nation’s porous state borders along with goods, traffic, and people.

Young people need mobility to access employment, yet tend to be the smaller contingent of healthcare consumers (and under Obamacare, the higher payers for premiums). Then there are senior patients, living longer and managing more chronic conditions, who tend to be

leading demand for care, and less flexible in terms of mobility.

Continuity of care takes on a certain premium -- especially with chronic conditions. And while retirement promises more time to travel, continuity of care is hampered by restrictive insurance coverage networks.

So what is the best way to accommodate the two demographics and their distinct needs?

Interstate insurance coverage through cross-country markets would just about do it. Consumers could access new plans based on changing health needs, rather than geographic limitations. And more importantly, families would be able to take greater advantage of today’s communications and travel technology to work, travel, and keep in touch with each other as well as with their care providers.

Telemedicine, combined with borderless insurance markets and accountable care cost matrices, would do more for more people (and the economy collectively) than just chipping-away at the stony status quo. But to virtually access potentially out-of-state (and network) doctors and expertise, insurance needs to evolve along with medical technology.

 

Whose Free Market?

State regulations on health insurance ought to start competing with one another directly to both attract insurers and force effective rules (that is, minimal regulation) to rise to the top. In this way, a national market could actually be effective in driving down prices by giving shoppers a larger, more dynamic destination for coverage.

While it could come off as yet another assault on state autonomy, it simultaneously breaks down political barriers to commerce, competition, and ultimately more consumer choice. And in any case, employer-sponsored coverage is already exempt from much of the state regulation that impedes insurers from reaching outside markets.

Plus, in a digital world replete with Electronic Health Records (EHR) systems and increasingly better individual health data, healthcare can follow the path blazed by business and go mobile. With state-based insurance coverage and sales, access to telemedicine is hamstrung, and quality of care is bound to geography rather than the true sophistication of medical knowledge.

Digitization of medical records is good news for insurers and consumers alike on a national market. Risk pools can be more sophistically created, rather than following broad regional patterns or (all but meaningless) state lines.

Nationalizing risk pools could actually make them more personal, calculating the expense to pay without respect to state law, but rather the full spectrum of both providers and unhealthy behaviors. Obamacare eliminated the problem of pre-existing conditions preventing coverage. In a national market, that would mean behavior really could take precedent in determining costs for care and coverage.

And for people moving to pursue career changes (or basic opportunities), the process of continuing care is made easier by medical records and insurance that follows them electronically, without any holdups between states.

The technology exists to equalize access (and outcomes), if only the limits of current coverage got out of the way. As health scientist Victoria Wangia at the University of Cincinnati has shown, consumer behavior varies widely with respect to everything from vaccination use to prescription medication, all predicated on the limits of geography. Bolstering the impediments to change by doubling-down on state-centric insurance exchanges is not progressive—even if Obamacare got more people insured. Democrats need to change their measures for success.

 

Repair, Replace, Reconsider

The Supreme Court decision on federal subsidies to shoppers without access to state exchanges actually doesn’t matter much in light of the need to fundamentally change the system. A meaningful solution is not particularly like the current makeup of Obamacare, because Obamacare hinges on preserving the current shape and texture of the market, with burdens on both states and businesses to increase access internally -- bolstered only by external (federal) incentives and penalties.

It would be better to truly challenge the current system (and the make-do solutions of Obamacare) by helping consumers, state governments, and private health insurers get more access, better prices, and more options through nationalized competition. It isn’t federalized care, but it is a national market.

If ever there were cause for some federal oversight and accommodation under the Interstate Commerce Clause, this would be it. This might be unpleasant for some Republicans worried of federal overreach. However, the antidote would be writing federal law to encourage and enable greater interstate negotiation of regional compacts for insurance coverage and regulation (or setting more basic federal standards for nationally-shopped plans) to lubricate exchanges, rather than micro-manage them.

Democrats are welcome to stop balancing the need to distance themselves from Obamacare while simultaneously challenging Republicans to come up with solutions, instead of replacements. If the priority is to make the most medically advanced nation on earth also the healthiest, exempting health insurance and care from the normal rules and mobility of the rest of the economy is a good step forward.

 

The Affordable Care Act, like all establishment-sponsored plans, promised a revolution to an exasperated populace, yet ultimately delivered little more than a wholesale endorsement of the current broken, unaffordable system, along with some added complications and expenses that got more skin in the game. To be effective, fixing it or replacing it will require compromise not just across the aisle, but with conflicted notions of partisan principle that do more to distinguish the parties than drive solutions.

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