May 11, 2006 2:58PM

With Enzi Bill, GOP Abandons Federalism, Free Trade

The U.S. Senate steps through the looking glass this week, with a debate on a health care bill that would shift power from the states to the federal government. Republicans, who typically argue against such things, support the bill. Democrats, who never miss a chance to expand federal power, oppose it.

The bill, sponsored by Sen. Mike Enzi (R-WY), deals with health insurance regulation. That has traditionally been the province of the states, with one large exception: In 1974, the feds allowed large employers to avoid state regulation by opting for federal regulation.  That gave multi-state employers the benefit of only having to contend with one set of health insurance regulations (rather than 50). Federal regulation has also traditionally been less burdensome than state regulation.

In fact, the states have been regulating health insurance like mad. Many states require consumers to purchase unwanted or even offensive coverage. (Thirty states require Catholics to purchase coverage for contraception; 14 states require them to purchase in-vitro fertilization coverage.) States have passed some 1,800 of these "mandated benefit" laws. The states also regulate insurance prices, which actually increases the number of uninsured.

States get away with over-regulation because they prohibit consumers and employers from buying health insurance from out-of-state. If you lived in some regulatory hell-hole -- let's say, New Jersey -- you could obtain much cheaper coverage by dealing with a carrier regulated by another state.

If Bruce Springsteen can purchase voice insurance from Lloyd's of London, surely his neighbors should be able to buy health insurance from Pennsylvania.

Enter Sen. Enzi, who has an odd solution to this mess: Let trade associations offer health insurance to their members, and let the feds decide what state regulations they follow.  The bill seems to be deregulatory; it would allow "association health plans" to avoid some unnecessary regulatory costs. But it would be the feds -- rather than employers or consumers -- who choose the set of rules that govern one's health coverage. Thus the bill would shift power from the states to the feds.

Democrats oppose the bill, though it's hard to fathom why. The bill would make broad-based federal health insurance regulation -- a long-time Democratic goal -- much easier to achieve. In short order, that would erase any short-term savings the Enzi bill might deliver.

Sometimes, I suspect the Democrats' opposition is a ruse: They keep opposing the idea because if they supported it, Republicans might come to their senses.

The real tragedy is that Republicans have at their fingertips legislation that would give individuals consumers and employers the right to purchase coverage from out-of-state.  Sen. Jim DeMint (R-SC) and Rep. John Shadegg (R-AZ) have a bill that would tear down those barriers to trade between states, as Congress was meant to do under the Commerce Clause

But the Shadegg-DeMint bill doesn't have a powerful coalition of trade associations lobbying for its passage. Trade associations like the Enzi bill because it would allow them to offer health insurance as a benefit to their members. The Shadegg-DeMint bill would do the same thing. But somewhere along the way it was determined that federal regulation would be more politically feasible than free trade between the states.

I guess it's easier to convince Republicans to increase their own power than to return power to individuals.