December 27, 2012 10:18AM

Free Trade in Health Insurance

Yesterday, Alberto Mingardi said the following in a post on this blog: 

Holland has now a universal health care system financed through competing insurance companies.

This raises an issue I’ve been thinking about for a while now: Why don’t we have free trade in health insurance? We can buy cars that are made outside of the United States, and most people would agree that we are better off as a result. So why not let Americans buy health insurance from foreign insurance companies?

In terms of the law and policy, I confess that I’m not completely sure how the system works, and why exactly people can’t use one of these Dutch health insurance companies, or companies of some other nationality. But my impression is that, with a few exceptions, cross‐​border trade in health insurance does not happen here in America. Before coming to Cato, I was in the individual health insurance market, and it was pretty clear that my health insurance options were limited to a few companies, and none of these companies were foreign. 

I have little doubt that we would be better off with free trade in health insurance, just like we are with (relatively) free trade in cars. Trade would mean that the health insurance industry has more competition, and consumers would benefit as a result. 

There’s lots of talk about how to bring health care costs down. Why not give free trade in health insurance a try?