Expanding Health Insurance Choice & Affordability in Virginia

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Good afternoon, Mr. Chairman and members of the committee. Thankyou for the opportunity to share my thoughts on this importantlegislation. My name is Michael F. Cannon. I have been a residentof the Commonwealth for nearly three decades. I am the product ofVirginia public schools, from elementary through graduate school. Iam currently the director of health policy studies at the CatoInstitute in Washington, DC.

In Virginia and across the nation, consumers and employers arestruggling with the rising cost of health insurance. Cost is theprincipal reason that tens of millions of Americans and anestimated one out of seven Virginians lacks coverage.

The legislation offered by Sen. Cuccinelli, S.B. 1331, wouldprovide important relief to Virginians struggling to afford healthinsurance by letting us purchase insurance licensed by anotherstate - much like we purchase cars, food, and furniture from otherstates, and much like corporations that do business in Virginia maybe chartered in other states.

An important contributor to the rising cost of health insuranceis state health insurance regulation. Regulation is supposed toprotect consumers, yet too much regulation harms consumers bymaking health insurance too expensive to afford.

One type of harmful regulation is laws that require consumers topurchase particular types of coverage - whether they want it ornot. The Virginia legislature drives health insurance premiumshigher by requiring residents to purchase 55 different types ofcoverage. This legislature requires residents to purchase coveragethey do not need (e.g., requiring tee-totalers to buy coverage foralcoholism and drug abuse treatment), coverage that they findmorally objectionable (e.g., requiring devout Catholics to purchasecoverage for contraceptives); and coverage for services that may bemore economical to purchase directly (e.g., HPV, colorectal cancer,and breast cancer screening).

Those laws are not consumer protection laws. If mandatingcoverage for cancer screening provided an important consumerprotection, then we should expect to see higher screening rates instates that enact such mandates. Instead, cancer screening rates instates that have mandated coverage of cancer screening arestatistically indistinguishable from screening rates in states thathave not. The same is true of access to dental care.

Laws that require Virginians to purchase coverage foracupuncturists, chiropractors, and podiatrists are not aboutprotecting consumers. They are about protecting acupuncturists,chiropractors, and podiatrists by forcing Virginians to purchasethose services.

In all, state regulation increases the cost of health insuranceby an average of 15 percent, according to the non-partisanCongressional Budget Office.

If we want to protect consumers, we must give them the freedomto choose what their health plan will cover. To do otherwise is toforce consumers to choose between expensive health insurance withunwanted whistles and bells, and no health insurance at all. Ifthis legislature were to decree that Virginians could purchaseeither a fully loaded Lexus or nor car at all, an awful lot of yourconstituents would be denied an automobile. The Lexus dealers wouldbe pleased, but Virginia would be poorer. That is exactly what thislegislature is doing to your constituents when it comes to healthinsurance.

S.B. 1331 would free your constituents from those harmfulregulations. Other states give consumers far more freedom to choosewhat their health plan will cover. Letting Virginia consumers andemployers purchase health insurance from the District of Columbiaand other states will make health insurance significantly moreaffordable and reduce the number of uninsured Virginians.

Some regulations - particularly financial solvency standards -do protect consumers from the danger that insurance carriers mightnot keep their promises. Yet even financial solvency standardsimpose costs, and no one knows the point at which the costs of morestringent standards exceed the benefits. To know that requirescompetition between different standards, such as those required byVirginia and by other states. By enabling that competition, S.B.1331 would begin a race to the top - a race to find the level offinancial solvency protection that forces carriers to keep theirpromises, while preserving access to health insurance.

Giving Virginians the freedom to choose their health plan willcome under fire from a few special interests. I have alreadymentioned one such group: the health care providers that use statelaw to compel Virginians to purchase their services. Domesticinsurance carriers will also oppose that freedom. Their oppositionis understandable, if not defensible. Giving Virginians the freedomto purchase health insurance from out-of-state carriers wouldexpose domestic carriers to greater competition. While thatcompetition will benefit consumers, it will also drive low-valueproducts out of business.

Virginia's insurance regulators will oppose greater consumerfreedom for the same reasons. The consumer protections provided byVirginia's Bureau of Insurance are a product. At present, thatproduct faces too little competition. S.B. 1331 would forceVirginia regulators to compete against the consumer protectionsoffered by regulators from other states. Few monopolists give uptheir monopolies willingly.

Nevertheless, this legislation would preserve an important rolefor the Bureau of Insurance. To help consumers make informeddecisions, the Bureau could provide information about the consumerprotections offered by various states. The Bureau could also helpconsumers enforce other states' consumer protections in Virginiacourts.

It should be the consumer, however, who chooses the rules thatwill be enforced. I urge committee members to be wary of provisionsthat would require consumers to purchase both the consumerprotections required by the state that licenses their healthinsurance plan and those required by Virginia. Though cloaked inthe rhetoric of consumer protection, duplicative regulation harmsconsumers by protecting providers, insurers, and regulators fromcompetition.

Thank you and I look forward to any questions you may have.