In spring 2006, Massachusetts enacted legislationto ensure universal health insurance coverageto all residents. The legislation was a hybridof ideas from across the political spectrum, promotedby a moderately conservative Republicangovernor with national political aspirations, andpassed by a liberal Democratic state House andSenate. Groups from across the political spectrumsupported the plan, from the HeritageFoundation on the right to Families USA on theleft, although the plan had detractors fromacross the political spectrum as well.
This study briefly describes the basic structureof the Massachusetts plan and identifies thegood, the bad, and the ugly. Although the legislation,as Stuart Altman put it, "is not a typicalMassachusetts–Taxachusetts, oh–just–crazy–liberalplan," there is enough "bad" and "ugly" in themix to raise serious concerns, particularly whenthe desire to overregulate the health insurancemarket appears to be hard–wired into Massachusettspolicymakers' DNA.
If we want to make health insurance moreaffordable and avoid the "bad" and the "ugly" ofthe Massachusetts plan, Congress — or, barringthat, individual states — should consider a "regulatoryfederalism" approach. Under such anapproach, insurers and insurance purchaserswould be required to subject themselves to thelaws and regulations of a single state but allowedto select the state. As with corporate charters, thissystem would allow employers and insurers toselect the regulatory regime that most efficientlyand cost–effectively matches the needs of their riskpools. The ability of purchasers and insurers toexit from the state's regulatory oversight (takingtheir premium taxes with them) would temperopportunistic behavior by legislators and regulators,including the temptation to impose inefficientmandates and otherwise overregulate.