In Virginia and across the nation, consumers and employers are struggling with the rising cost of health insurance. Cost is the principal reason that tens of millions of Americans and an estimated one out of seven Virginians lacks coverage.
The legislation offered by Sen. Cuccinelli, S.B. 1331, would provide important relief to Virginians struggling to afford health insurance by letting us purchase insurance licensed by another state — much like we purchase cars, food, and furniture from other states, and much like corporations that do business in Virginia may be chartered in other states.
An important contributor to the rising cost of health insurance is state health insurance regulation. Regulation is supposed to protect consumers, yet too much regulation harms consumers by making health insurance too expensive to afford.
One type of harmful regulation is laws that require consumers to purchase particular types of coverage — whether they want it or not. The Virginia legislature drives health insurance premiums higher by requiring residents to purchase 55 different types of coverage. This legislature requires residents to purchase coverage they do not need (e.g., requiring tee‐totalers to buy coverage for alcoholism and drug abuse treatment), coverage that they find morally objectionable (e.g., requiring devout Catholics to purchase coverage for contraceptives); and coverage for services that may be more economical to purchase directly (e.g., HPV, colorectal cancer, and breast cancer screening).
Those laws are not consumer protection laws. If mandating coverage for cancer screening provided an important consumer protection, then we should expect to see higher screening rates in states that enact such mandates. Instead, cancer screening rates in states that have mandated coverage of cancer screening are statistically indistinguishable from screening rates in states that have not. The same is true of access to dental care.
Laws that require Virginians to purchase coverage for acupuncturists, chiropractors, and podiatrists are not about protecting consumers. They are about protecting acupuncturists, chiropractors, and podiatrists by forcing Virginians to purchase those services.
In all, state regulation increases the cost of health insurance by an average of 15 percent, according to the non‐partisan Congressional Budget Office.
If we want to protect consumers, we must give them the freedom to choose what their health plan will cover. To do otherwise is to force consumers to choose between expensive health insurance with unwanted whistles and bells, and no health insurance at all. If this legislature were to decree that Virginians could purchase either a fully loaded Lexus or nor car at all, an awful lot of your constituents would be denied an automobile. The Lexus dealers would be pleased, but Virginia would be poorer. That is exactly what this legislature is doing to your constituents when it comes to health insurance.
S.B. 1331 would free your constituents from those harmful regulations. Other states give consumers far more freedom to choose what their health plan will cover. Letting Virginia consumers and employers purchase health insurance from the District of Columbia and other states will make health insurance significantly more affordable and reduce the number of uninsured Virginians.
Some regulations — particularly financial solvency standards — do protect consumers from the danger that insurance carriers might not keep their promises. Yet even financial solvency standards impose costs, and no one knows the point at which the costs of more stringent standards exceed the benefits. To know that requires competition between different standards, such as those required by Virginia and by other states. By enabling that competition, S.B. 1331 would begin a race to the top — a race to find the level of financial solvency protection that forces carriers to keep their promises, while preserving access to health insurance.
Giving Virginians the freedom to choose their health plan will come under fire from a few special interests. I have already mentioned one such group: the health care providers that use state law to compel Virginians to purchase their services. Domestic insurance carriers will also oppose that freedom. Their opposition is understandable, if not defensible. Giving Virginians the freedom to purchase health insurance from out‐of‐state carriers would expose domestic carriers to greater competition. While that competition will benefit consumers, it will also drive low‐value products out of business.
Virginia’s insurance regulators will oppose greater consumer freedom for the same reasons. The consumer protections provided by Virginia’s Bureau of Insurance are a product. At present, that product faces too little competition. S.B. 1331 would force Virginia regulators to compete against the consumer protections offered by regulators from other states. Few monopolists give up their monopolies willingly.
Nevertheless, this legislation would preserve an important role for the Bureau of Insurance. To help consumers make informed decisions, the Bureau could provide information about the consumer protections offered by various states. The Bureau could also help consumers enforce other states’ consumer protections in Virginia courts.
It should be the consumer, however, who chooses the rules that will be enforced. I urge committee members to be wary of provisions that would require consumers to purchase both the consumer protections required by the state that licenses their health insurance plan and those required by Virginia. Though cloaked in the rhetoric of consumer protection, duplicative regulation harms consumers by protecting providers, insurers, and regulators from competition.
Thank you and I look forward to any questions you may have.