Healthcare Insurance Reform: How to Fix the Healthcare Problem


As Republicans and Democrats wage war over the prospect of repealing and replacing the Affordable Care Act (commonly referred to as Obamacare), we are running out of time to implement a more freeform healthcare system.

As has become standard in the increasingly divided United States political scene, both sides of the debate are sure that they are right—and sure the other side is trying to destroy lives and ruin our country’s healthcare industry. Republicans argue that the ACA is flawed and could be improved with an alternative bill. Democrats argue that, despite the ACA’s imperfections, repealing or replacing it would kick millions of people off health insurance and put their lives at risk.

I have been very public with my view that the true problem with healthcare in the United States right now is not being addressed by either side of the political argument. The problem—the lack of anything resembling a free market in the health insurance industry—leaves the market without meaningful buyer-seller relationships and with no opportunity for supply and demand to fix skyrocketing costs.

The Problems Facing Modern American Healthcare

One critical area to consider is how our country and our government currently handles health insurance providers. Earlier this year, one of the biggest talking points in the healthcare debate was about how many insurance companies were pulling out of the ACA entirely. This piece from The Atlantic gives a brief overview of what happened in a few states, from Iowa (where ACA exchange shoppers were left with only one insurance provider to choose from) to Tennessee (where residents were temporarily left with no ACA insurance options).

The situations described in the Atlantic piece illustrate what are arguably the two biggest problems in health insurance right now. First off, when people shopping the ACA exchange only have one health insurance option to choose from in their states, it essentially creates a government-granted monopoly. Monopolies, of course, are dangerous because they have full control over pricing. Without competition to keep prices down, ACA’s exchanges risk becoming the very opposite of affordable.

Secondly, when some states have no health insurance options to choose from in their Obamacare exchanges, that illustrates the grave need for interstate competition in the healthcare industry. In February, the health insurance provider Humana pulled out of Tennessee’s ACA exchange—the last insurer to do so. It wasn’t until May that BlueCross BlueShield agreed to fill the void, and even then, the company only agreed to be a part of Tennessee’s exchange under certain conditions. In the intervening three months, Tennesseans trying to buy health insurance via their state’s Obamacare exchange were essentially out of luck. (The Atlantic article reports that Humana’s withdrawal left 40,000 people with no health insurance option.)

This situation could have been avoided entirely if health insurance companies weren’t regulated in such odd, inexplicable ways. Consumers who want to buy car insurance can buy it from anyone they want. If they want to work with an in-state provider, they can. If they want to buy from a national entity, they can do that too. This across-state-lines way of doing business gives drivers a lot more choice when deciding how to insure themselves. That additional choice means more competition, which keeps insurance providers on their toes and helps keep automotive insurance affordable and accessible to virtually anyone who needs it.

Health insurance doesn’t work the same way. People can’t buy health insurance across state lines, which means that each state is essentially its own market bubble. Someone planning to buy health insurance—even outside of the ACA exchange—is limited to the insurance providers that offer coverage in that state. State lines serve as barriers to broader competition, which in turn leads to higher coverage rates.

Finding a Path to Better Healthcare Reform

If there is a strategy for healthcare reform that could truly lead to cost reductions and better coverage across the board, it lies in creating more of a free market for health insurance.

The first step to this free market is to curb regulations. Part of the reason health insurance providers are jumping ship on the Affordable Care Act is that it places too much burden on them. It’s important to remember here that health insurance companies are not government agencies, designed only for the good of the people. On the contrary, health insurance providers are businesses aiming to maximize their profits. Regardless of the industry, the fact is that burdensome regulations make it harder for private enterprises to serve their customers, offer quality services, and make money. Trimming some of the regulatory burden placed upon insurance providers—both by the ACA and by other government laws and standards—would lead to a wider availability of options for customers.

The other essential part of the equation is to open competition across state lines. This possibility would be made more realistic by a curbing of healthcare insurance regulations, as the context of the issue right now, is a lack of standardization in how different states handle insurance providers. Allowing consumers to buy insurance across state lines would knock down the barriers that are currently preventing competition in the healthcare insurance industry. A more competitive landscape would bring the industry closer in line with a free market, giving customers the ability to choose the best coverage and “vote” for top providers with their dollars. This competition would increase the quality of coverage while simultaneously decreasing the cost.

Would changing these two factors—regulation and interstate competition—fix healthcare overnight? Of course not. However, it would help create an environment where change could be possible. Perhaps most importantly, it would provide relief to businesses and consumers alike while the elected officials in Washington work on fixing the larger problems currently plaguing the industry. Compared to the back-and-forth arguments that have raged about healthcare for years, driven by partisan politics, animosity, and self-righteousness, the progress that a more freeform healthcare insurance market could provide should be something that every person supports—regardless of political affiliation.