Want Some Competition? Open Up the State Lines

I suppose it’s encouraging that advocates of a government health insurance company (“public option”) invoke the word “competition.”

The Wall Street Journal makes a point that is so obvious I wish I had mentioned it here before: OK, if you’re for competition, how about enhancing competition among insurance companies by letting them sell across state lines?

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I have read critics of yet another government health program say “we don’t need it; we have plenty of competition. There are over 1,000 insurance companies in this country.”

It’s true enough that there are a large number of insurance companies. But they are sheltered by state lines, so the number of companies selling in a given state are much less than 1,000.

Furthermore, most people have not 1,000 companies to choose from or even 10. Instead, they face a Hobson’s choice: The company and plan chosen by their employer. Oh, perhaps they can choose between the equivalent of eggshell white and pearl (deductible levels). But that’s about it – and government, through the federal tax code, effectively creates that situation.

(Cross-posted from State House Call.)