Ezra Klein, Jonathan Chait, and Timothy Noah are all dumping on Republican health-care proposals because they think they will be bad for people who are sick or at high risk of becoming sick.
Noah argues that subsidized high-risk pools are fine as a transition measure to be followed by Obamacare, but a terrible idea as a stand-alone. But most conservatives favor it precisely as a transition measure. They believe that if government allowed a robust market in individual insurance to develop, it would be easier for people to purchase cheap and renewable insurance policies before they got sick and the problem of “pre-existing conditions” would therefore diminish over time.
Klein and Chait, meanwhile, argue that allowing people to buy individual insurance across state lines would start a race to the bottom. Insurers would locate in the least regulated states. Without being mandated to cover various items, insurers would only sell bare-bones policies that cover the risk of common catastrophes. As healthy people opted out of buying coverage for more specialized risks, such coverage would skyrocket in price for those who need it. Moreover, Klein notes, the CBO has estimated that allowing interstate sales in the individual market would not do much to raise the number of people with insurance.
In response I would say: 1) Some people who currently have no insurance would be able to get catastrophic coverage under the reform, and that should at least be weighed as an advantage of the proposal; and in weighing the downside let’s not forget that our system of employer-provided insurance is already unraveling. 2) Stephen Bainbridge argues that competition among state regulatory regimes has not, in practice, led to a race to the bottom; he thinks it has led to something more like a race to the top (with the “top” defined as the most intelligent regulation rather than the most regulation). 3) Allowing interstate sales in the individual market probably isn’t going to lead to a dramatic expansion of that market, or a major increase in the number of people with insurance, unless it is coupled with a change to the tax code. As long as people are punished for getting their insurance through the individual market rather than through their employers, the growth of the individual market will be stunted. Letting all employers buy insurance across state lines would enhance the effect of this reform.