Candidates without a clue

Introduction

If folks who watched Thursday night’s Republican presidential debate were expecting the candidates to tell us what they’d do to replace Obamacare if they could get rid of it, those folks would have been disappointed.

In fact, the 10 candidates who are currently leading the polls said so little about health care during their two hours on stage that one has to wonder if they’ve given any thought to an Obamacare alternative. They haven’t.

The only ones who uttered more than a sound bite about health care were Ohio Gov. John Kasich, who explained why he expanded his state’s Medicaid program with Obamacare money, and Donald Trump, who claimed that even though he’d said good things about the single payers systems in Canada and Scotland, he preferred a “private system” for the U.S. “without the artificial lines around every state.”

Wisconsin Gov. Scott Walker, former Arkansas Gov. Mike Huckabee and Sen. Marco Rubio all noted that they would work to repeal the Affordable Care Act, but made no mention of what they would replace it with. Huckabee contended that the Social Security program had been “robbed” to pay for Obamacare, but he didn’t offer an explanation.

Trump’s mention of artificial lines around states apparently was a reference to the fact that many health insurers sell coverage in only one state. Ever since the Affordable Care Act was signed into law five years ago, many Republicans have said that one of the first things they’d do if they ruled Washington would be to allow insurers to sell policies across state lines.

It sounds like a swell idea, and inevitably leads to suspicion that the federal government is somehow making it impossible for insurance companies to do that. But that’s not the case. Obamacare actually contains a provision that would facilitate the sale of coverage across state lines. Starting next January, in fact, states can form compacts with each other to encourage insurers to sell their policies in multiple states.

What the GOP seems to want to do is the opposite of what the party normally espouses: that the federal government should stay out of the states’ affairs as much as possible. What Republicans apparently desire is to have the federal government force the states into allowing insurers licensed elsewhere to sell whatever they want to sell in every state—regardless of the individual states’ laws and regulations. A lot of state lawmakers and regulators don’t like that idea at all. It essentially would take away their ability to set their own standards for insurance company solvency as well as for the adequacy of the plans out-of-state insurers might want to sell.

Many consumer groups are also opposed. They fear it would open the door once again to the marketing of junk policies that don’t provide much coverage, a door the Affordable Care Act closed, and for good reason.

Aside from that, however, history has shown that even when states throw out the welcome mat to out-of-state insurers, insurers don’t rush in. In fact, as Georgia found out a few years ago, not a single insurer from any of its neighboring states applied to sell coverage in the Peach State even after lawmakers there said, essentially, “y’all come on over.”

Here’s why. For an insurer to succeed in any given market, it has to have a sizable base of enrollees. And insurers know you can’t just wish that into being. The selling-coverage-across-state-lines idea runs into a chicken-and-egg dilemma. You have to have thousands—maybe even tens or hundreds of thousands—of customers in order to negotiate good discounts with local doctors and hospitals. Insurers need good discounts from providers to be able to offer policies at a competitive price. If they can’t get those discounts, they won’t be able to sell coverage at or below the premiums set by more well-established insurers. Who would want to buy a policy from a newcomer that charged more than a company you were already familiar with? Not enough to make moving into another state worthwhile. About the only time that has happened successfully is when another insurer is able to buy an already established insurer. But that, of course, would defeat the purpose of allowing coverage to be sold across state lines.

This idea is based on the belief that the more insurers there are in a given market competing for business, the less health insurance will cost. But no one who knows how health insurance really works would make that argument. Big hospitals and physician practices might like it because few if any of the insurers would be able to negotiate from a position of strength. Not only would premiums not fall, they probably would go up. Chances are the amount we spend on health care would go up too, for another reason: higher administrative costs. Imagine how many more people a doctor would have to hire just to deal with a boatload of new insurers. Or to deal with a bunch of politicians who don’t know what they’re talking about.