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Will the Northern Marianas become America's insurance capital?

It seems that the Republican health-care alternative is, surprisingly, even worse than I thought. It's not just that it allows insurers to cluster in whichever state has the loosest regulations and sell policies that only accord with those minimal standards (which is the dynamic that brought you a credit card industry based almost entirely out of South Dakota). It also allows them to use the Virgin Islands, Guam, American Samoa and the Northern Marianas for the same purpose. All those territories are poorer, and would have even more incentive to give insurers whatever regulatory concessions they wanted in return for the jobs and tax revenue that would come from Wellpoint opening offices in Guam.

By Ezra Klein  |  November 6, 2009; 12:17 PM ET
 
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Comments

For what it's worth, we Virgin Islander's could USE a few more insurers here in the territory. Throw in another hospital and it'd be an offer no one could refuse!

Posted by: PhD9 | November 6, 2009 12:32 PM | Report abuse

Hmm, 50 states lose jobs - the Northern Marianas gain jobs.

Posted by: GCReptile | November 6, 2009 12:49 PM | Report abuse

The Marianas Islands has been a horribly corrupt place that has been run as a kleptocracy since it became a US Territory in the 1980s. It is the home of sweastshops, sex-shops, human trafficking, money laundering, drugs and gun running. Much of the commerce there is run by folks connected to Chinese and Russian criminal gangs. The idea that one would turn over your health care to this failed, bankrupt and lawless place is insane. Thanks for pointing out that loophole in the proposed Republican legislation. Abramoff is in jail but it looks like his party is still actively protecting his Saipan sugar daddies.

Posted by: dengre | November 6, 2009 1:15 PM | Report abuse

The Soviets had a solution for that. It was called the Berlin Wall, and anyone trying to escape the communist party's unending wisdom and egalitarian benevolence by climbing over the thing was summarily shot.

I say, lock the insurance companies inside their little politically defined state cells and make them dance, dance, dance, the collective's tune. And if they try to escape... well, that would be unpatriotic.

Posted by: msoja | November 6, 2009 1:15 PM | Report abuse

It is not clear that Aetna or WellPoint would even have to establish a physical presence in the N. Marianas in order to designate it as their 'primary State'. I mean it is not like the Cayman Islands are studded with 90 story office towers for all the banks that are based there

The rules are set out on p.119 of the Boehner Amendment:
"The term 'primary State' means with respect to individual insurance coverage offered by a health insurance issuer, the state designated by the issuer as the state whose covered laws shall govern the health insurance issuer in the sale of such coverage under this part" and in the last sentence of the section: "With respect to such designated state, the issuer is deemed to be doing business within that state."

It looks to me like you might need a lawyer with a power of attorney to sign forms and such, and a licensed insurance agent, and possibly some medical professionals for the required outside review board, but otherwise it looks like you mostly need a PO Box and a couple of licenses.

Posted by: BruceWebb | November 6, 2009 1:29 PM | Report abuse

Ezra - You continually denigrate the idea of allowing insurers to sell policies across state lines by comparing this idea to the credit card industry. Can you elaborate? How has having all credit card companies set up in a state with the lowest level of regulation been detrimental to consumers? Please cite examples? Do you agree that there would be trade-offs involved in changing this -- perhaps some people would have less access to credit, perhaps fees would go up, etc?


I think you're too dismissive. Usually you seem to be in favor of more federal control/power. Why are you more in favor of states right to regulate insurers in this instance?


Do you think that state's which lard on numerous mandates and drive up the cost of insurance are doing good by pricing some willing consumers in their states out of the insurance market? Is this better than having cheaper insurance that covers less?

Posted by: MBP2 | November 6, 2009 1:43 PM | Report abuse

"I think you're too dismissive. Usually you seem to be in favor of more federal control/power. Why are you more in favor of states right to regulate insurers in this instance?"

He's not. Klein has said that he would abolish the state level regulations - provided that we could replace them with national-level regulations. But the Republican idea doesn't do that - it guts the state-level regulations without replacing them at all.

Posted by: guardsmanbass | November 6, 2009 2:07 PM | Report abuse

"Is this better than having cheaper insurance that covers less?"

What do you consider "lard"? Coverage for mammograms?

Posted by: pseudonymousinnc | November 6, 2009 2:33 PM | Report abuse

"How has having all credit card companies set up in a state with the lowest level of regulation been detrimental to consumers? Please cite examples?"

OK, just for starters: Interest rates (sometimes exceeding 30%) that would be illegal under most states' usury laws. Fee structures that likewise would fail (late fees, over-limit fees). Extremely pro-bank, anti-consumer contracts.

And because all of the companies have the same incentive to cluster in those low-regulation states, it's not as though you have real competition -- such as, for instance, a high-interest credit card company in a low-regulation state that offers some other kinds of perks in order to compete with another company that is subject to more consumer-oriented regulation. In that situation, you could at least make the case that customers have the ability to choose between competitors, and that their acceptance of the tradeoffs in doing business with the less-regulated company is just the market in action.

Same thing would happen with health insurers -- rather than having a cheap, crappy plan offering incentives in order to compete against a more expensive but consumer-friendly plan, we'd end up with a "choice" of several crappy plans.

Posted by: Janine1 | November 6, 2009 2:43 PM | Report abuse

I certainly don't mean mammograms or preventive measures in general. I am referring to non-essential services which are mandated in many states because provider groups lobby (incessantly) for their inclusion.

I would say examples of larding on mandates would be requiring coverage of: chiropractic care, podiatry, invitro-fertilization, substance abuse counseling, hair loss treatment, erectile dysfunction, among other things. I'm not at all against these services being included in insurance plans, but i think employers and consumers should have the choice not to pay for these things (or to buy them if they want them).

Federal regulation could possibly be an improvement if it is less prone to lobbying from specific provider groups than state politicians seem to be. I'm skeptical....

Posted by: MBP2 | November 6, 2009 2:46 PM | Report abuse

Janine -

Some good points. But if consumers or credit card companies valued more regulation wouldn't credit card companies set up in states with more regulation and then use this as a way to differentiate their products? "We may cost more, but we're more consumer friendly" -- something like that....

I think people need to recognize the trade-offs involved. I'm not saying 30% interest rate is a good thing. But for someone 30% may be much better than the alternative-- a payday lender charging the equivalent of 80-100% interest. And there certainly are some people that banks would not offer credit cards to UNLESS they can charge 25% or 30%. Perhaps access to credit is too easy and should be decreased, but there are costs to this.

Same in the debate over selling insurance across state lines. Peole in NH can buy individual insurance much mroe cheaply than people in NY -- partly because of all the mandates and regulations in NY. Would NY residents be better off if they were able to purchase NH-level insurance? Would NH residents be better off if the price of individual insurance doubled??

Posted by: MBP2 | November 6, 2009 2:56 PM | Report abuse

It continually amazes me the number of people willing to cock the government's gun and point it at their neighbors' heads for the sake of acquiring things such as mammogram coverage.

It's freaking sad, is what it is.

Posted by: msoja | November 6, 2009 3:31 PM | Report abuse

"But if consumers or credit card companies valued more regulation wouldn't credit card companies set up in states with more regulation and then use this as a way to differentiate their products? 'We may cost more, but we're more consumer friendly' -- something like that...."

I don't know why that doesn't happen -- maybe because the playing field is so tilted toward the CC companies that consumer desires just aren't a strong enough pull.

But my point is that, for _whatever_ reason, it _doesn't_ happen. So WHY should we believe that it would be different in the health insurance context, and that more expensive but consumer-friendly plans would be available as a market choice? I mean, I'd like to believe in unicorns too, but come on. Given our actual, real-world experience with the credit card market, we have every reason to expect that, given a similar opportunity to avoid state regulations, and in the absence of strong federal regulations in their place, insurance companies would flock to the Northern Marianas and most consumers would end up with a "choice" of only crappy plans.

Posted by: Janine1 | November 6, 2009 4:09 PM | Report abuse

It continually amazes me that soggy has shown us that he nothing to add but empty glibertarian slogans, and yet chooses to repeat it over and over again. It's freaking sad, that's what it is.

The lowest-common-denominator model that Janine1 notes with the credit card industry isn't a sole example of an industry finding a pliant state and getting it to gut its regulations. And given how the Senate works, there's usually going to be a constituency to write that kind of arbitrage into law.

Posted by: pseudonymousinnc | November 6, 2009 4:20 PM | Report abuse

--"... and most consumers would end up with a 'choice' of only crappy plans."--

Which would seem like a good opportunity for someone who wanted to offer a non-crappy plan at an affordable price, no?

But not to worry. No U.S. government of the foreseeable future is going to release its regulatory, cost distorting, market intruding control of anyone in the health care field (or anywhere and everywhere else). Creeping socialism has crept up around everyone's necks, and after have crept so far it's not going to let go now until the job is complete. The 10.2% noise you hear is some of the gurgling for air as the big drowning begins.

Posted by: msoja | November 6, 2009 4:25 PM | Report abuse

@pseudonymousinnc: "What do you consider "lard"? Coverage for mammograms?"

Yes, mandated coverage for mammograms is indeed lard. Paying for things like mammograms with insurance is a big part of the reason medical costs are rising so fast.

Posted by: ab13 | November 6, 2009 4:39 PM | Report abuse

"It continually amazes me that soggy has shown us that he nothing to add but empty glibertarian slogans, and yet chooses to repeat it over and over again. It's freaking sad, that's what it is."

And it continually amazes the rest of us that you have never have anything to add besides childish name-calling and really clever "glibertarian" remarks.

Posted by: ab13 | November 6, 2009 4:41 PM | Report abuse

biggovernment.com is running the story:

The [Joint Committee on Taxation] letter makes clear that Americans who do not maintain “acceptable health insurance coverage” and who choose not to pay the [H.R. 3962] bill’s new individual mandate tax (generally 2.5% of income), are subject to numerous civil and criminal penalties, including criminal fines of up to $250,000 and imprisonment of up to five years.

--end quote

Welcome to the gulag.

Posted by: msoja | November 6, 2009 6:29 PM | Report abuse

They are full of crap. There are no provisions like that in the bill. I'll check the link but I suspect what they are doing is taking whatever provision of the tax code applies to falsifying a tax return and taking the theoretical maximum as if the government is going to go after some stubborn glibertarian in the same way they are going to do with a drug kingpin.

Typical wingnut talking points. Gulag! Get a grip dude.

Posted by: BruceWebb | November 6, 2009 6:44 PM | Report abuse

http://republicans.waysandmeans.house.gov/UploadedFiles/JCTletter110509.pdf

And yes Publius is full of crap just as I predicted. The actual letter explains that the IRS rarely pursues criminal penalties for tax evasion, in 2008 they initiated 757 cases with 666 convictions as against 392,000 instances of civil penalties under the relevant sections.

And while US Code provides for fines up to $250,000 for this kind of crime in general, the actual section of US Code that governs this limits that to $100,000.

Something you would know if you actually read the JCT letter rather than choosing to be pwned by Publius. It took me like two minutes to do my due diligence and fact check this. Try harder next time.

Posted by: BruceWebb | November 6, 2009 7:00 PM | Report abuse

--"The actual letter explains that the IRS rarely pursues criminal penalties for tax evasion"--

Well, that makes it all better then. Nothing to see here, citizen. Move right along.

It's a criminal disgrace. The United States government is going to *force* families to spend $15K a year, and you think it's okay because the IRS rarely finds people intransigent enough to require having them thrown in jail.

I'm telling you, I think this is going to do it. If the bill passes with everything in it, it's going to tilt the whole mess over on its side. It's disaster. It's the biggest disgrace, yet.

Posted by: msoja | November 6, 2009 8:10 PM | Report abuse

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