McCain’s Insurance Deregulation Scheme Promises A Downward Spiral In Health Care Coverage

Last night on CNN’s Larry King Live, Jamal Simmons, a supporter of Sen. Barack Obama (D-IL), argued that Sen. John McCain’s (R-AZ) health care plan would “do for the health care industry what the Republicans did for the credit card industry”:

Yes, what’s interesting about this and what we’re going to find out about John McCain is that John McCain was a neo-con before George Bush was a neo-con. He’s been friends with all these guys: Doug Feith, Bill Kristol, all these guys. You want to talk about health care? Johns McCain wants to do for the health care industry what the Republicans did for the credit card industry. They want to deregulate it and let people be able to choose their health care.

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Indeed, as Robert Gordon, a senior fellow at the Center for American Progress Action Fund, argues in a recent Slate article, deregulation of the credit card industry “offers a cautionary tale about a little-understood provision at the center of John McCain’s health care plan.”

Following a pair of Supreme Court decisions which deregulated the banking industry, credit card companies relocated to states with no interest rate caps and charged “what they wanted” to borrowers in states with interest rate limits. McCain’s reform takes a similar tact. He would allow health insurers to operate across state lines “without complying with the laws in the state in which they operate,” and permit insurance plans from out-of-state to lure away healthier patients.

As Gordon points out, insurance companies “would have little incentive to continue doing business” under certain state rules which “require that companies issue coverage to all new customers and not set higher rates for people who are already sick”:

[Under legislation that McCain supports], insurers wouldn’t even need to pick up and move their operations; it would be enough to file some paperwork with a state insurance commissioner and pay that state’s relevant taxes…An insurer operating under Arizona law would be able to offer healthy New Yorkers a cheaper policy than an insurer working under New York law that has to price policies the same for everyone.

If the deregulated environment allows credit card companies to “use pricing practices, like teaser rates, to attract cash-strapped families and then…double or triple those rates without notice,” Gordon argues that McCain’s approach to deregulating the health insurance industry would similarly permit insurance companies to deny coverage to Americans with pre-existing conditions and “improve their own profits by offering targeted policies to people with the fewest health expenses”:

As with the history of credit cards, it’s Robin Hood in reverse. Apart from the obvious injustice, this approach could add to spiraling health costs. The sickest 10 percent of Americans are already responsible for 70 percent of the nation’s health expenses. When more such Americans go uninsured, skip checkups, and land in the emergency room, they end up costing taxpayers more.

Pre-existing conditions are not confined to chronic diseases. In fact, some individual insurance companies do not count a C-section as a pre-existing condition, and policies differ based on state laws and regulations. Under McCain’s proposal to free insurance companies from state regulations, insurers that continue to extend coverage to moms who have had a C-section would quickly find themselves at a competitive disadvantage with insurers that provide the least protection to new moms.

Thus, McCain’s deregulation scheme, like past banking reforms, seeks to extend industry profits, not consumer protections.