A Health Idea Entrepreneurs Love

Small businesses want to be able to purchase insurance across state lines.


On Monday, I was in a room in the Grand Hyatt in downtown Washington, D.C., with over 700 small-business people from across the country, most of whom were very concerned about the impact of the rising costs of healthcare on their businesses. This was at the 2008 National Small Business Summit, held by the National Federation of Independent Businesses, where a panel on healthcare featured Democratic Sens. Ron Wyden of Oregon and Blanche Lincoln of Arkansas, Republican Rep. Charles Boustany of Louisiana, and Stuart Butler of the Heritage Foundation.

The panelists talked about their various ideas for reforming the country's healthcare system. Butler advocates a "connector" that would act as a clearinghouse for health insurance, similar to what was enacted by Mitt Romney in Massachusetts. Lincoln said one central problem in our healthcare system is that it focuses too much on acute care and not enough on chronic care. Wyden discussed the bill he has submitted to Congress that would organize Americans into a national health insurance pool.

But only one line from a panelist was interrupted by applause from the audience. That was when Boustany said the government should allow the purchase of health insurance across state lines. Because of different regulations among the states, health insurance premiums can be much higher in one state than another. For example, David Gratzer of the Manhattan Institute has written that "similar HMO coverage for a business in New Jersey is a third more per employee than in California."

But allowing people to purchase out-of-state insurance—currently prohibited—would not only let those New Jersey small businesses have access to cheaper plans for their employees; it would also create more competition among insurance companies, which should reduce prices.

So is free interstate commerce for health insurance a workable solution for small businesses' healthcare woes—or at least a way to mitigate the ridiculous costs we have now? To be sure, the NFIB members who were present at this conference are not entirely representative of small businesses in general. NFIB has a reputation for tending to support more conservative policies, so it's not a great surprise that the most free-market proposal discussed got the most attention.

But allowing people to buy insurance across state lines does have some bipartisan support. Barack Obama wrote about it as a good idea in his book The Audacity of Hope. Republican Rep. John Shadegg of Arizona has periodically pushed for a Health Care Choice Act that, however, has not gotten to the floor of Congress.

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