The cost of health insurance is sky rocketing in many parts of the country. The question for many people is why is this so? There are a number of reasons, but one of the big ones boils down to the basics of capitalism – competition. Ready to grind your teeth? The health insurance policy you have costs less in another state. Yes, the same exact policy. That being said, it probably also costs a lot more in another state. How can this be? It has to do with the way health insurance is regulated in the United States. While there are federal regulations, the licensing of most health insurance companies is done on a state basis. This means the health insurance companies must obtain 50 different licenses.
As you might imagine, this process adds to the cost of doing business. Imagine if the website you are reading this article on had to get a business license in all 50 states! You probably wouldn't be reading it because of the cost to the site owner. Regardless, this drives up cost and creates a ton of red tape. Many insurance companies simply throw up their metaphorical hands and end up only getting licensed in some states.
So, why should you care about this? Well, it drives prices up. Most states have only a few dominant health insurance companies. With nominal competition, they can raise prices. That means your health insurance premiums go through the roof. Consider the case of Anthem Blue Cross who is raising its premiums in California by an average of 39 percent in 2010. This huge increase could not be undertaken if the market didn't support it because most of the insured would simply look for cheaper policies. The lack of competition means there really aren't any cheaper versions.
One of the ways to slash costs in the great health care debate would be to simply allow nationwide competition amongst the health insurance companies. It would not solve the overriding problems we see, but it would drive costs down in light of the competition involved.
Mark P. Warner is with BestPlacetoBuyHealthInsurance.com - the best place to buy health insurance on the web.
