Monday, February 27, 2012

Selling Insurance Across State Lines

The Conservative approach to health care reform is as paradoxical as the progressive. Conservatives pound the drum of "States' Rights" but then turn around and advocate buying insurance across state lines.

Before allowing people to buy insurance across state lines, conservatives should ask "why doesn't the market does not already allow this?"

The answer is actually simple:

Insurance is a legal product which is dependent on jurisdiction. In our union of states, the jurisdiction is the state.

Insurance works as follows: People put their health care dollars into a pool. To receive health care they file a law suit against the pool. That lawsuit is under the control of the state courts.

Yes, every single transaction in insurance based health care is a legal claim against a pool. That is why we use the term "claim." Processing of these is controlled by a court system.

Attempts to buy insurance across state lines confuses jurisdiction. Insurance in California might be higher than Arizona. That is because the courts in California load insurance with excess baggage. Attempts to sell insurance over state line is equivalent to selling local legal precedents over state lines.

Yes, big insurance companies love the idea of confused jurisdiction. Big insurance companies will be able to use confused jurisdiction to their advantage. But that is not good for the people who suddenly lose access to the pool their health depends upon and are left with no legal recourse.

Insurance is dependent on the court system. We've been sold an absurd product that makes every single transaction a legal claim. The fact that you can't buy insurance outside your jurisdiction is a symptom of this underlying absurdity.

I favor a different approach to health care. In the medical savings and loan, people build equity for use in their health care. Payments to your doctor are straight cash transactions. Because you are using cash transactions (instead of legal claims) you can use your money anywhere that cash is accepted.

Since the Medical Savings and Loan is just a collection of financial tools and not a legal product there is not the same state line issues involved in the program.

As an investor, I would have the right to invest my health savings anywhere I see fit. Foundations, giving grants from their own money, have a right to use the money as they see fit. It is possible that a foundation could have a contractual obligation to use money in a state. I could start a Utah Charity that demands all funds are used in the Beehive State. This is a contractual obligation added to the product. Such contractual obligations are not inherent in the product.

Insurance is a legal product and dependent on jurisdiction. We know this from the terminology. Every transaction is a legal claim. Since every transaction is a legal claim, people must be in the same jurisdiction as the insurance company.

Conservatives have clearly not thought through the foundations of health care. They yell "states' rights" in one sentence and demand insurance be sold across state lines in the next. This paradoxical thinking will not result in quality health care reform.

A quick note on the MS&L: In the Medical Savings and Loan, you will have access to a person called a Health Care Advocate. Ideally, the advocate will be an independent agent with whom you have multiple face-to-face meetings. While there will not need to be artificial restrictions on where you invest your money, the program is highly local. The financial tools in the plan could be used across state lines. The heart of the program is intensely local.


  1. Real site! Keep on posting this kind of topic. I'm pretty sure a lot of people can benefit this.
    Private Health Insurance

  2. Docs would love to be all cash and eliminate the paperwork and chasing insurance carriers for money.