Health Care Choice: Giving Arizonans More Health Insurance Options

Posted on October 02, 2007 | Type: Policy Report | Authors: Noah Clarke, Dr. Eric Novack
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Executive Summary

In January 2007, Arizona Gov. Janet Napolitano proposed expanding the states Medicaid program to cover children in families earning up to $60,000. Although the plan may have laudable goals, it could have negative consequences for the state.

Economists at Harvard University and the Massachusetts Institute of Technology have found that public insurance programs like Medicaid crowd out private alternatives. They estimate that between 50 and 75 percent of enrollment increases that resulted from expanding Medicaid came from people who left private-sector insurers.

For Arizona, that means many families currently paying for their own health insurance may trade in their private health plans and enroll in the state plan instead. Under this scenario, two-thirds of Arizonans could become dependent on the state for their health care needs, putting tremendous pressure on the states finances.

Short of expanding the state system, several policy alternatives exist that would help more Arizonans purchase health insurance. One option for improving access to affordable health insurance would be to allow Arizonans to purchase health insurance from any company in any state, much as they already do with car and life insurance. Currently, residents can only purchase in-state policies that are made more expensive by lack of out-of-state competition and a bevy of regulations. If policymakers would permit Arizonans to purchase health insurance from any state, residents could save hundreds of dollars. Just next door in California, the average individual premium per year is $550 lower than in Arizona. Many other states have lower-cost options. An open health insurance market would also provide more continuity of coverage and portability for Americas mobile labor force.

Health insurance is among the most challenging public policy issues. This study proposes one way to improve access to health insurance. Arizona law already has the groundwork for an open health insurance market. If policymakers repealed retaliatory taxes and amended statutes that restrict insurance offerings, Arizonans could reap financial savings and better health coverage.

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