If you think buying cheaper prescription drugs in Canada is a good idea, what would you say to buying a cheaper health insurance plan from another American state?
What would you say if it meant the average Mainer could have another $3,300 a year tax free?
If you think it’s a good idea, you’re not the only one. So does President Bush, which is why he is pushing for a national health insurance market.
The idea of buying health insurance across state lines is also extraordinarily popular with the American people. A recent Zogby poll for the Council for Affordable Health Insurance showed that 72 percent of the American people support allowing someone living in one state to purchase health insurance from another state if the insurance is state-regulated and approved. In addition, 82 percent said they would be likely to purchase a policy across state lines if they were paying very high rates and needed access to more affordable health insurance policies.
Maine’s notoriously high health insurance rates, especially for individuals, would likely make this idea even more popular among Mainers.
On Oct. 12, eHealthInsurance, the nation’s largest source of health insurance for individuals and families, released data from its semi-annual Cost and Benefits of Individual Health Insurance report that showed that Iowa, at $103 for an average age of 35, has the lowest average monthly health insurance premiums for single policies of any of the 43 states in which eHealthInsurance sells insurance.
The average premium figures are derived from a sample of 82,000 individual and family health insurance policies purchased through its Web site, including policies that are PPOs, HMOs, point of sale, indemnity and high-deductible health insurance plans. The comparison of these average monthly premiums provides a fair approximation of the relative costs of health insurance among the states.
Because eHealthInsurance does not sell in Maine, we checked Anthem Insurance’s Web site and found the least expensive monthly premium for a 35-year-old male in Hancock County is $286, $183 (or 177 percent) more expensive than the average monthly premium rate in Iowa.
In other words, if the average Mainer enjoyed the average Iowan’s individual insurance premium, he or she would have $2,196 more in his pocket at the end of each year.
And assuming for the moment that the same thrifty individual Mainer decided to deposit $2,000 of this savings into a health savings account, the new tax-free account for medical expenses made possible by the 2003 Medicare drug law, then he or she could realize an additional federal tax savings of around $500 (assuming an income of between $28,000 to $68,000).
In addition, if Maine, like many states, also provided for HSA deposits to be made tax-free under state tax law, that would mean an additional tax savings of $170.
Well, so far this Mainer is now ahead $2,866 for the year, but it’s not quite the end of the story. If Bush succeeds in not only passing his plan for a national health insurance market but also for his plans for the deductibility of health insurance premiums for HSA-eligible plans, then the Mainer’s $103 monthly premium for a high- deductible plan would be deducted from his or her federal taxes for an additional federal tax savings of $309.
That brings the Mainer’s total savings in a national health insurance market to $3,175. We can probably leave it there, but if this Mainer works for a small business, there is a Bush proposal for a $200 tax rebate for individuals working for small business or a family farm who contribute at least that amount to their own HSA. In that case, the total savings would come to $3,375.
With savings like these, there is no question that many more Mainers will be able to afford health insurance. We don’t yet have a national market for health insurance but already, after only nine months of sales of HSA-qualifying health plans, thousands of previously uninsured individuals, families, small businesses and family farms are finding affordable insurance either for the first time or the first time in a long time.
Assurant Health reports that 43 percent of its HSA applicants were previously uninsured. Similarly, eHealthInsurance reports that approximately 33 percent of its HSA purchasers were previously uninsured.
Maine’s high insurance rates not only take a large chunk out of individual take-home pay, but they also act as a drag on the state’s economy adversely affecting its ability to compete with other states for jobs. Now there is an opportunity for Maine leadership to take advantage of the plans for a national insurance market and push for it to occur sooner rather than later.
The results could be stunning for the Maine economy and could significantly increase the affordability of health coverage for thousands of Mainers who currently go without it.
Former Speaker of the House Newt Gingrich is the founder of the Center for Health Transformation. Vince Haley is the State Health Transformation Project director for the Center for Health Transformation.