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Author: erikinthered100 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 4332  
Subject: Re: State lines Date: 10/12/2012 4:01 PM
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1. States have different laws as it pertains to insurance. In order for a company to operate (sell insurance) in a particular state, they need to meet the rules of that state. Customers and companies are generally prohobited from conducting business interstate in this manner when the company is not approved for those reasons.

Different states have different mandated coverage. In one state, you might be able to buy a real insurance policy, catastrophic care only insurance, while another state may have a plethora of mandates which converts all "insurance" into "cadillac" style prepaid health care.


2. Jurisdiction is a huge part of it. If someone in NY wants to buy a policy from some fly-by-night company in VT and that company has not been approved by NY, the customer likely has no recourse if the company defrauds the customer. By requiring the company to get approval to do business in NY, they are able to not only vet the company to some extent, they also now have some level of legal authority to shut the company down if they are fraudulent.

Wouldn't this be a problem for many other goods and services as well? I don't see "jurisdiction" acting as a barrier to free trade among the states in most other areas.


Other goods and services are not substantially different and do not subject individuals to undue risk if the company that sells the product turns out fradulent.

If you want to buy a tv from your local best buy or from some retailer online in another state, if that TV breaks, you are not out a ton of money.

If you buy insurance from an un-approved company and they default on paying your $50,000 medical bill, you are likely up a creek without a paddle.


This is a rationale employed by those who favor restrictions on interstate health insurance. But it doesn't hold up to common sense. If an insurance company and policy meets the standards of one state, why shouldn't another state recognize that company as legitimate? I have yet to hear of a single state which is lax or irresponsible in its regulation of health insurance (the only problem appears to be overregulation).


This is a problem with the state insurance commissions, not the insurance companies. Why would any insurance company want artificial barriers to how they do business???

To limit competition.




dave
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