Nothing prevents an insurance company in State A from doing business in State B, but if they do so they must meet all of the regulatory standards of State B. One reason why New York is such an expensive place for insurance is that the regulations can be very onerous. On the flip side, New York also has a reputation for sound, stable insurance companies. It's kind of strange how that works, I guess. Historically, a state like New York with a well-run financial regulatory structure (despite the fact that its politics are so leftist) is looking to protect its citizens from fly-by-night insurance carriers from other states who may undercut New York insurance companies by selling insurance policies without the financial backing and reserves that NY requires.
The issue here really comes down to the Commerce Clause vs. the Tenth Amendment.
http://en.wikipedia.org/wiki/McCarran%E2%80%93Ferguson_Act
The problem is state mandates that create local monopolies. Licensing and permitting don’t protect you from scoundrels or bad actors. That’s utter myth.
There is no conflict between the 10th and the Commerce Clause. The conflict is between individual liberty and state control. I should be able to cross state lines and buy whatever insurance I want as an individual.
That power is available to Congress and would create real competition. That way if I want a policy that is no-frills and “unmandated” I can get it. Let the state regulate all businesses within its borders, but it cannot regulate interstate commerce and that is what they’ve done.
Undo it and prices fall. It is absolutely pro-consumer and doesn’t need a massive bureaucracy to manage it.
The main culprit is lack of a national market for health insurance, which would greatly increase competition and thus lower costs to the consumer.
In turn, the main culprit for the lack of a national market is the 1945 McCarren-Ferguson Act, which exempted health-insurance providers from federal anti-trust regulation so long as the individual states took on the task of such regulation. The rhetoric and intent of the Act might have been consideration of the Tenth Amendment, but the effect has been different. The upshot has been to disempower consumers by making them, in effect, captive customers in their respective states; the wildly varying intrastate regulations providing an extremely powerful incentive to merge and “cartelize” within the individual states, while providing no incentive to trade between them. The lack of antitrust oversight, in turn, encourages, all those practices the feds claim they hate: price-fixing, rate-setting, and, in general, “restraint of trade” for the purpose of keeping prices high.
In principle, I’m not in favor of federal anti-trust legislation, as its history proves it usually hinders competition rather than promotes it. However, in the case of health insurance, I would certainly approve of a situation in which federal regulation at least made everything uniform so that an insurer in Wisconsin could seek a buyer in New Jersey without the insurer’s having to adjust his entire business operations to New Jersey state insurance law. The out-of-state policy could be regulated by New Jersey law in terms of possible situations like abuse, breach of contract, etc.; but the point is, the coverage of the policy wouldn’t have to adjust to New Jersey law and its particular special interests, lobbyists, etc.
It’s not ideal, but it’s better than the existing situation — which caused insurers to become, effectively, a state monopoly; and certainly much better than the ObamaCare alternative — which will incentivize health insurance to become a federal monopoly. Neither McCarren-Ferguson nor ObamaCare promotes INTER-state commerce, and neither does a thing for promoting or increasing competition.