Regulation and Competition: An Examination of the “Consumer Choice Health Plan”

Legislation to enact the “Consumer Choice Health Plan” is promoted as a step toward competition and away from regulation. This characterization is misleading. The tax provisions in this plan include potentially beneficial reforms, but have offsetting effects that impair economic efficiency. The plan's regulatory provisions rest on a misconception of the characteristics of competition in the health insurance market. These provisions encumber the framework within which competition takes place, and thereby reduce the effectiveness of competition. On balance, the plan is likely to restrict rather than expand the range of effective choice in the health insurance market.