should health insuranuce industry be regulated?

Introduction

There exists substantial amount of literature regarding the advantages and disadvantages of regulations in the USA economy , the initial attempts to approximate the general impact goes back to the 1970s Basing on this work , it is understood that regulations inflict a significant burden on businesses as well as the consumers in the USA According to past estimates , the cost of regulation reached the 1 trillion mark in 2004 (Krugman 2006 ) with more than 185 millions of Americans being covered by health insurance , the question of whether the health insurance industry

should be regulated or not has been asked by different stakeholders . However , this question remains controversial since the costs and benefits of health regulation are debatable

Debate on whether the federal government should regulate the health insurance industry or not is not new in America among the USA politicians or even amongst policy experts , reform advocates insurance companies and the common public . My view on this subject is that the government should not regulate the health insurance industry since health insurance industry needs to regulate it self in accordance with the marketing forces to ensure that no external interference distorts the industry . To further support my position I will pose several arguments as to why the government should not regulate the health insurance industry . I shall discuss several points in specific which are underlined below

Costs

In many occasions , state-level regulations in an industry have resulted being an obstacle to competition which in turn hurts the final consumers . Previous Academic studies have shown that the markets which are left to compete amongst themselves without regulations serve the consumers better than those being regulated (Krugman , 2006 . In every case , competition has resulted in reduced prices while the quality remains equal if not improved . In a study carried out by on benefits of deregulation , it was established that , deregulation provided consumers with cost benefits amounting to almost 50 billion each year (Robert and Jerry , 1996

Regulating health insurance industry will also result in considerable compliance as well as administrative expenses . The health insurance industry , for instance is being regulated through agencies in each state of America . The usual size of staff for the health insurance organizations was about 300 in 2004 resulting in an approximated budget of about 20 .2 million (Krugman 2006 ) More so , the health insurance companies which take part in different state markets are forced to apportion huge resources to deal with the issues raised by the state regulatory bodies and state lawmakers . If the industry can regulate itself and political motivated regulations removed , the expenses the companies incur as a result of these regulation will be greatly be reduced

Ever since the 70s , industry analysts have been rethinking their views regarding economic regulations in health insurance industry . The common viewpoint among all economists in the industry is that regulations lead to poor services to the consumers and that the possible benefits of not regulating the industry can be substantial (National Association of Independent Insurers , 1995

Joskow (2003...