Selling Health Insurance Across State Lines Doesnt Lower Costs

Following the failure of the legislative effort to repeal and replace the Affordable Care Act (ACA), the fate of another of the President’s health care priorities remains unclear. In his first address to Congress, President Trump articulated five principles for health care reform. his fifth and final call to give “Americans the freedom to buy health insurance across state lines,” a reform that, in his words, would create “a truly competitive national marketplace that will drive down costs and provide much better care.” better”. this concept was not in the house reconciliation bill (the “american health care act” or ahca) to repeal and replace key provisions of the aca, but president trump can use his regulatory authority to promote cross-border sales of health insurance.

the president has the authority to act on his own thanks in part to the aca. that law includes a provision that encourages “health care choice agreements,” whereby an insurer could establish itself in one state and sell health insurance to consumers in many other states without having to follow the laws and regulations of those states. however, under the obama presidency, the us. The Department of Health and Human Services (HHS) never published regulations allowing these interstate sales.

Reading: Why can’t insurance across state lines

While the provision here encourages states to enter into regulatory agreements between states to facilitate interstate sales, under the trump campaign and various congressional proposals, the federal government would effectively override the authority of states to regulate their markets. Absent legislative action, there is nothing to prevent HHS Secretary Tom Price from issuing the required regulations and working with states to develop standards for interstate sales. in fact, several states already allow interstate sales.

the theory behind policies to allow the sale of insurance “across state lines”

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Traditionally, health insurance has been regulated by the states, which, until the aca established a set of essential health benefits and other minimum consumer protections, meant that there was significant variation between states in rules that govern insurance companies and the health plans they sell. . Some states have had extensive requirements requiring coverage of certain benefits, such as autism treatment, diabetes screening, or mammograms, while others have taken a hands-off approach to benefit design. Similarly, before the ACA prohibited charging women or people with pre-existing conditions more for their coverage, some states limited the flexibility of insurers to set premiums based on enrollee characteristics, while others did not. they did.

The concept of selling insurance across state lines, dating back to the 1990s, grew out of frustration with variation in state regulation. Advocates contend that if an insurance company were allowed to operate under the rules of a single state but sell plans in multiple states, it could lower the price of its plans, giving consumers new, more affordable options.

when theory collides with reality

While frustration with the costs of our current health care system is well-founded, proposals to allow interstate sales will do nothing to encourage more competition or address the underlying drivers of health care costs. Like politics, health insurance is local. Today’s health plans essentially give members access to a local network of doctors and hospitals at a reduced price. According to many insurance experts, the main barrier for an insurer looking to enter a new market isn’t state regulations, it’s the cost of building a network of providers at discounted prices.

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To date, six states have enacted laws to allow interstate sales: georgia, kentucky, maine, rhode island, washington and wyoming. however, none of these states have had a single new insurer enter their market due to their law. When asked about their laws, state officials and insurance industry experts in those states agreed that establishing a competitive provider network is the top barrier for new market entrants. They also noted that the sheer complexity of how insurance products are developed, priced, and regulated makes it difficult to establish a single state-to-state framework for consumer protection.

At the same time, there is a significant risk that if the ACA’s insurance reforms are repealed and Congress enacts legislation to require interstate sales, it could lead to adverse selection in many states. Without a minimum federal standard of protection, some multistate insurers with national or regional networks could take advantage of exemption from state standards for benefit design, premium grading, and other consumer protections. this would allow them to attract younger and healthier members than local insurers who must comply with the laws of their state. this, in turn, could threaten the long-term viability of local insurers, increasing premiums and reducing consumer choice.

looking forward

Cross-border legislation pending in Congress would effectively force states to allow interstate sales. However, if President Trump wishes to make good on his campaign promise to encourage the sale of health insurance across state lines, he need look no further than the current law and his own Secretary of HHS. He is likely to find, as six states already have, that interstate sales will do nothing to improve consumers’ choices or lower premiums.

For more information, check out our explainer for essential facts about health reform alternatives: Allowing the sale of insurance between states.

See also: Life Insurance Illustrations

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