Should insurers be permitted to sell health policies across state lines? This policy idea has been around for more than a decade, but it is seeing renewed scrutiny during this election year. Both leading Republican applicants for president—Donald Trump and Ted Cruz—have involved the idea in their campaign platforms.
Selling health insurance across state lines has been a popular Republican healthcare policy idea since at least the year 2005, when the Health Care Choice Act was introduced in Congress. It would have permitted the sale of insurance regardless of state, but the bill died in committee. It has been a conservative party line ever since, although, and is often utilized as a Republican response to the Affordable Care Act.
Supporters of the idea claim that selling insurance policies across state lines would offer consumers with more choice, making better competition. Insurers would not have to follow state-particular regulations, lowering costs that could then be passed along to the consumer.
But selling insurance across state lines is not the healthcare.
Between the years of 2008 and 2011, 6 states enacted legislation permitting insurance to be bought and sold across state lines. Not one of the 6 states—Georgia, Kentucky, Maine, Rhode Island, Washington and Wyoming—saw a single insurer enter a new market or give a new product.
Consumers do not need to go out of state for healthcare, which means that if out-of-state insurers want to compete with existing carriers in a new market, they have to make a local network of contributors. Building a network entails contracting with doctors and hospitals in the communities where they offer policies, discussing lower payment rates for when their health plan members receive treatment.
Currently, health insurance is regulated by individual states. Proponents of selling across state lines discuss that having to comply with 50 different sets of mandates is what keeps insurers from doing business in more markets and giving more products. If insurers could sell across state lines, they discuss, they could headquarter in a state with fewer regulations, and offer all types of—theoretically cheaper—policies.
For instance, in California, entire health plans have to cover treatment for lead poisoning. But let’s say Kate lives in San Diego, and she believes her threat of getting lead poisoning is really low. Kate would be fine with a plan that does not cover that treatment, and if she could purchase an out-of-state plan that did not have to cover it, her costs might be lower.
There are few cases where selling across state lines could be beneficial for customers. Various communities in the U.S. are situated on or near state lines. Consumers in these cities would not be burdened by out-of-state networks.
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