Proposals to sell insurance across state lines have been floating around for a while. In 2005, Congress considered the first proposal to sell insurance across state lines at the federal level. Many of the candidates running in the recent Republican presidential primary endorsed the idea, including Scott Walker, Marco Rubio, Ted Cruz and Rand Paul. A proposal to sell insurance across state lines is a core component of Republican presidential nominee Donald Trump’s healthcare agenda.
With election day approaching and attention returning to plans that would allow the sale of insurance across state lines, it is worth asking whether these proposals would be effective.
The ACA provision that allows interstate sale of health plans
Even those in the know when it comes to health reform may be surprised to learn that the Affordable Care Act actually includes a provision (Section 1333) to allow payers to sell insurance across state lines. The provision, which went into effect in January, allows two or more states to enter interstate healthcare compacts. Payers operating within interstate compact would be able to sell plans in all its member states.
As of October, around 16 states have explored post-ACA legislation to create interstate healthcare compacts, according to the National Conference of State Legislatures. However, that’s about as far as most states made it. Since the ACA was enacted, only three states have enacted legislation to allow the sale of insurance across state lines. Legislation has been proposed in another handful of states, but has not been enacted. No states have entered agreements with any others to form an interstate healthcare compact.
Those in favor of selling insurance across state lines argue the ACA provision allowing the sale of insurance across state lines doesn’t help because the law still imposes overly burdensome regulations. Tom Miller, a health policy expert at the American Enterprise Institute, told The Hill in October that the provision was “a fake-out.”
Would payers sell across state lines if they could?
While some believe that burdensome ACA regulations prevent meaningful sale of insurance across state lines, it is not clear that this is the case. In an October 2012 paper published by the Robert Wood Johnson Foundation, researchers looked at legislation in states that allow the sale of insurance across state lines. They determined that local regulations were more likely to deter the practice than federal law.
The difficulty out-of-state payers face in building a network of local providers is one obstacle to proposals that allow sale of insurance across state lines. These proposals also ignore the cost of delivering care and fail to account for differences in cost of care between states and regions, according to the paper.
The researchers concluded the federal minimum standards of insurance imposed by the ACA might reduce the impact of selling insurance across state lines. However, it is more likely the failure of these proposals is due to administrative complexities and the fact that local officials aren’t willing to cede regulatory authority to other states.
Separating myth from fact in interstate health insurance sales proposals
There are potential benefits to selling insurance across state lines, at least according to those in favor of such proposals. Individuals would have access to lower premiums and more options available. However, this isn’t necessarily how things would play out in a market that allowed interstate health insurance sales, according to a fact sheet from the National Association of Insurance Commissioners (NAIC).
While some consumers could find cheaper plans under in-state health insurance sales proposals, payers would most likely seek regulations that allow them to cherry pick the healthiest patients. Others would most likely see their premiums rise and might see fewer options available to them. If minimum insurance standards legislated by the ACA were removed, the quality of coverage would likely decline as payers chose state regulators with the least stringent consumer protections.
If election season is any indication, it is unlikely proposals to allow interstate sale of insurance are going away. However, existing plans to allow the interstate sale of insurance seem to indicate that these proposals aren't likely to go anywhere. If they do, many patients may not see any competitive pricing benefits.