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Jack Torres
Jack Torres

How To Buy Insurance Across State Lines

The concept of selling insurance across state lines, which dates back to the 1990s, was borne out of frustration with the variation in state regulation. Proponents contend that if an insurance company were allowed to operate by the rules of just one state but sell plans in multiple states, they could lower the price of their plans, giving consumers new and more affordable choices.

how to buy insurance across state lines

To date, six states have enacted laws to allow cross-state sales: Georgia, Kentucky, Maine, Rhode Island, Washington, and Wyoming. Yet none of these states has had a single new insurer enter its market because of its law. When asked about their laws, state officials and insurance industry experts in those states agreed that establishing a competitive provider network is the primary barrier to new market entrants. They also observed that the sheer complexity of how insurance products are developed, priced, and regulated makes it difficult to establish a single cross-state framework for consumer protection.

The Trump Administration has made expanding choice and affordability in the health insurance market a key priority. Average individual market premiums available through the Exchange more than doubled from 2013 to 2017, and half of U.S. counties had only one issuer during the 2018 plan year. While average premiums dropped slightly and issuer participation increased this year, premiums remain far too high and a substantial portion of counties continue to have just one issuer. Expanding the sale of health insurance coverage across state lines could provide more options to people with access to just one issuer and give them a new opportunity to pick a plan that better meets their needs and lowers their cost.

But eventually, a national market would begin to take shape. Insurers would ultimately have an incentive to build these multi-state plans, because they would have larger risk pools, reducing the volatility of health-care spending, and reducing administrative costs. This will be especially important as more people buy insurance on their own, rather than through their employers: a major goal of market-oriented health reform.

UPDATE 3: Sarah Kliff discusses a new paper out of Georgetown that contemplates recent interstate-insurance reforms in Maine, Georgia, and Wyoming. The paper highlights the challenges of building a new provider network, says Sarah:

A day after voting to repeal the federal health law, a group of more than 60 House Republicans introduced a bill reviving an idea long popular with conservatives: allowing consumers to buy health insurance across state lines so that residents of a state with expensive health plans could find cheaper options.

Insurers are allowed to sell policies only in states where they are licensed to do business. Most insurers obtain licenses in multiple states. States have different laws regulating benefits, consumer protections and financial and solvency requirements. Even before the federal health law was passed, states could have opted to set up compacts for health insurance. But they did not.

What do advocates say are the main advantages of the Republican plan to allow insurers to sell across state lines? The individual health insurance market is dominated in many states by just a handful of companies, so this provision would allow consumers to shop broadly for cheaper policies, supporters say.

The new health law allows states to form insurance compacts but does not require that they do. States joining a compact, however, would be required to pass legislation authorizing that decision. States could begin the process starting Jan. 1, 2016.

What do advocates say are the main advantages of the Republican plan to allow insurers to sell across state lines? The individual health insurance market is dominated in many states by just a handful of companies, so this provision would allow consumers to shop broadly for cheaper policies, supporters say.

The President's Plan Will Support The Innovative Measures States Are Taking To Help Those Who Cannot Afford Insurance Or Who Have Persistently High Medical Expenses. Governors across the Nation have put forward plans to make basic private health insurance more accessible for their citizens. The President has directed Health and Human Services (HHS) Secretary Mike Leavitt to work with Governors and the Congress to make basic private health insurance available, and to help States pay private health insurance premiums for the poor and the hard to insure.

This increasing burden of health spending on the U.S. economy is unsustainable. Higher spending on public programs like Medicare and Medicaid strains state and Federal budgets. Higher insurance premiums pose a challenge for employers and burden workers with higher health costs and lower wage increases.

Insurance should be affordable and provide increased stability and peace of mind for working families across the country. The President has proposed the creation of Association Health Plans (AHPs), which will allow employers, especially small businesses, to band together and purchase health insurance across state boundaries. By purchasing coverage for thousands of employees at a time across many different small businesses, association members can pay lower premiums for better coverage, as some large companies can today.

Americans should not have to worry about changing doctors, learning a new insurance bureaucracy, having their premiums go up if a family member is sick, losing their insurance tax advantage when leaving employment-based plans, or being subject to more costly mandates. The President believes Americans should be able to purchase health insurance across state lines and take it with them wherever they go.

Our government has a responsibility to promote access to quality affordable health care for the poor and chronically ill. The President’s proposals would provide important assistance to these vulnerable Americans, extending extra financial assistance to low-income Americans; encouraging states and employers to help the chronically ill obtain affordable health coverage; and allowing individuals to purchase affordable insurance through their civic, community, and religious groups. Promoting these initiatives, and continuing to increase support for Community Health Centers, will ensure health care is available where it is needed most.

Americans should have the option of taking their health insurance with them when they change jobs, move, become self-employed, or leave the labor force, and should be able to shop for better insurance deals in other states. They should not be forced to change doctors, learn a new insurance company’s rules, lose their insurance tax advantage, face higher premiums because someone in their family has fallen ill, or be subject to more costly mandates. Americans should be able to find the best policy for them in any state, and then keep that policy wherever they live.

Most health insurance is not portable today. Employer-based group insurance usually does not provide truly portable health insurance when employees change jobs or stop working. People changing jobs usually must change insurance policies to receive any health benefits from their new employer. State regulations and benefit mandates limit cross-state portability and increase costs.

One of the best ways to give more Americans access to quality, affordable, and portable health insurance is to remove the artificial regulatory barriers that limit access and choice. Currently, people can only purchase insurance offered in their home state and cannot shop for better deals in other states. Individuals and businesses in many states have only a few options for health insurance because each state is a separate health insurance marketplace.

State rating regulations and benefit mandates are elaborate and costly. In fact, 20 states have more than 30 separate mandates each, and six states have more than 50. While benefit mandates make health insurance coverage more comprehensive, they also make it more expensive by requiring insurers to pay for care that consumers previously paid for out of their own pockets or chose not to consume. Mandated benefits increase the cost of basic health coverage, pricing insurance out of the reach of many Americans who must then go uninsured. They also make it very expensive for insurers to operate in multiple states.

Large employers and unions are able to pool their employees and members together across state lines, enjoying economies of scale, purchasing clout, and regulatory efficiencies. By contrast, small employers have to try to purchase health benefits for far fewer workers at a time on a state-by-state basis. As a result of different benefit mandates and policy approval processes across the 50 states, small businesses generally are not able to join together across state lines. It is expensive and difficult to develop an insurance policy that meets the requirements of many different states, and the resulting costs from this complexity tend to make such policies unaffordable. 041b061a72

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