Op-Ed

Why selling health insurance across state lines won’t work

U.S. House Speaker Paul Ryan claims that allowing people to purchase health insurance across state lines will lower costs and improve access. He’s wrong about both.
U.S. House Speaker Paul Ryan claims that allowing people to purchase health insurance across state lines will lower costs and improve access. He’s wrong about both.

The linchpin of the Republicans’ plans to replace the Affordable Care Act is based on a simple idea of more competition to lower prices, which, like many so-called simple ideas, can easily be proven wrong.

House Speaker Paul Ryan’s three-pronged plan claims that allowing people to purchase health insurance across state lines will lower costs and improve access.

“I never understood the appeal of this idea. It only makes sense if you don’t know what you’re talking about,” health-care expert Austin Frakt, of Boston University and the Partnered Evidence-based Policy Resource Center at the Boston VA Healthcare System, told the Los Angeles Times.

The problem is that states can already permit cross-border sales. Six states — Georgia, Kentucky, Maine, Rhode Island, Washington and Wyoming — have passed laws to study selling health insurance across state lines or forming interstate compacts.

In 2011, Georgia took it a step further and passed a law to let insurers sell any policies in Georgia that they sold in other states. There have been no takers in Georgia or any of the other states, Sabrina Corlette, a research professor at the Center on Health Insurance Reforms at Georgetown University’s Health Policy Institute, told ManagedCare magazine in a June 2016 article.

The reasons are financial and not regulatory, according to Corlette, who also co-authored a 2012 report on selling health insurance across state lines.

To do business in another state, insurance providers would have to go through the expensive process of developing a network of doctors and hospitals in the face of established competitors who have already negotiated discounts.

It is important to note that this only impacts the individual market, where just 7 percent of non-elderly adults got their coverage in 2015, according to the Kaiser Family Foundation. Around 50 percent got their health care through their employers, which are typically self-insured and exempt from state regulations. (The report also shows 20 percent on Medicaid and 14 percent for Medicare with 9 percent uninsured.)

But even if the insurance companies offered cross-border plans, premiums would go up in states with the toughest regulations, which would threaten the viability of local companies, according to a February report by the American Academy of Actuaries.

Insurance companies also would cherry-pick the healthiest people for their cheap plans and “everyone else would face steep premium hikes if they can find coverage at all,” according to a report by the National Association of Insurance Commissioners and the Center for Insurance Policy and Research.

It would “start a race to the bottom by allowing companies to choose their regulator,” the NAIC report said.

So tough consumer protections in any one state would be unenforceable for the out-of-state-policies. Imagine letting consumers choose to have their auto insurance regulated by New Hampshire, where it is not mandatory.

And good luck getting help from out-of-state regulators in, say Alaska, when something goes wrong in Kentucky.

Another problem is that a key driver of insurance premiums is not where the policy is sold but the cost of delivering care where the consumer lives, which varies widely from state to state, according to the actuaries’ report.

And don’t try to argue that if the government cut all those mandates in the ACA it would reduce insurance costs because the NAIC says mandates add at most 5 percent to the price of premiums.

Even if you don’t believe all the experts cited above, there is one insurmountable obstacle: Senate rules.

“You’re not going to get 60 votes to approve buying insurance across state lines. That is a fantasy in the Senate,” Sen. Lindsey Graham, R.-S.C., told NBC’s “Today Show.”

John Winn Miller of Lexington is a former newspaper reporter, editor and publisher who manages a social media marketing company.

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