Buying Medical Insurance Across State Lines __TOP__
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.
buying medical 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.
Garrett Ball is the owner of Secure Medicare Solutions, a national, independent Medicare insurance brokerage that works with 30+ companies in 43+ states. Secure Medicare Solutions has been in business since 2007 and worked, first-hand, with tens of thousands of people going onto Medicare or already on Medicare.
We live in an age of increasing geographic mobility. People drive across state lines to their jobs. Technology allows us to work from different time zones. Snowbirds who retire early continue to split their summers and winters between climates. More people in general are buying vacation homes. A National Association of Realtors report found increasing demand for vacation homes, driving up prices 36% between 2013 and 2018.
And what if you divide your time fairly evenly between two places? Again, buy health insurance in your state of residence. What if you have medical conditions that require ongoing care or take prescription drugs long-term?
Multi-state plans are available in 35 states as of 2020. Check with a health insurance website for the most up-to-date multi-plan availability, and read plan details carefully to understand their networks and benefits.
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Yet after the Supreme Court ruled in 1944 (United States v. South Eastern Underwriters Association) that the Sherman Antitrust Act applied to insurance, the industry pressured Congress to overturn the ruling. This led to the McCarran-Ferguson Act of 1945, which put the states in charge of regulating insurance, including the exclusive power to license insurers to operate within their borders; the new law also protected state insurance regulations from preemption by federal regulation.
As the proportion of Americans with private health insurance soared from 23% in 1945 to 83% in 1975, the industry grew up fragmented into 50 different states. The inconvenience of this arrangement was, to some extent, checked by the Employee Retirement Income Security Act (ERISA) of 1974, which preempted state regulation of health-care benefits for self-insured employer plans. (A self-insured plan is one where the employer pays the benefits that it offers from its own funds but typically hires an insurance company to administer the benefits.) Though this provision allows large employers to procure health-care services for their employees nationwide, the millions of Americans who must get health-insurance coverage from small group plans or individual policies remain locked out of health plans from other states.
The following year, the U.S. Department of Health and Human Services issued a formal Request for Information with the intent of making it easier for individuals to purchase insurance across state lines but was unable to make any progress in implementing it. The upshot is that allowing individuals to purchase health insurance from other states would likely require statutory authorization and revisions to the McCarran-Ferguson Act.
The variation in individual market premiums does not simply reflect differences in the underlying cost of delivering medical care; it shows state-specific differences in health-insurance markets. This is clear from the fact that, while premiums vary relatively little within states (even across substantial distances), substantial differences in premiums track state boundaries (even between neighboring counties). For instance, in every county in eastern Oklahoma, benchmark premiums range from $500 to $699, whereas every county across the border in western Arkansas has premiums between $200 and $399 (Figure 2).
Under ERISA, large employers typically manage the health benefits covered by their self-insured plans across state lines, which frees them from restrictive and potentially costly state regulations. Employer-sponsored health-insurance premiums are not just lower on average than those for equivalent individual market plans but vary much less between states (Figure 3).
The structure of insurance markets does much to influence the ability of providers to inflate and pass on costs. Blue Cross hospital insurance plans were initially established by the American Hospital Association (AHA) for the sake of bolstering hospital revenues, and AHA in most states secured favorable tax and regulatory policies to protect hospitals from competition. By providing open-ended reimbursements to facilities according to the expenditures they incurred, such insurance plans caused hospital costs to soar.
If individuals were allowed to purchase plans from other states, regulators in each state would be forced to place the interests of these individuals above those of insurers and the rest of the health-care industry. A 2008 study by the Department of Health and Human Services estimated that the reduction in premiums resulting from allowing individuals to shop for insurance across state lines could reduce the number of uninsured Americans by 12 million.
In an attempt to reduce premiums by increasing the proportion of enrollees who need little medical care, five states and the District of Columbia have reinstituted the individual mandate penalty that Congress repealed at the end of 2018. Yet the mandate did little to compel individuals to enroll in order to reduce premiums at the federal level because the penalty was small relative to the often exorbitant cost of premiums, and its reestablishment at the state level is unlikely to be more effective. Reinsurance programs that provide additional subsidies to plans that attract disproportionate numbers of sicker enrollees have been established by 15 states and may prove more successful at reducing premiums. But the cost of such programs would soar if an influx of enrollees from other states were permitted.
This market already exists, albeit to a limited and restricted degree, with Short-Term Limited Duration Insurance (STLDI). Such plans are available in about half the states, though the maximum duration of enrollment permitted by state law varies (some states allow plans to guarantee renewal for up to three years, while others limit enrollment to three months). STLDI plans are able to offer significantly lower premiums and better benefits to individuals who sign up before they get sick, and they seek to attract enrollees by providing access to broad national networks of medical providers. ACA plans, by contrast, typically cover only the bare minimum number of local providers required by state law. Allowing individuals to purchase STLDI plans from other states would make insurance coverage more affordable while also facilitating the development of competition between national networks of medical providers.
Congress should protect consumers by establishing national standards for STLDI plans. These standards should require insurers to renew coverage indefinitely, regardless of medical conditions that individuals may develop, and prevent states from forcing individuals to drop coverage that they purchased in other states.
Competition across state lines is necessary for any fundamental transformation in American health care. While the old model, providing services by local hospitals, made sense 80 years ago, the growing specialization of the medical profession and the capital intensity of surgical procedures make it increasingly inappropriate. Not every county can support cutting-edge neurosurgery, and some states may be unable to do so. Large academic medical centers and specialized facilities typically deliver significantly better-quality clinical outcomes than smaller hospitals, where staff may be poorly equipped and have little experience treating complex cases.
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. 041b061a72