On March 11, the Department of Health and Human Services (HHS) issued a request for information (RFI) soliciting comment on how the Administration can work to reduce barriers to and enhance insurers’ ability to sell individual health insurance plans across state lines via Health Care Choice Compacts (HCCCs). HCCCs are arrangements available under Section 1333 of the Affordable Care Act (ACA), which allow two or more states to join together and establish a regulatory framework for providing coverage. In a HCCC, an insurer can offer a qualified health plan (QHP) in the individual market of any state participating in the compact, and the plan would only be subject to the laws of the state in which it was first written/issued. To date, no state has entered a HCCC and no insurer has offered to sell a policy through one. Some states – Georgia, Maine, Oklahoma, and Wyoming – have passed laws permitting the sale of insurance plans across state lines. However, despite this flexibility, no insurer has elected to sell such policies.
Perhaps in response to the apparent disinterest among states and insurers, HHS asked for comment on how it can expand access to and operationalize the sale of policies across state lines. Specifically, it requested feedback on: the advantages and disadvantages of sales through HCCCs; whether regulatory barriers exist preventing states from engaging in these sales; how such policies may impact access to QHPs; and the financial impact of interstate sales, among other issues. To understand stakeholders’ perspectives on the sale of insurance coverage across states, we reviewed comments submitted by fifteen stakeholders, including consumer advocacy groups, insurers, state regulators, and state-based marketplaces. We found that nearly all stakeholders oppose expanding interstate sale.
State Regulators: California Insurance Commissioner, New York State Department of Financial Services, Oklahoma Insurance Department, Pennsylvania Insurance Department, Washington Insurance Commissioner
Advocates Worry that the Proposal Could Reduce Access to High-Quality Coverage
Twenty consumer advocate groups, including the American Diabetes Association, American Heart Association, and National Alliance on Mental Illness, among others, submitted joint comments to the RFI, stating that the Administration’s proposal “would weaken consumers’ access to high-quality health insurance.” Though the RFI seeks to lower costs and increase choice, the groups argued that the interstate sale of insurance would likely have the “opposite effect[.]” They explained that while premiums for out-of-state policies may be lower, the cost sharing imposed under such policies would likely be high and may expose consumers to “unexpected financial burdens[.]” The advocates worried that expanding across state sales would “erode” state consumer protections since out-of-state insurers would not have to comply with most in-state requirements. It would also create confusion as to which state bears ultimate regulatory and enforcement authority since a plan approved in one state could be sold in multiple other states. Out-of-state plans could “further muddy consumers’ ability to select the best plan for their needs,” as in- and out-of-state plans would likely cover very different sets of benefits.
Insurers Agree That the Benefits of Selling Across State Lines Are Minimal
Among the five insurer comments reviewed, all agreed that a new federal mechanism for across state sales is “unnecessary,” since states already have the authority to establish interstate compacts, if they so choose. The insurers commented that there is a “lack of interest” (Cigna) in these sales, because the cost savings are minimal and the administrative complexities are vast. Premiums are set at a local level based on a population’s risk and cost of care in the market. Allowing an out-of-state insurer to sell in state “will not alter these underlying factors” (BCBSA). Therefore, under an HCCC, the insurers reasoned that premiums are unlikely to drop for consumers, and insurers would save only the cost of filing a product – a nominal expense compared to the administrative costs of expanding into a new state. For example, out-of-state insurers would likely face high costs in establishing a provider network, because they lack “well-established” relationships with in-state providers and have less leverage to negotiate competitive rates (Cigna).
The insurers agreed that the proposal is also unlikely to increase competition and choice. Rather than bring new competition in, Common Ground believes that the proposal would “serve only to drive competition out[.]” It wrote that it would have to consider whether to “remain in currently underserved counties if an out-of-state insurer were allowed to sell insurance that does not meet Wisconsin regulations.” Several insurers expressed similar concerns, noting that across state sales could create a race to the bottom, with insurers incorporating in states with the fewest regulations, and then selling in other states where in-state insurers are held to more robust standards (UPMC). This dynamic would place in-state insurers at a disadvantage, since they would be required to cover more services than their out-of-state competitors and, thus, their prices would be higher and less attractive to consumers.
Insurers concluded that nothing in Section 1333 of the ACA prevents states from entering compacts, but that the complexities provide for few benefits and create significant ambiguity (AHIP). If HHS issues further regulation in this area, the insurers urged it to clarify the role each state plays in any HCCC formed, including which states’ laws apply and who maintains oversight of: consumer protections, insurer solvency, network requirements, risk adjustment, and more.
Most State Regulators Oppose Federal Preemption, Citing Negative Economic Impacts
Of the five state insurance departments reviewed, four – California, New York, Pennsylvania, and Washington – opposed expanding across state sales, and one – Oklahoma – supported it. Those opposed rejected any efforts by the federal government to preempt state licensing requirements, and “stress[ed] the importance of maintaining the existing, long-standing state-based regulatory approach” (California). The states felt that allowing an out-of-state insurer to skirt in-state requirements would leave consumers with “illusory coverage” (California), and that any plan without a local provider network would be “illogical” for consumers (Pennsylvania). The states argued that participation in an HCCC should be entirely voluntary and that states should maintain the autonomy to regulate their own market.
If the federal government acts to preempt state law in this area, the states cautioned that “the results would be disastrous” (New York). Under such a scenario, New York explained that state governors’ and legislatures’ control would be undermined; insurers would compete on an uneven playing field, risking insolvency and job loss for local carriers and brokers; and consumers would be “confused and  angry” by the influx of low-quality coverage. States noted that this is not the right solution for reducing healthcare costs, since it would threaten the stability of local insurance pools. State regulators also warned that they would largely lack the authority to help consumers who purchase out-of-state policies. The states cautioned that consumers would have to turn to out-of-state regulators to seek any redress against an out-of-state insurer, and “[o]ne would expect that that regulator would rightly prioritize the complaints of its own citizens” (Pennsylvania).
Only Oklahoma expressed support for promoting across state sales, briefly stating that it would “maintain close contact with the domiciliary state of any insurer[.]” It wrote that policyholders would be required to acknowledge a disclosure statement outlining the limitations of the plan, including the lack of mandated benefits that are ordinarily covered under Oklahoma plans.
The Marketplaces Fear State Regulation Would be Undermined
Four of the state-based marketplaces commented on the RFI – Colorado, California, D.C., and Massachusetts – and all felt that expanding the sale of policies state lines “impede[s] the role states play as the primary regulator of insurance” (California). The marketplaces explained that they rely on their state regulators to ensure that the QHPs sold meet certain consumer protections. For example, state regulators conduct form and premium rate reviews, engage in market conduct exams to ensure general compliance, and assist consumers when they encounter a problem with their insurer. D.C. expressed concern that across state sales puts these oversight activities “in jeopardy.” D.C.’s marketplace wrote that “we would have our hands tied,” if an out-of-state insurer failed to reimburse providers or denied consumers’ claims. The marketplaces stated that “regulators can only enforce laws within their jurisdiction” (California), and when oversight functions become fragmented, it is likely to lead to fraud and abuse.
The marketplaces also explained that more choice is not always better for consumers. For example, in 2019, Massachusetts’ marketplace offered 57 non-group health plans and 70 small group health plans. It reported that this choice was “sufficient for most residents,” and that too much choice can be “counterproductive,” if it causes consumers to struggle in comparing plan options. Similarly, California explained that an HCCC could reduce the availability of comprehensive plans, as out-of-state insurers may “lure healthy enrollees away,” forcing other insurers to cover less in an attempt to avoid bad risk. The marketplaces agreed that if they wanted to offer such policies, they would do so – arguing there is no need for HHS to take regulatory action (Massachusetts).
Take-Away: Of the fifteen stakeholders reviewed, only one – Oklahoma – favored expanding the sale of insurance products across state lines. All other stakeholders opposed such expansion, commenting that these sales are already permitted, yet no insurers have elected to do so. The stakeholders were clear that this inactivity is not due to regulatory barriers, but rather, that the benefits of such arrangements are minimal and that the risk of undermining state authority is significant. These stakeholders asked that HHS not preempt states’ roles as the primary regulators of insurance. If states want to pursue such arrangements, they will do so on their own.
A Note on Our Methodology
This blog is intended to provide a summary of comments submitted by specific stakeholder groups: consumer advocacy groups, insurers, state-based marketplaces, and state regulators. This is not intended to be a comprehensive report of all comments on every element in the RFI, nor does it capture every component of the reviewed comments. Additionally, a portion of submitted comments were not available for our review at the time of publication. For more stakeholder comments, visit http://regulations.gov.