Trump Administration Pushes for Sale of Insurance Across State Lines

It’s the health reform idea that won’t die. Recently, the Trump administration issued a request for information (RFI) seeking recommendations on ways to facilitate the sale of insurance across state lines, either through “Health Care Choice Compacts” authorized under the Affordable Care Act (ACA) or some other mechanism. Selling health insurance across state lines is already permitted under current federal law, and indeed many insurance companies market their plans in multiple states. However, the concept being promoted by the Trump administration would allow insurers to bypass the insurance standards of states that have strong consumer protections and benefit requirements by headquartering in a state with few regulations in place.

The policy is often touted as a way to reduce the cost of coverage and improve consumer choice, but states – and insurers – have been reluctant to embrace it, and for good reason.

In 2012, CHIR conducted a study of states that authorized insurers to sell plans across state lines. In addition to finding that such policies improved neither choice nor affordability at the state level, the report suggests  that federal legislation to preempt state consumer protection laws could prompt a regulatory “race to the bottom” among states, ultimately reducing the availability of comprehensive insurance for people with pre-existing conditions. Key findings include:

  • At the time of the study, only six states had enacted laws to allow the sale of insurance across state line, despite all states having the authority to do so.
  • None of the state laws had increased the availability and affordability of health insurance – no out-of-state insurers had entered or signaled an intent to enter the states’ markets as a result of the laws.
  • Stakeholders indicated that the difficulty of building an out-of-state provider network and discrepancies in the cost of care between different regions created substantial barriers to insurers selling health insurance across state lines.
  • State regulators were hesitant to defer to other states’ consumer protections and market rules, and reported administrative and operational hurdles in attempts to form partnerships with other states.
  • Neither insurers nor consumers, the very stakeholders the laws purported to benefit, lobbied for the legislation.

You can read the full study here.

Take Away: It’s unclear what the administration hopes to accomplish with this RFI, and whether it is a preliminary step in a regulatory process that would encourage Health Care Choice Compacts or some other kind of state-level regulatory rollbacks. Improving health insurance choice and affordability through a competitive marketplace is a valid aim. But selling insurance across state lines not only does little to address the underlying barriers to improved market choices (“It’s the network, stupid”), it could also put state protections for people with pre-existing conditions at risk. Comments on the RFI are due May 6.

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