The Impact of Laws to Allow Cross-State Sales of Health Insurance: Few Benefits, Potential Risks for Consumers

Conservative policymakers frequently argue that the way to reduce health care costs and increase consumers’ insurance choices is to exempt health insurers from state regulation and allow an “interstate market” for health insurance (to learn more about how across state lines policies are designed to work, check out this FAQ from Kaiser Health News). In fact, allowing across state sales is one of the pillars of proposals to repeal and replace the Affordable Care Act (ACA) (for more analysis of presidential candidate Mitt Romney’s health care platform, check this out.)

Up until now, however, no one has studied whether across state lines proposals actually work. To understand what happens when a state allows health insurance to be sold across state lines, my colleagues (and frequent CHIRblog contributors) and I investigated across state lines laws in six states.

These laws were typically supported by state lawmakers seeking an alternative to the ACA. For example, one insurance company representative noted that the across state lines legislation in their state “became part of the Rotary Club speeches in which legislators pointed to their accomplishments.”

Although these proposals are often touted as an alternative to the ACA, our analysis in six states found that across state lines laws did not result in a single insurer entering the market or the sale of a single new insurance product. Further, there was no evidence that these initiatives actually bring down costs or increase consumer options. In fact, such proposals could put consumers at risk by limiting state officials’ ability to respond to the needs of their residents and eliminating important state-based protections.

The bottom line:  There is no “easy button” to bring down insurance costs and provide consumers with more choices.  Quick fix gimmicks such as the across state lines proposals have failed largely because they are unable to address the true barriers to insurance market competition (such as building a provider network) and don’t account for localized health insurance rules. At the same time, if enacted more broadly, these laws could undermine consumer protections by reducing the ability of state regulators to oversee insurers and respond meaningfully to consumer complaints.

To learn more about these findings and many more, I encourage you to check out the full report and news coverage on our findings.

And for more information on reports like these, be sure to check in with CHIRblog‘s where we’ll keep you updated on our research and everything you need to know about the “State of the States.”

The opinions expressed here are solely those of the individual blog post authors and do not represent the views of Georgetown University, the Center on Health Insurance Reforms, any organization that the author is affiliated with, or the opinions of any other author who publishes on this blog.