Buying Insurance Across State Lines

Buying insurance across state lines is a misnomer. You will still need to buy an insurance policy that designed for your home area.

New York has the highest average health insurance cost, and New York City is even higher. It may seem like a great idea for a New Yorker to buy insurance from New Mexico, which has the lowest health insurance cost. But the New Mexico plan comes with New Mexico doctors and hospitals. That’s sort of inconvenient.

The true term should be “selling insurance across state lines”. That does several things. It allows the insurance companies to pick the states with the least regulations. It’s a return to the unregulated market where we were 30 years ago. States, in a race to harvest taxes from the companies, will battle to cut the most regulations.

Buying Insurance Across State Lines – How it Was Before

Buying Insurance Across State Lines
Buying Insurance Across State Lines

Before Obamacare, insurance law was left mostly to the States.  States were allowed to set their own standards, and many did.  Some required higher minimum coverages; some had “prompt pay” regulations which fined insurance companies for slow payments, some required coverage for wigs during chemotherapy, and the like.  These are all generally considered positive benefits, but they raised premiums.  This would have been a pain to the insurance companies back before computerized billing, but now it’s just a few more lines of computer code, and it brought in some extra premiums.

Obamacare, the Affordable Care Act, added many extra coverage requirements at the federal level that some states didn’t include.  These include maternity, birth control, mental health, annual checkups, and pediatric care.  The result, of course, was that premiums went up, insurers were happy with the extra income, and people paying the bills were unhappy with the higher bills.

If the Obamacare coverage requirements were repealed, and the States were bypassed by allowing buying insurance across state lines, there is worry about a “race to the bottom” with several states competing to cut the most insurance requirements and therefore have the lowest prices.

Is Less Regulation Good or Bad

Less regulation is good in many cases, but for a product like insurance that few can understand, regulation has been proven necessary. We don’t want to return to the days of insurance policies with holes, or undercapitalized insurance companies that can’t pay their claims. What good is a policy that excludes cancer, or has a low limit? Or, as a case that affected me several years ago, fully covers only 1 doctor a day. Do you pay the surgeon, the anesthesiologist, or the doctor in the ER?

In fact, there was a study done in 2012 of states that allowed buying insurance across state lines1.  There were few or no examples for the study.  Most insurance companies declined to participate.  In fact, the lobbying group for most private insurers, America’s Health Insurance Plans, hasn’t endorsed the idea. Neither has the Blue Cross Blue Shield Association.

There’s one other big footnote to this proposal.  It would apply only to those buying individual or small business policies.  Most large companies (where most Americans get their insurance) are self-insured and are already buying across state lines and exempt from state regulations.  Oh, and the congressional plan is exempt also.

  1. Selling Health Insurance Across State Lines, The Center on Health insurance Reforms, http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2012/rwjf401409