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Previewing a House GOP Leaders’ Health Plan, #9: Allowing Insurers to Sell Across State Lines

Conservative health care proposals commonly allow insurers to offer health plans to people or small businesses in other states, even if the plans don’t comply with the other states’ requirements — and the health proposal that House GOP are crafting may do the same.  Selling health insurance “across state lines,” supporters say, would reduce premiums and give consumers substantially more options.  The handful of states that tried to open their markets to out-of-state insurers before health reform, however, had little to show for it.

As a 2012 study found, insurers didn’t actually enter the insurance markets of states passing “across state lines” legislation, or even express interest in doing so, due to practical problems in establishing networks of health care providers.

More importantly, if out-of-state insurers do enter state health insurance markets to a significant degree, less-healthy individuals and small businesses with workforces that are older or in poorer health would likely face much higher premiums as state consumer protections and market reforms are effectively undermined.

A House Republican Study Committee proposal would let out-of-state insurers sell insurance within a state without having to comply with the state’s consumer protections, including (1) limits on insurers’ ability to charge higher premiums based on age, gender, or health status; 2) requirements to offer coverage to people with pre-existing conditions if a state adopted that protection before health reform; and 3) requirements to cover certain benefits.  The out-of-state plans would need to comply only with consumer protections in the state where they’re licensed, which would encourage insurers to seek licensure in states with very weak regulations and consumer protections and where they exert substantial political influence.

Out-of-state plans would mainly attract healthy people with low health care costs, since they have less need for consumer protections such as those listed above.  Meanwhile, sicker-than-average people would generally remain in plans offered by in-state insurers, which would push up premiums for the in-state plans by saddling them with sicker beneficiary pools. 

Thus, if insurers could offer out-of-state plans, premiums would rise for people expected to have relatively high health care costs and the number of people with high health care costs who have insurance would fall, the Congressional Budget Office found.  The New America Foundation similarly concluded that this type of proposal “would lower premiums for the healthiest Americans, but it would raise premiums and reduce coverage options for everyone else. . . .  Individuals with troublesome health histories would have to pay more, or go without coverage.”

Read the rest of our series previewing a House GOP leadership health plan here.