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Trump, House GOP Proposals Allowing Insurers to Sell Across State Lines Would Undermine Insurance Markets

President-elect Trump’s proposals to replace the Affordable Care Act (ACA) include allowing 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.  Health plans from House Speaker Paul Ryan and other congressional Republicans include similar proposals.  Selling health insurance “across state lines,” supporters say, would reduce premiums and give consumers many more options.  But, in fact, it would likely do nothing to help those who’d lost their health coverage due to the ACA’s repeal to find alternative coverage in the individual market.  And it would likely make coverage much less affordable for those who are older or in poorer health. 

The few states that tried to open their markets to out-of-state insurers before health reform had little to show for it.  Insurers didn’t enter the insurance markets of the states that allowed them to, or even express interest in doing so, due to practical problems in establishing networks of health care providers, a 2012 study found.

More importantly, if out-of-state insurers do enter state health insurance markets to a significant degree, less healthy individuals and small businesses whose workers 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, for example, 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.  That 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, more of whom would end up uninsured, 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.”