But will insurers take the president up on his offer?
President Trump recently announced his intention to sign an executive order permitting the sale of health insurance policies across state lines. He also expressed an interest in allowing interstate organizations to buy multi-state plans, a proposal long championed by Sen. Rand Paul (R-KY). The senator hopes that the order will relax the Employee Retirement Income Security Act so that trade associations can purchase health insurance across state lines, just as it allows companies to do for their employees.
Allowed Under the ACA
In his February address to Congress, President Trump endorsed interstate health insurance sales as a way to “create a truly competitive national marketplace that will bring costs way down and provide far better care.” The Affordable Care Act, however, already grants insurers the right to sell policies across state lines. Rhode Island, Wyoming, Georgia, Kentucky, and Maine have all enacted what are known as “health care choice compacts” that authorize cross-state health insurance sales, though no insurer has taken those states up on the offer.
The industry’s reluctance may be based on logistical concerns. According to the American Academy of Actuaries, simply allowing insurers to sell policies in multiple states wouldn’t necessarily bring down premiums, since health care delivery and costs vary from state to state. In addition, an out-of-state insurer must painstakingly build a network of health care providers and then negotiate contracts with them before it can operate.
The organization stresses that out-of-state insurers would lack the leverage to negotiate better prices with health care providers without first signing up a significant number of enrollees. “Any cost savings resulting from differences in benefit coverage requirements among states can be small compared to cost savings that can be accomplished through negotiating strong provider contracts,” the academy argues.
The Insurance Industry Response
The National Association of Insurance Commissioners has also expressed its concerns about cross-state health insurance sales, noting that insurers could choose to operate in states with less stringent insurance regulations and consumer protections. As a result, insurers would “cherry-pick” only the healthiest enrollees, which might push up costs for the elderly or patients with pre-existing conditions. “While those individuals in pristine health may be able to find cheaper policies, everyone else would face steep premium hikes if they can find coverage at all,” the NAIC declared in a statement.
The NAIC also noted that insurance regulators don’t have the authority to regulate an insurer based outside of its jurisdiction. It further refuted the notion that allowing individuals to buy policies outside their state with fewer ACA-mandated benefits would reduce prices, claiming that mandated benefits add only 5% to a policy’s cost.
Likewise, America’s Health Insurance Plans stated that it wants to see more details on how interstate health insurance sales would be implemented. “While cross-state selling has been offered as a solution [there are challenges] that need to be addressed for it to be a viable solution,” a spokesperson for the group told The Hill.
Nevertheless, President Trump’s possible executive order shines a light on the continuing debate over health care reform, which has suffered several setbacks in the Senate in recent months. In the meantime, a bipartisan coalition of governors and senators have launched discussions about possible fixes to the ACA. Insurance agents should be aware of those proposals so they can help their clients pick the right policy if changes are made.