There are many state-level regulatory and structural issues to overcome before insurance can be allowed to cross state lines.
Insurers are inching closer to offering insurance to out-of-state consumers. The Centers for Medicare & Medicaid Services (CMS) recently submitted a request for information inviting insurers and stakeholders to outline ideas how the program can work for both consumers and insurers. Ultimately CMS aims to “eliminate regulatory, operational and financial barriers to enhance issuers' ability to sell health insurance coverage across state lines.”
Selling insurance across state lines is not a new idea. It’s actually baked into the Affordable Care Act. Section 1333 allows states to enter into a compact where insurers can offer health plans with the other state. At the advent of the ACA, Section 1333 was met with little fanfare from insurers. Governments didn’t enact the proper details for enforcement, so the law was shelved.
CMS wants to get the ball rolling. States have a lot of authority regulating insurance markets. In their RFI, CMS implicates states passing legislation to make cross state insurances sales possible.
Complexities in Crossing State Lines
Insurers are met with several challenges selling in other states. Insurers are entrenched in their respective states. Any out-of-state insurer will face an uphill battle competing with in-state company. Secondly, regulating an out-of-state industry is not something states are used to doing. Though insurers are bound by regulations of their home state, services would be subject to network rules and consumer protections of the the consumer state.
Affect on Consumers
Some industry experts are concerned about how cross state insurance could harm consumers. A common complaint is that insurers would set up in states with the least regulation, selling low cost plans, low coverage plans in states with high regulation. Another concern is consolidation. Opening up markets will bundle bigger, cheaper plans leaving smaller plans unable to compete. The marketplace would consolidate, which usually means higher prices in the long run.
Allowing cross state insurance does nothing to assuage runaway health care costs. Consumers still receive health care services in the area they reside, regardless where the policy is written. Detractors point this out, claiming it doesn’t really matter if the policy was written in Utah or New York City.
States that stand to benefit the most from cross state insurance sales are the ones that currently have the least competition. Arizona and Nebraska, for instance, have struggled to find enough insurers to meet the demands of its residents.