Sometimes an idea that seems too good to be true is just that. One of those ideas is being touted by President-Elect Donald Trump and the Republican leadership in Congress as a key component of the Affordable Care Act (ACA) “repeal and replace” strategy. The idea is to allow health insurance to be sold across state lines. This regurgitated policy proposal is a popular sound bite, let consumers save money by purchasing health insurance coverage from another state where the policy may be cheaper. However, this proposal, which has been kicked around for well over a decade, is a bad idea.
Supporters claim that by removing state boundaries that hinder insurance products to be sold in different states, health insurers will be better able to bring down costs due to increased competition in the health insurance marketplace. Further, they believe that insurance should be marketed and sold nationally as opposed to the current system where health insurance is sold regionally and regulated by individual states. Supporters argue that by allowing insurers to sell health insurance according to the rules of any single state that they choose, this would enhance regulatory competition among the states. This competition would create an incentive to attract insurers due to a reduction in redundant and “unnecessary” regulations. Thus, leading to a decline in insurance costs for consumers as companies create plans that meet the needs and demands of their consumers, as opposed to providing additional benefits that raise costs and are not used by the majority of consumers. Sounds good huh?
Luckily, we do not have to speculate on the potential impact that this policy change would have in New Jersey. Five states and the federal government already allow it! Georgia, Kentucky, Maine, Rhode Island, Wyoming and the ACA as well (as long as all states involved agree to it) allow for insurance to be sold across state lines. The Kaiser Health News report on the experiences in these states found that, “not a single insurance company has offered” to sell a policy approved in one of those states to consumers in another.
Why is that? Network adequacy for one is a major concern. A 2012 study by The Center on Health Insurance Reforms at Georgetown University pointed out how the challenges of finding providers likely doomed this proposal from taking root in America. Here is an illustration as to why it is difficult. A person, who lives in New Jersey and wants to buy a plan sold in Maine, is going to have a problem when it comes to finding health care providers that are in-network in their state. Why? Because the network was designed for the residents of Maine and the health care needs in their state. Therefore New Jersey health care providers will be in limited supply and building a robust network in New Jersey to meet the newfound consumer demand will be quite expensive. This will make the choices of in-network doctors and hospitals under this new multi-state plan very limited. That is, unless you don’t mind taking flights to Portland, ME when you need medical attention.
There is also the very real idea that out-of-state insurance policies could potentially discriminate against women. Prior to the ACA, thirty seven states permitted gender rating of health plans. Gender rating is the “unethical” practice of charging men and women different rates for identical health services. These different rates usually resulted into higher insurance premiums for women than men. Studies conducted before the enactment of the ACA showed that women in the individual market could pay up to 1.5 times more than men for health insurance. Research also showed that gender rating costs women in the United States approximately $1 billion dollars annually.
If that provision of the ACA were to be repealed then New Jersey’s current gender rating ban in the individual market would only apply to New Jersey-based health plans. So if you bought health care coverage from an out-of-state insurance company as envisioned by this proposal, then “Josephine” will likely pay more for the same coverage than “Joseph”. I, for one, do not want my daughter or yours to be treated differently than our sons when it comes to affordable and quality health insurance.
Additionally, individuals with pre-existing conditions could be at risk. One of the most important protections under the ACA was a provision that insurance companies cover those with pre-existing health conditions. Prior to the implementation of the ACA, New Jersey was one of five states that required health plans to do so. Allowing insurers to sell across state lines effectively creates a dynamic where lower premiums would be realized for the healthiest New Jersey residents, but it would raise premiums and reduce coverage options for virtually everyone else. So if you are an individual with a worrisome health history like a diabetic with heart disease running through your family, look out! You would likely have only the options of going without coverage or acquiring an in-state insurance plan, which will likely increase premiums when only the sickest are left behind.
Finally, if you have a problem with one of those out-of-state policies…good luck! The New Jersey Department of Banking & Insurance would have no jurisdiction to assist you with any problems associated with a policy sold in another state. If an unscrupulous out-of state insurance company were to take advantage of you through a potentially discriminatory policy with limited consumer protections, there is not much New Jersey can do under this proposal if you have a complaint. Striking the proper balance between cost containment and consumer protection in health insurance is a delicate balance that should be treaded upon carefully. Therefore, I strongly believe that allowing out-of-state health insurers to sell policies here in New Jersey is the wrong prescription to fix the problem of providing affordable health insurance in our state. That’s my take. What’s yours?