CROSS-STATE
health insurance idea draws skepticism.
SACRAMENTO, Calif. — Allowing insurers to market health care policies across state lines is one of President Donald Trump’s main ideas for lowering costs.
While supporters of the idea cast it as a way to make insurance policies more competitive, critics say it’s unlikely to result in more affordable plans and could undermine stronger consumer protections in states such as California and Hawaii. Such a “race to the bottom” could leave some older consumers with health problems unable to afford coverage, critics say.
And there’s another complication: Trump’s proposal appears to need Democrats’ support to pass in Congress. Congressional aides involved in health care legislation say the proposal to allow crossstate insurance sales would need 60 votes in the Senate.
In his speech to Congress Tuesday night, Trump said the nation must turn to new ideas to help control costs.
“The time has come to give Americans the freedom to purchase health insurance across state lines,” the president said.
The estimated 20 million Americans who buy coverage directly from an insurer would be affected. Their health plans are regulated by state governments, which decide the minimum benefits that must be covered and mediate disputes between insurers and their customers, among other consumer protections.
Variation between the states was more pronounced before the Obama administration passed the Patient Protection and Affordable Care Act, which raised the minimum legal standards for coverage nationwide.
In New York, health plans had to cover everyone at the same price, whether sick or healthy, young or old. In California, patients must be able to see a primary care doctor within 10 days.
Trump and congressional leaders have vowed to repeal the law and replace it, although the details of their plans remain in flux.
The Trump proposal on cross-state sales would “eviscerate the ability of state legislatures and state governors to decide what the appropriate consumer protections are for their state’s consumers and businesses,” said Dave Jones, a Democrat who regulates some of California’s health plans as the elected insurance commissioner.
The concept has been around for at least 10 years, but experts say there is a good reason why it hasn’t advanced: It might not deliver as promised.
“Premiums really reflect the cost of care where an individual lives,” said Barbara Klever of the American Academy of Actuaries, a professional group that represents experts who advise on health care and pension programs.
Health insurance is somewhat like real estate in that costs reflect local conditions. If an insurance company based in a low-cost state such as Utah is allowed to sell policies in a high-cost state such as New York, its premiums for New Yorkers would reflect medical costs in their own state, not Utah.
Economist Joe Antos of the American Enterprise Institute said the idea of crossstate health insurance has an instinctive appeal because Americans have seen competition drive down costs in other areas, from credit cards to air travel.
But Antos said it’s a “faulty analogy” when it comes to health insurance because where the competition really needs to happen is among hospitals and doctors. And they are increasingly consolidating into bigger units, partly to fend off insurer demands to cut fees.
“You have to have competition at the service-delivery level, as well,” Antos said. “The most expensive part of health care is hospitalization, and that is pretty much going to drive the price of insurance.”
Concerned that repealing the Affordable Care Act would eliminate consumer protections, Democratic lawmakers in some states, including Hawaii and Nevada, have introduced legislation to preserve the act’s consumer protections in state law. Allowing crossstate insurance sales could undermine those efforts.
“We have a small market … and it would take a lot for some company from the mainland to try to come out here and get a foothold,” said Hawaii state Sen. Rosalyn Baker, a Democrat who heads that state’s committee overseeing health care.
Cross-state insurance is popular with conservative lawmakers who believe extensive state-level regulations require people to buy coverage they don’t want or need and drive up costs for consumers, particularly those who are young and healthy.
“If you live in the state of California or New York and you wanted a policy that had fewer state mandates and might be cheaper, I don’t see why you shouldn’t be able to go to the state and find a plan that supports your needs,” said Sally Pipes, president of the Pacific Research Institute, which advocates free-market ideas.