Selling Insurance Across State Lines Is Bad for Consumers

Last month, Republican GOP presidential hopeful Mitt Romney unveiled his plan to replace President Obama’s Affordable Care Act with new conservative health care reforms. His proposal emphasized the role that states should play in improving health insurance coverage. Paradoxically, Romney also promoted a long-held conservative belief that allowing insurance companies to sell policies across state lines will reduce costs. Unfortunately, allowing insurance companies to sell policies between states would completely undercut the ability of states to reform their own health insurance industry.

Currently, insurance companies must obtain a license to sell insurance within a state. To get that license, companies can only sell policies that comply with the state rules and regulations about what services must be covered. In this way, citizens of each state are able to decide for themselves what kind of health insurance market they would like to shop in. This was what allowed then Governor Mitt Romney to institute the health care reform in Massachusetts that became the model of President Obama’s Affordable Care Act.

Allowing health insurance companies to sell policies across state lines would end each state’s ability to regulate their own insurance market. Health insurance companies will do exactly what banks and credit card companies did in the late 1970’s when they were allowed to sell across state lines, move to the states with the fewest regulations and force states into a race to the bottom. Today most banks and credit cards companies are based in South Dakota and Delaware because those states have little to no regulations. Citizens of Montana or Maine can’t pass new consumer protections from credit cards or banks even if they wanted to because banks based outside their states can ignore all of their laws. The conservative vision for health care reform is to follow this path of no regulations and no accountability.

On top of all that, there’s no reason to believe that getting rid of consumer protections for insurance will lead to lower health care costs. If insurance companies were free from rules requiring comprehensive coverage, they would focus on designing policies to attract inexpensive patients. Instead of providing quality care more efficiently insurance companies would instead be free make big profits by selling skimpy, cheap policies for young and healthy people while avoiding old and sick customers. If you are young and healthy this would save you some money on your premiums, but older and sicker patients who need health care services the most would be unable to afford decent coverage. Instead of lowering costs this would only guarantee big profits for insurance companies while pushing the cost for sick patients onto tax payers through Medicaid and state subsidized high risk insurance pools.

Obama’s health reform law, which many Republican’s are intent on repealing, actually addresses state regulations in a much more comprehensive manner. Under the Affordable Care Act, after 2014 states will be able to band together to create regional health insurance markets. This way, state residents will still have the power to democratically decide what consumer protections they want, while insurance companies will have the opportunity to get more patients in a regional market.

-- CWA News / NPR / Slate / Think Progress / The Incidental Economist / Commonwealth Fund