Health Insurance Across State Lines

Since 2011, five states, Georgia, Rhode Island, Maine, Kentucky, and Wyoming have passed laws allowing insurance companies to sell insurance plans in their states. Georgia’s law has been in affect since 2011. As of this writing, no policy has been sold under those state laws.

Section 1333 of Obamacare allows insurance companies to create plans with enrollees from different states. So far, no insurer has created one of these plans.

There is a commonsense reason behind insurers lack of enthusiasm for selling insurance across state lines. In order to offer insurance, a company must create a network of doctors and hospitals to serve its customers. This means that the cost of providing care, obviously the biggest cost associated with providing health insurance, cannot be greatly reduced. Doctors and hospitals aren’t offering their services for a discount.

Another critical factor is the control states have over their insurance market. As long as every insurer in the state has to offer basically the same plans, there is no way to offer a cheaper plan.

Simply put, if an insurer has to contract with the same doctors and hospitals and must offer the same plans–there is no way to bring down the cost of insurance.

Passing a federal law that allowed insurance companies to pick which state laws they follow would create a race to the bottom. The price of premiums would go down, but the coverage offered would be greatly reduced. Also, this would give states no authority over the health insurance market within their borders.

This article from Bloomberg has a lot of good information about purchasing health insurance across state lines.

This article from The Hill has more information and suggests an interesting tax reform.

Advertisements

I'd love to hear from you.

This site uses Akismet to reduce spam. Learn how your comment data is processed.