President-elect Donald Trump has proposed interstate health insurance, "a perennial favorite of Republicans," Harwell notes. Maine, Georgia and Wyoming have tried it, but no insurance companies took them up on their offers. "Trump’s proposal is different, aimed at allowing sales of health plans across all 50 states instead of just a few. And he has released no specifics about how it would work," Farwell notes. "But Maine’s experience reveals some of the problems with this general approach."
First, insurers need networks of health-care providers to "keep costs down, by negotiating lower prices with providers in their networks, which should lead to more affordable monthly premiums for consumers. Networks also allow insurers to select doctors and hospitals that meet certain safety and quality standards," Farwell writes. "But networks are expensive to set up. Insurers have to pay lawyers to draw up contracts, spend time negotiating rates and so on. That’s part of why even in states with lax insurance regulations, you don’t see 20 insurers competing for business. Allowing the sale of insurance across state lines wouldn’t make forming networks any easier."
Also, "Health-care costs vary from state to state . . . because of the relative age and health of residents and other factors. That’s reflected in different monthly premiums in each state," Farwell notes. "Under Trump’s proposal, a wide swath of America’s population would presumably become the customer pool for health insurers. States with cheaper health care would likely end up subsidizing customers in other states," which could suppress premium increases. "But health insurers would have to grow even bigger to serve such a big customer base. Is that in consumers’ best interests?" she asks, noting antitrust lawsuits against big insurance mergers.
The National Association of Insurance Commissioners, which has a "Myth vs. Reality" sheet about interstate insurance, "warns of a 'race to the bottom,' in which insurers cherry-pick the healthiest customers in each state, who are the cheapest to insure. That would leave everyone else — the older, sicker and more expensive — to face steep premium hikes, if those people can even find a plan to cover them," Farwell writes. Rural areas and states have older populations.
"Proponents point out that the proposals pushed by Trump’s pick for HHS secretary, Tom Price, and House Speaker Paul Ryan would require insurers to provide a minimum level of benefits in order for consumers who buy them to qualify for tax credits. And Trump has said that health plans would have to comply with regulations in each state," Farwell writes. "But if that’s the case, it’s difficult to envision how the benefits of his proposal would be realized. They’re built, at least theoretically, on doing away with a lot of those regulations." (Read more)