By Rachana Pradhan
Republicans talking about their ideas for replacing the Affordable Care Act often propose selling health insurance “across state lines.” The general thrust of the idea is to boost competition in state insurance markets by providing consumers a wider array of plans from which to choose.
How is this proposal for interstate insurance sales different than what currently exists in the marketplace, where the nation’s largest health insurers (Aetna, United HealthCare, etc.) already sell policies in multiple states? And what evidence do we have about whether the idea would be successful? What has happened in the handful of states that have already tried it? What effect would it have on the uninsured? Here are a few things you need to know:
1. A major aim is to reduce regulation and requirements for what insurance must cover.
Under the Affordable Care Act, health insurance plans for individuals and small businesses are required to include a minimum set of benefits called “essential health benefits.” That package broadly includes 10 categories of benefits, including emergency services, maternity and newborn care, prescription drugs and hospitalization.
In addition to those federal standards, each state has its own laws that require certain benefits to be covered by health insurance. Many of these so-called “mandated health insurance benefits” predate the ACA’s enactment in 2010. The National Conference of State Legislatures (NCSL) has estimated that, between the states and the federal government, there were more than 2,000 health insurance mandates prior to the ACA.
The idea behind the across-state insurance sales proposal is to let insurers skirt benefit requirements with the goal of making premiums cheaper and giving consumers more variety. Critics of the ACA and of the current state mandate situation, argue this variety of mandates in different states drives up the cost of health insurance.
Under a scenario in which the ACA would be repealed, its minimum federal floor for health benefits and other requirements for health insurance would be eliminated. Companies could set up headquarters in a state that is less regulated, and they could sell policies in other states but only abide by the laws of the state in which they are based.
ACA supporters contend this change would result in a “race to the bottom” in which health insurance companies would be encouraged to offer skimpy coverage and only attract the healthy.
2. Who has pushed for this proposal?
Republicans in Congress as well as GOP presidential candidates have been the main advocates for increasing interstate health insurance sales, but the idea has been in circulation for many years.
In 2005, members of Congress considered passing the Health Care CHOICE Act, a bill that would have changed rules in the individual insurance market to increase interstate insurance sales. The idea surfaced again in 2013 as part of an Affordable Care Act replacement bill known as the American Health Care Reform Act. It was developed by the U.S. House of Representatives’ Republican Study Committee. In 2015, key members of the House and Senate with health care jurisdiction included the idea in an ACA replacement bill called the Patient CARE Act.
Republican presidential candidates in 2016, including Donald Trump and Ted Cruz, have said the proposal would be included in their plans to repeal and replace the ACA.
3. State benefit mandates increase premiums, but the impact is highly varied.
Mandated health insurance benefits generally are categorized in three ways: health services, providers and categories of dependents that must be covered by an insurance policy.
NCSL points out that, depending on how a state benefit mandate is defined, the increased cost of a monthly premium can be anywhere from less than 0.1 percent to more than 5 percent. The nonpartisan National Association of Insurance Commissioners, which represents state insurance regulators and has opposed interstate health insurance proposals, has cited a similar figure. But the cost can vary greatly, because it depends on how each state’s laws and regulations are crafted.
4. Several states that tried to boost interstate insurance sales have not seen interest from health plans.
The “across state lines” idea has already been tried in a handful of states – both Democratic and Republican. And it hasn’t had much impact. Georgia, Kentucky, Maine, Rhode Island, Washington and Wyoming have enacted laws with the aim of increasing interstate health insurance sales. Some states enacted their statutes before the ACA became law. However, current and former state officials have said potential competitors have been deterred by roadblocks related to building a health care provider network, and negotiating competitive payment rates.
Research from the Robert Wood Johnson Foundation from 2012 explains the reasons behind this obstacle, noting that across-state-lines legislation ignores the primary driver of high health insurance costs – the cost of delivering care. The amount of regulation in a particular state or benefit requirements were not the main deterrents for health insurers in those places. Advocates of the across state lines counter argue that their approach would work better in a post-ACA world.
5. It’s not totally clear how many uninsured would gain coverage.
Research from University of Minnesota economists Stephen T. Parente and Roger Feldman in 2011 estimated that a national health insurance market with competition among all states could result in 12.5 million previously uninsured people gaining coverage. The analysis assumes the ACA is not in place.
However, estimates for how many people would gain insurance have not been consistent. In 2005, the Congressional Budget Office said the Health Care CHOICE Act “would not have a substantial effect on the number of people who have health insurance coverage.” At the time, the nonpartisan budget scorekeeper estimated that there could be a small increase in the number of uninsured, and about 1 million people would no longer be enrolled in employer-sponsored coverage. Many of those people would gain individual health coverage, CBO said.
The Patient CARE Act that was proposed a decade later as an ACA alternative never received a CBO score, because the legislative language was not developed.
By comparison, in early 2016, President Barack Obama said 20 million people had obtained health insurance because of the ACA. That figure includes coverage from several sources, including private health plans purchased through the law’s health insurance exchanges, Medicaid and young adults staying on their parents’ plans until age 26.
Rachana Pradhan (@rachanadixit) is a health care reporter for Politico Pro. Before coming to Politico, Pradhan spent more than three years at Inside Health Policy focusing on implementation of the Affordable Care Act.
