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Health Insurers Decline To Cross State Lines

October 9, 2012
Written by: , Filed in: Practice Management
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If health insurers could sell across state lines without the snarl of 50 differing sets of state regulations, then the marketplace would increase consumer choice and make insurance more affordable.

So goes an argument by many opponents to the Affordable Care Act. Let’s first, they say, try across-state-lines insurance sales and a few other measures such as malpractice liability reform. Let’s see how that works before we make any radical changes.

Well, across-state-lines insurance is being tried. It’s not working—so far, at least. Since 2010, Wyoming has allowed the sale of insurance from five other states consistent with its insurance laws. Since July 2011, Georgia has permitted the sale of insurance products if they are approved for sale in another state, as long as the issuing company is licensed in Georgia.

According to a new study:

No out-of-state insurers have entered either of these markets or indicated their intent to do so as a result of the states’ across state lines legislation. Maine officials reported that no out-of-state insurers have yet indicated their intent to enter the market under Maine’s new across state lines law.

Starting in 2014, Maine will allow the sale of individual insurance policies sold in any of four nearby states.

The Center on Health Insurance Reforms carried out the study, available here. The center is at the Georgetown University Health Policy Institute in Washington, DC.

So what’s the hangup? Primarily, it’s provider networks. As the study says, “To compete with domestic insurers, out-of-state insurers must build a network of local providers and negotiate competitive reimbursement rates.”

The study continues:

Out-of-state insurers thus face a chicken-and-egg dilemma: they must build a sufficient membership to negotiate competitive rates with providers, but, to garner that membership, they must show customers they have an adequate network of providers.

Of course, it’s early. Maybe insurers will overcome those and some other barriers the study notes, including the inherent complexity of health insurance that requires it to be tailored to local environments. The study authors are skeptical, but we’ll see.

Unfortunately, the study says, “State officials and insurers also noted that across state lines legislation ignores the primary cause of high prices—the cost of delivering care.” In other words, insurance from a low-cost state such as Wyoming may not end up being low-cost if it has to cover the higher cost of care in, for example, Atlanta.

The report concludes: “While it is certainly the case that many consumers and small businesses lack meaningful choices among insurers and struggle to find affordable coverage, our findings suggest that across state lines legislation does not appear to be the ‘silver bullet’ that proponents are searching for.”

Related seminar: The Business of Radiology

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