We’ll have a new president on January 20. Pundits are busy gazing into crystal balls trying to guess what the new administration will do. Perhaps it’s to distract us from the fact that they got the election so wrong. Or maybe they think they can conjure something from the thin proposals the President-elect has offered thus far. Then again, maybe it’s just to fill air-time.
But one pre-election proposal is more concrete than most. Under the new administration we will be able to purchase health insurance across state lines. For fans of the free market, this idea seems obvious. Expand the competition in all the markets, prices come down, quality goes up, everyone wins.
If only it was so simple.
It turns out, there is no federal law that prevents the sale of health insurance across state lines. The laws that exist are at the state level. This creates a problem for the new POTUS right out of the chute. Most of the gang on his side of the aisle also happen to be fans of states’ rights.
Let’s assume President-elect Trump isn’t too concerned about those pesky states’ rights. How will it work?
We only have to look to Georgia, Maine, and Wyoming to find out. These three states have already enacted legislation to allow insurers from other states to come in. The Robert Wood Johnson Foundation found that the goal of their legislation is to increase the affordability and availability of health insurance in their state.
Guess how many out-of-state insurers offered plans to their residents. That’s right. Zero.
In addition, Kentucky and Washington completed feasibility studies on the idea. They concluded there were too many roadblocks to implementation.
Insurers cited the challenge of building local networks of providers as the primary barrier in the scheme. Further, cost differences between regions aren’t always due to lack of competition. They are often the result of regional differences in the cost of care itself.
Another challenge involves the states themselves. Establishing a regulatory relationship to manage insurance across state lines takes more resources than most states care to invest.
Finally, assuming these barriers can be overcome, there is a concern for the consumer. If state line restrictions were dropped by a federal mandate, insurers would be incentivized to move to the least regulated states. Think Delaware for corporations, South Dakota for credit card companies. It would lead to a deregulation of the insurance industry as a whole as insurers leave the more regulated states.
You have to look pretty hard to find someone who thinks health insurance is just fine as it stands today. We need real reforms to bring down costs so the sick among us can get the care they need…preferably without bankrupting the country in the process.
What we don’t need to do is spend time and money on solutions that are already not working. Across state lines insurance is one of those non-solutions, even if it sounds good on the campaign trail. Let’s hope our lawmakers see that.
Amy Rogers MD is not a practicing physician and nothing written here should be taken as medical advice from either Amy or AssetBuilder. Medical decisions should be made with care in consultation with your health care provider.