Guest post by Michael Halasy Practicing Emergency Medicine PA, Health Policy Analyst, and Health Services Researcher
Interstate Health Insurance Sales
One of the more common ideas often thrown around in health policy is the idea of allowing patients to purchase health insurance across state lines. The idea of course, is to allow patients access to potentially cheaper policies, and that by increasing competition, lower rates will ensue.
While this does not sound like the worst idea, there are several problems with this concept, the first, and most obvious, being regulatory. Insurance plans are regulated by each state, and each state has a mandatory minimum coverage. State regulators have legal authority to oversee all insurance matters within their state boundaries, but do not have the authority to oversee out of state plans. If a patient were to purchase insurance in a neighboring state, and then have a grievance or complaint against that company, the patients legal recourse might be very limited. Additionally, if they buy plans that do not meet the minimum coverage requirements of their own state, are there potential legal problems?
The second issue with this, is that it will create an adverse risk pooling. Out of state insurers will almost certainly offer plans to healthy, young individuals. This will leave in state insurers with a potentially sicker risk pool. What this will do is lower premiums potentially for one group of patients, but concurrently raise rates for a sicker group. Risk pooling, and spreading the risk through a group of patients is the backbone of health insurance, this could possibly interfere with this.
The final issue is fragmentation. In a system that is already badly fragmented, increased fragmentation reduces the leverage of insurers. In a BNET article in 2009, it was noted that the city of Milwaukee, with multiple insurers, and no dominant health insurer on the landscape, demonstrated that on average, providers would not accept less than 200% of Medicare as their reimbursement. Nearby Chicago however, with a dominant BC/BS insurance market demonstrates that on average, providers accepted 112% of Medicare as their reimbursement. The reason is simple. Leverage. Who has it? The insurers? Or, the providers?
Finally, perhaps the biggest issue with Interstate Health Insurance sales is that it fails to address rising costs. It will create a cost shifting onto sicker patients, and lower premiums for younger, healthier patients….but only temporarily. It will not address the continued, unsustainable rise in healthcare costs, and could create a regulatory nightmare.