Washington, DC — Today, the Centers for Medicare and Medicaid Services issued a request for information to gather recommendations on how to sell health insurance across state lines. Leslie Dach, chair of Protect Our Care, issued a statement in response:
“This move by the Trump administration is just another attempt to sabotage health care. The Trump Administration wants to let insurance companies pick the state with the least regulation, and allow insurers to bypass much needed consumer protections. This has nothing to do with choice, competition, or affordability for consumers; it is about increasing profitability for the insurance companies and guaranteeing worse coverage for the rest of us.”
Background:
SELLING ACROSS STATE LINES WOULD BE A “RACE TO THE BOTTOM” THAT UNDERMINES CONSUMER PROTECTIONS
CBO: Selling Across State Lines Would Result In People Living In States With More Consumer Protections To Be Offered Plans From States That Do Not Have Those Protections. “Under H.R. 2355, CBO expects that individual health insurance would be offered across state lines to individuals in states with relatively expensive coverage mandates and rate-setting rules that permit relatively little variation in the prices an insurer may charge. The insurers offering those policies would be licensed in, and regulated by, states that do not have those characteristics.” [Congressional Budget Office, 9/12/05]
Urban Institute: Insurers Would Domicile Firms In States With Lax Regulations And The Least Consumer Protections. “Pre-ACA proposals to permit sales of insurance across state lines would have allowed insurers to take advantage of the regulatory variation across states. The same is true for current proposals to permit such sales while simultaneously repealing all or most of the ACA. Under such a policy scenario, insurers would have powerful financial incentives to domicile firms in states that have little regulation of nongroup insurance markets, such as those without guaranteed issue, those with no limits on premium rating, those permitting liberal use of benefit riders, and so on.” [The Urban Institute, 6/29/16]
NAIC: Allowing The Sale Of Insurance Across State Lines Would “Preempt” Consumer Protections In States. “In the same vein, we strongly oppose legislation that would preempt state authority. We continue to see proposals that would preempt state licensing requirements and, thus, consumer protections by allowing sales across state lines by federal edict, without proper discretion for the states to form compacts between themselves. We also see proposals that would preempt state solvency requirements and regulations by creating federally licensed insurance pools called ‘association health plans.’ Such federal actions would strip states of the ability to protect consumers and create competitive markets and should be rejected.” [NAIC Letter to Reps. Walden, Brady, Pallone and Neal, 1/24/17]
Oregon Department Of Consumer And Business Services Director Pat Allen: “That Really Is A Race To The Bottom.” “Groups such as the National Association of Insurance Commissioners argue that insurers might flock to states with the most-limited requirements for the industry. That could result in some plans carrying cheaper premiums, though more limited coverage. ‘That really is a race to the bottom in terms of what the regulatory playing field looks like,’ said Pat Allen, director of the Department of Consumer and Business Services in Oregon.” [Wall Street Journal, 12/3/16]
Consumers Would Be More Vulnerable Because They Potentially Would Have Limited Ways To Hold Out Of State Insurers Accountable. “Health insurance sales across state lines raise the question of who would enforce the regulations of the state from which coverage is sold. Individuals may not even be aware that they are buying a policy not subject to the laws of their own state. Say an insurer violated the laws or regulations of the state of sale. Insurance regulators in the purchaser’s state would undoubtedly find it difficult, if not impossible, to enforce their laws on an insurer that may not even be licensed to sell coverage in their state. Regulators in the state in which the insurer is domiciled might have insufficient resources and insufficient incentives to protect the residents of another state. Consequently, it is unclear how consumers would have a path for redress if necessary.” [The Urban Institute, 6/29/16]
NAIC: “Allowing Insurance To Be Sold Across State Lines Would Eliminate The Ability Of Insurance Regulators To Assist Consumers.” “Interstate policies would for the first time allow insurers unlicensed in the purchaser’s state to sell health insurance, which would otherwise be a criminal offense. Licensure is the key that allows state regulators to take action to protect consumers. The regulators of one state have no authority to enforce the laws of another state. Instead, consumers will have to hope that the regulator in a distant jurisdiction has the ability and resources to assist consumers nationwide.” [NAIC, accessed 3/6/19]
SELLING ACROSS STATE LINES WOULD TILT INSURANCE TOWARD THE HEALTHY WHILE RAISING COSTS FOR THE SICK
NAIC: “Interstate Sales Would Allow Some Insurers To Cherry-Pick The Best Customers By Avoiding Consumer Protections.” “Interstate sales would allow some insurers to cherry-pick the best customers by avoiding consumer protections that require them to cover individuals with preexisting conditions and limit their ability to charge higher prices for older, sicker customers. In states with robust consumer protections, insurers could reap huge profits by skirting these rules. [NAIC, accessed 3/6/19]
NAIC: “Existing Risk Pools…Would Become Progressively Sicker And More Expensive Until They Ultimately Fail.” “Out-of-state insurers would be able to lure healthy enrollees away from existing risk pools, which would become progressively sicker and more expensive until they ultimately fail. Insurers that currently comply with state consumer protections would be forced by out-of-state competitors to evade them as well. Insurance policies would cover less and less, as insurers try to design policies that discourage the sickest customers from applying. [NAIC, accessed, 3/6/19]
Urban Institute: Selling Across State Lines Would Provide Strong Incentive For Healthy To Purchase Coverage From States With The Fewest Regulations. “Insurers doing so could then selectively sell insurance to just the healthiest, lowest-risk individuals living in states that regulate their markets more strictly. Healthier individuals living in states that require more sharing of health care risk between the healthy and the sick would have a strong financial incentive to buy coverage from these out-of-state insurers, who could charge them low premiums based on their particular characteristics and health experience.” [The Urban Institute, 6/29/16]
Premiums Will Increase For Those Who Purchase Insurance In More Regulated States, Which Would Most Likely Be The Sick. “Consequently, average health care costs would increase significantly for those enrolled in a product meeting the standards of a high-regulation state, making premiums unaffordable for those trying to buy more comprehensive coverage. Premiums would go up not just for sick people but also for relatively healthy people who prefer the more generous coverage in the more regulated market, that is, healthy older adults or families.” [The Urban Institute, 6/29/16]
SELLING ACROSS STATE LINES WOULD LEAD TO EMPLOYERS DROPPING COVERAGE
CBO: Selling Across State Lines Would Result In 1 Million People Losing Their Employer Sponsored Coverage. “Some employers (especially smaller ones) would find it desirable to stop offering coverage to their employees because the insurance available in the individual market had become cheaper. In addition, some people with relatively low health care costs who, under current law, will obtain health insurance coverage through an employer, would choose instead to purchase individual health insurance coverage from an out-of-state insurer. That would increase the per-person cost of the employer’s group health insurance, and would result in additional employers deciding to drop the group coverage. Based on CBO’s analysis of research on the responses of individuals and firms to changes in the price of health insurance, CBO estimates that, if the full effect of H.R. 2355 were realized immediately, about 1 million people—including both employees and covered dependents—would lose employer-sponsored health insurance coverage.” [CBO, 9/12/05]
EVEN CONSERVATIVES SAY SELLING INSURANCE ACROSS STATE LINES WON’T REDUCE COSTS
Heritage Foundation Senior Research Fellow Edmund Haislmaier: “No One Should Be Under The Illusion You Can Dramatically Lower The Cost Of Insurance In Los Angeles If You Buy An Arkansas Policy.” “‘No one should be under the illusion you can dramatically lower the cost of insurance in Los Angeles if you buy an Arkansas policy,’ said Edmund Haislmaier, a senior research fellow at the Heritage Foundation, a conservative think tank.” [Wall Street Journal, 12/3/16]