One of the key demands Republicans have made in the Health Care Reform Debate is the ability to sell health insurance across state lines. Currently, to sell health insurance in a state, a company must be licensed by the state and comply with the relevant state laws. State laws usually define what types of things must be covered by policies in the state (like new forms of treatment or certain medical supplies), how pre-existing conditions are treated, what agency within the state regulates the industry and how disputes between the insurance company and the insured are resolved to name a few.
Some states highly regulate health insurance and some do not. The argument can be made that the more a state regulates health insurance the more it contributes to a rise in health insurance premiums. A simple example of why this might be is if a state requires the coverage of diabetes supplies in all policies, the insurance company must pass this cost on to all consumers in the form of a higher premium. An equally important argument is that the requirement that a company be licensed by individual states to sell health insurance limits competition and again this raises premium prices.
So what does it mean to you as a consumer if you can buy health insurance across state lines? For the sake of argument assume that New York is a state that highly regulates health insurance and it results in premium prices of $1,500 per month. Again for the sake of argument, assume Texas is a state that loosely regulates health insurance and it results in a premium of $1,000 per month.
Currently, a New Yorker cannot buy a health insurance policy from a company that is only licensed in Texas. New Yorkers who want insurance must buy it from a company licensed in New York for $1,500. The Republican proposal would allow New Yorkers to buy health insurance from the company in Texas for $1,000 saving $500 per month.
There are pros and cons to every attempt to reduce the cost of health insurance. Some of the pros for selling insurance across state lines are:
1. Consumers get access to more affordable health insurance
2. Competition in the insurance market is increased
3. Consumers have a wider variety of choices and can select a plan that fits their needs. They are not forced to buy health insurance that covers things that are mandated by their state like diabetes supplies if they don’t need them.
The cons are a little more complicated. Many of them are not guaranteed to happen but represent the worst case scenario:
1. Health insurance policies are not easily comparable. Health insurance may be cheaper due to services specifically not covered, how pre-existing conditions are covered or a whole host of things dictated via state law. This may not be easily understood by the average consumer.
2. Jurisdiction over dispute resolution may be complicated making resolving disputes difficult. If you live in New York and buy your health insurance from Texas which state has authority to resolve disputes?
3. Health insurance companies will chose to operate out of the least regulated state which will effectively eliminate the health insurance regulations many states that highly regulate health insurance have established.
The last item listed as a con is very interesting if your a Republican. Typically, Republicans fight to preserve the rights of states to govern the activities that take place within their borders. If health insurance is allowed to be sold across state lines it will reduce a states ability to govern an important commerce activity – the sale and delivery of health insurance.
As a result, Republicans are in the position of arguing for something that would limit states rights. A very strange place for Republicans to be.