President Trump’s pick for HHS secretary says consumers would benefit if health insurance policies could be sold across state lines. At least one broker says that position misses a key fact of selling health insurance.
The plan outlined for reforming the Patient Protection and Affordable Care Act by President Trump’s nominee for Health and Human Services secretary, Georgia Rep. Tom Price, MD, (R) calls for permitting the sale of insurance across state lines.
The Senate may vote on Price’s nomination within days, and his confirmation would add momentum to Republican plans to repeal or “repair” the ACA. Republican representatives are split on which is the better option, with more conservative members insisting that the entire law be scrapped.
Simply repealing Obamacare actually could make state differences more influential, according to a recent a recent study from Georgetown University’s Health Policy Institute.
Prior to Obamacare, the cost and value of healthcare insurance varied greatly from state to state, the report says, so a repeal without some solution for that problem would be a step backwards.
Permitting sales across state lines could be the answer, says Sally C. Pipes, president, CEO, and Thomas W. Smith Fellow of Health Care Policy at the Pacific Research Institute.
“Unleashing competition in the insurance market is a very good thing,” Pipes says. “If a family wants to buy coverage in a state that has fewer mandates, they should be able to. States that have a lot of heavy mandates, which push up the cost of coverage by between 30% and 50%, will be encouraged to reduce those mandates in order to keep people buying coverage in their states.”
A repeal or wholesale modification of the ACA could prompt more insurers to enter the marketplace, Pipes says, which would greatly increase the choices for consumers if they are able to purchase plans offered outside of their home states.
“Research has shown that interstate insurance sales would make healthcare coverage available to 12 million more people simply by making policies more affordable,” Pipes says.
“Buying in another state won’t be the best option for some people because, for instance, you might not be able to access the providers covered by that plan or your own provider may not be in the network.
“But for some people focused primarily on the costs, like young people, it can be a great idea. It will open up the market place rather than closing it, as we have right now.”
Missing a Key Factor
Proponents of interstate sales, however, are missing a key factor in how healthcare insurance is rated and sold, says one insurance broker.
Premiums are determined in part by where the policyholder lives, explains Valerie Clark, president of Clark & Associates Insurance Services, a Reno, NV-based insurance agency specializing in health insurance plans for employer groups.
For local residents, “the networks in Reno dictate a certain price tag and the bulk of the rate you charge somebody is going to be based on those existing contracts,” she says.
“The rest is based on age and other demographics. I don’t see a lot of room for influence on the costs just because you bought the policy from another state.”
Clark also doubts that consumers will be able to save money by buying a policy from a state with fewer mandates. To protect consumers, a state could require that a policy sold to its residents meet that state’s requirements, rather than the requirements of the originating state, she says.
“The potential benefit from selling across state lines is pretty small,” Clark says. “I do hope that this administration can fix what is wrong with Obamacare, but I don’t even see that issue as being in the top 15 of what needs to be fixed.”