Buying Health Insurance across State Lines
Last year, Georgia became the first state to allow insurers licensed in other states (and subject to other states’ mandates and regulations) to sell insurance in Georgia. But so far, no insurer has even applied. Why is that?
In an exchange between Richard Unger and Michael Cannon, Unger comes across as a general naysayer (offering no explanations of his own) but Cannon’s excuses seem weak: it’s administratively expensive for out-of-state insurance companies to enter the Georgia market, negotiate contracts, create new networks, etc. Here’s the problem: You don’t need out-of-state insurers to do this. In-state insurers (with contract and networks already in place) could in principle start selling insurance under some other state’s laws. Cannon also says that the uncertainty created by the Supreme Court ruling on ObamaCare and the general uncertainty about the implementation of ObamaCare are the culprits – an argument also endorsed by Avik Roy.
Okay, but how hard could it be to file and start selling a new type of insurance for companies already in the trade? After all, they’ve got to sell something.
I’m not convinced we have the right explanation here.
Clear proof that you can lead a horse to water but you can’t make it drink.
This is a perfect illustration of the “web” of regulations. Even if one string is cut (in this case, the restriction Georgia lifted) the general patchwork of federal regulations (Obamacare) still traps insurance companies.
The other words associated with webs (traps, lies, etc.) are equally applicable here.
Avik Roy and John Goodman — two of the only voices you can trust on issues like these!
I’m not familiar enough with the Georgia law but I think Cannon probably has it about right, especially if it applies only to the individual market. Some other observations —
1. The health insurance market is no longer very competitive after two decades of consolidation. There just aren’t very many players left.
2. Mandates are important, but not as important as other regulatory issues such as rating.
3. Companies are frozen in place until the current mess is straightened out — ain’t nobody doin’ nuthin’ right now.
4. The MLR requirement is a killer. It is impossible to enter a new market or introduce a new product. At a minimum, new enrollees will be paying premiums for a while before they file many claims. Plus, there will be extraordinary marketing expenses in the introduction phase.
5. Most (maybe all) companies do indeed rely on network discounts these days. I wish there were a couple of indemnity companies around — but there aren’t, especially after the buzz saw Pat Rooney;s Medical Savings Insurance ran into when it tried to pay on a fee schedule basis.
6. I am hearing more and more that investors are about to bail on insurance company stocks. The prospect of future dividends just isn’t there anymore.
We need new entrants like Paul Kitchen’s nHealth, but ObamaCare killed a promising new company in its crib.
Greg is right on. Plus, I wonder if creating a nexus in another state just isn’t worth the potential state taxes and other costs.
If we could open up the borders to health insurance shopping, we would pay much more competitive rates for coverage.
@Sharon B., did you read this post before commenting, or just the headline? #CuttingCorners
Good post.
Without Obamacare and with a free market across state lines, there is no telling what the possibilities are.
Consumers would benefit, but no, they don’t want that apparently.
A carrier would need to have an approved policy in a state with fewer mandates than GA. That should produce a lower premium (fewer benefits). However, that plan would have to be rated based on then networks available in GA and would have to make some assumptions regarding possible differences in enrolled demographics. All in, the price difference may not be that great. If NY or NJ passed such a law the differences could be material.
Seems like a lot of work for what may be very few members enrolled.
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Sounds good at first, BUT, how many people are going to bother to take a serious look and compare the differences in coverage between states? I can picture many people buying the cheapest coverage they can find and then wondering why many of the things they end up needing aren’t covered. Much of the language used is confusing and many people don’t know enough about their own health needs to make an informed decision. Unfortunately some people (and their children) have to be protected from themselves.