Buying Health Insurance across State Lines
Does it make a difference? Not so far. This is Sarah Kliff:
A new paper from Georgetown University…looked at the three states — Maine, Georgia and Wyoming — that have passed laws allowing insurers from other states to participate in their markets…
So far, none of the three have seen out-of-state carriers come into their market or express interest in doing so. It seems to have nothing to do with state benefit mandates, and everything to do with the big challenge of setting up a network of providers that new subscribers could see.
All three states tend to have relatively rural populations, which could make setting up a provider network especially vexing. Avik Roy has previously argued that this could be a short-term issue, that providers need more time to actually set up these networks.
The study did not look at whether the competitive threat of entry of out of state health insurance companies affected the price increases, benefits offered, denial rates, etc. of in-state insurers. If in-state insurers took actions to benefit consumers to offset a new entrant’s advantage, such as lower rate increases and lower rates of denials, then the law is a whopping success. The goal of the law is to increase competition, lower prices and increase consumer benefit and not to increase the actual number of companies.
I agree with Roy’s conclusion that more time is necessary to determine the effect. I doubt the laws in these states allowing out-of-state insurers have been around long.
I agree this will take some time. We cannot really expect Company A from Alabama to begin selling coverage in Wyoming more efficiently than Company B from Wyoming. However, over time large insurers will expand and create broad networks that encompass several states — or preferable, a national market. States that pass this legislation probably either had problems because of a small, largely rural population (or were already relatively unregulated). If a company regulated in Texas, for example, was allowed to begin selling Texas-regulated policies in Massachusetts, New York or New Jersey, they would sell like hot cakes. The reason is these Northeastern states have costly regulations that Texas does no’t have.
I have several questions for the experts:
Once the same insurance plan is sold across state lines, what happens to jurisdiction for patient rights:
a. do patients lose their rights to file in state court and instead diversity jurisdiction in federal court applies – where the amount in controversy must exceed $10,000?
b. does your state insurance commission still have jurisdiction to advocate for you as a patient consumer?
c. are the extraordinary differences between state legislated insurance requirements for types of coverage [ie Washington State that more liberally covers paraprofessional services] preserved or is there no longer state jurisdiction?
Thank you in advance.
Dorothy Calabrese MD
Allergy-Immunology, San Clemente, CA
I haven’t read the paper. However, it is difficult to believe that networks are the issue.
Large insurers already run nationwide networks for large ERISA companies and, who knew, the federal government. My itty-bitty individual policy, purchased in a smaller state, has a nationwide network as well.
Patients under ERISA plans definitely have to file in Federal Court.
Dorothy Calabrese M.D.
Allergy-Immunology, San Clemente, CA
I have to agree with Linda. PPO networks already exist in these states and can be leased for a few dollars a month per covered life. Some states have few health plan competitors because of bad regulations; while others lack competition due to demographics or logistics. I think opening up the market for competition on a national scale would make a huge difference in the long run. When Texas (a big state with numerous uninsured motorists) deregulated the auto insurance market, the number of competitors shot up and the premiums fell.
Kentucky passed this 6 years ago, and still no measurable effects? It could be the short time frame, or the small size of the available markets, or that people aren’t aware of their options..
Barriers to entry are a serious obstacle when it comes to succeeding in new markets (whether we are talking about insurance companies, or any other business for that matter.) It is not only difficult because you are new to all the potential subscribers and it requires a massive amount of networking and advertising to make yourself known in the new area, but it’s also challenging because of the already established insurers that are already providing their services and have achieved some level of recognition within the market. It’s not easy, but definitely possible. I agree with Avik Roy in that perhaps providers just need some more time to see actual results.
Would be interesting to follow.
Health insurance is very important to every one. I hope by 2014 every American must has minimum health insurance.
http://www.medicarewyoming.com/