During the run-up to the Presidential election, then-candidate Donald Trump made many broad promises about replacing Obamacare. One of the oft-repeated components of his solution was to allow insurance carriers to “sell across state lines”; at other times, he described it as “erasing the lines around the states.” He gave very little detail about the two expressions. If there had been, it would have shown that enacting such broad ideas is not simple, nor is it likely to be a solution, in whole or in part, to America’s coverage woes.
The Role Of Legislative Authority
The first hurdle for any such idea is one of legislative authority. Regulation of insurance is a function of state government, not federal, and each state has an insurance department which oversees both insurance carriers and insurance brokers/agents operating in that state. One of the most basic complaints about the enactment of the ACA from Republican and conservative critics was that the federal government had no constitutional authority to enact such legislation; while debate on exactly where the border lies between federal and state jurisdiction is likely to be energetic for the foreseeable future, it’s dubious that those quarters from which President Trump would need to draw support — those same ones who criticized the ACA as “federal overreach” — could wholeheartedly support another “solution” which presented the same problems of federal authority.
Leaving aside the issue of whether the federal government could “erase the lines” — what does that mean, as opposed to the way things work now?
Right now, there are several large health insurance carriers, such as United Healthcare, Aetna, and Humana, which already offer coverage in most states. If any insurance carrier wants to operate in a given state, it must first approach that state’s insurance department with its proposed plans and rates. Then, the insurance department reviews the plans to ensure they meet state benefit mandates. For example, the state of Texas requires all health plans sold in the state to cover certain fertility treatments which are not necessarily required in other states, and also that the carrier has sufficient financial reserves to adequately cover a reasonable loss. If those conditions are met, the carrier will usually be approved to offer coverage in the state.
A Gray Line?
Is that “selling across state lines?” Or is the intent to allow any insurance carrier to offer coverage anywhere in the country? (One assumes, at the very least, that such a proposal would require the insurance carrier to either meet the financial requirements of the insurance department of the state in which they are domiciled, or to gain similar approval from a new “federal department of insurance.” Even if the federal government somehow made that possible, it’s unlikely that insurance carriers who currently confine themselves to a specific state or region would take advantage of “erasing the lines.”
Why? You May Ask. Because very few health insurance coverage plans are pure “indemnity” plans, in which the carrier provides benefits to the insured, regardless of the provider (doctor or hospital). Almost all health insurance plans are PPOs (“Preferred Provider Organizations”), EPOs (“Exclusive Provider Organizations”), or HMOs (“Health Maintenance Organizations”); those three organizations are different, but the one thing they have in common is that the insurance carrier contracts ahead of time with providers and facilities to set up a “provider network” which has already agreed to serve those insured with that carrier at reduced rates or for pre-determined amounts.
Further Evaluating State Line Obstacles
Would “ABC Insurance of Oklahoma,” for example, have contracted providers in Texas? Possibly, especially if some of the hospital or physician organizations with which it contracts also have existing providers in Texas. But would it have contracts in place with providers in Maine? North Dakota? Arizona? It’s very unlikely; negotiating and contracting with a provider or an organization of providers is time-intensive, and certainly not worth the effort for “onesies and twosies” — ABC Insurance would only bother to establish a presence in a state if they expect it to be a significant nexus of business for them. It doesn’t matter how many lines are erased; an insurance carrier won’t offer insurance in states, counties, or regions in which it cannot project that it will do sufficient business to justify all the setup costs.
Healthcare in America is a very complex system, combining providers, employers, insurance carriers, third-party administrators, federal entitlement programs, and state and federal regulations in a system which has grown and adapted for more than a hundred years. In this, as with any other complex system, there is no single “magic bullet” to solve all ills, and any attempt to apply a solution touted for its simplicity, fairness, etc. usually only adds an additional layer of complexity.