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Kaiser Health News (KHN) is a nonprofit news organization committed to in-depth coverage of health care policy and politics. The Washington, D.C.-based news service is a partner of KHI News Service.

Interstate health insurance has a tryout in Georgia but no takers

By Andy Miller, KAISER HEALTH NEWS | December 09, 2016

Photo by Congress.gov Rep. Tom Price, the Georgia congressman picked by President-elect Donald Trump to lead the U.S. Department of Health and Human Services, supports a proposal to allow health insurers to sell their policies across state lines. Georgia approved such a law five years ago, but no health insurer has taken advantage of it.

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Among Republican ideas to transform the health care system is a proposal to allow health insurers to sell their policies across state lines.

President-elect Donald Trump and Rep. Tom Price, the Georgia congressman picked by Trump to lead the U.S. Department of Health and Human Services, have backed the proposal. They and other advocates see it as a way to boost competition. The interstate sales idea is part of a general GOP blueprint to replace the 2010 Affordable Care Act, often called Obamacare.

In Georgia, the interstate sale of health insurance has been legal for five years.

The state Legislature in 2011 passed a bill letting insurers sell any policies in Georgia that they offer in other states. The legislation was hailed by supporters and business groups as a way to skirt the state’s required benefit coverages — such as screenings for cervical, prostate and colorectal cancer, along with mammograms — and thus lower the sticker price of insurance.

The law is still in effect. But since it was passed, no health insurer has taken advantage of it.

And since January, an obscure provision of the ACA has been in effect, letting individual states agree among themselves to allow sales by one another’s health insurance companies. Although several states have passed laws to move toward such a compact, none has made any deals to sell across state lines, insurance experts and regulators told The Hill in October.

Each state has its own set of health insurance regulations, though large employers that self-insure (those that use their own funds to cover employees’ health expenses) are exempt from these state rules.

Currently, the idea of eliminating barriers to interstate sales is drawing some opposition from state insurance regulators and insurance industry officials, The Wall Street Journal reported last week. “That sounds like a silver bullet to solve a major problem, and there are no silver bullets,” said Louisiana Insurance Commissioner Jim Donelon. “There are no simple answers.”

Some Democrats have voiced concern about the erosion of state consumer protections.

Graham Thompson, executive director of the Georgia Association of Health Plans, an industry group, said Wednesday that the GOP proposals aimed at helping health insurers are “a positive change in tune’’ after industry losses suffered under the ACA.

A federal law allowing interstate sales across the country “could be different’’ from the more limited Georgia experience, Thompson said. “We’ll have to see the details.”

He said that one obstacle to insurers selling out-of-state policies in Georgia is that “all health care is local — and all health care costs are local.” So insurers would still have to strike contracts with local hospitals and other medical providers, Thompson noted.

Bill Custer, a health insurance expert at Georgia State University, said a handful of other states have passed interstate insurance laws similar to Georgia’s, but the effect has been the same.

State insurance regulators told the Wall Street Journal that in states requiring locally licensed insurers to offer extensive coverage, healthy people might abandon those companies to buy bare-bones policies from out of state. That, in turn, would leave local plans insuring mostly people with health problems, who need broader, more expensive coverage. As the locally registered insurance companies absorb the financial hit, the state might feel pressure to relax standards to give them a break.

But the proposals pushed by Price and House Speaker Paul Ryan, R-Wis., still would require a minimum set of essential benefits at the federal level in order to qualify for tax credits, said Custer of Georgia State. So the effect of interstate insurance could be minimal, he said.

“It’s unlikely to have a large effect on competition in any market,’’ he said.

An industry trade group, America’s Health Insurance Plans, said in a statement this week that “our first interest is in providing consumers with competition and choice, which empowers them to better health and financial stability. We want to work with lawmakers to bring our experience and lessons learned to the table, and we want to cooperate and collaborate to find solutions that work for consumers.’’