Republicans have long argued that allowing insurers to sell policies across state lines would provide Americans with greater choice of coverage. Under the Republican health care alternative filed yesterday in the House, young and healthy individuals can purchase policies from insurers that don’t abide by local benefit or rate standards. The Republican bill allows the health insurer to choose a “primary state” “whose covered laws shall govern the health insurance issuer” and market policies to other states without adhering “to all of the consumer protection laws or restrictions on rate changes of the state.” Insurance companies could choose a state with scarce regulations and sell policies that don’t provide adequate benefits and only attract the healthiest applicants.
Democratic leaders argue that the policy would allow health insurers to circumvent critical consumer regulations and further fragment risk pools. But a little-noticed provision on pages 202–206 of the House health care bill also allow insurers to sell policies across state lines. Section 309 says that states may form “Health Care Choice Compacts” to “facilitate the purchase of individual health insurance coverage across State lines.” But that’s where the similarities end.
While the Republican-backed proposal allows the insurance company to decide that it will be governed by the state with the scarcest regulations, the Manager’s Amendment to the House health care bill specifies that the states that form the compact can designate the “primary state,” not the insurer. The Democrats’ compacts would be subject to model guidelines developed by the Secretary of Health and Human Services (in consultation with the National Association of Insurance Commissioners) and would preserve the authority of all states to enforce local laws relating to market conduct, unfair trade practices, network adequacy, consumer protection standards, grievance and appeals, fair claims payment requirements, rate review, and fraud.
The insurer would be subject to the benefit mandate standards and rate regulations of a single primary state, but — unlike the Republican alternative — it would not be able to avoid local consumer protections and regulations. Still, some progressives fear that insurance companies will pressure compacts to chose the state with the lowest standards and that state governments would lack the resources to properly enforce local consumer protections.
The bill reported out of the Senate Finance Committee also permits states to form “health care choice compacts,” although the rules governing those compacts are still being developed by Senate staff working to produce a final Senate bill.