With the Republican sweep of both Congress and the White House, it appears that the Affordable Care Act (ACA), better known as Obamacare, is on the verge of being overhauled from its current form.
And as Business Insider’s Allan Smith reported after speaking with Rep. Kevin Brady, chair of the House Ways and Means Committee, the idea of a “healthcare backpack” has grown to become the predominant tagline for the GOP’s Obamacare replacement — even if they don’t have a full plan yet.
“A backpack that is tailored to the needs of patients and demands of families, that can go with them throughout their lifetime,” Brady told Business Insider when describing a new law. “From job to job and state to state and home to start a business or a family.”
The “state to state” part of this “backpack” has been touted by Republican leaders — from President-elect Donald Trump, to House Speaker Paul Ryan, to Trump’s nominee for secretary of health and human services, Rep. Tom Price — as the idea of “selling across state lines.” But such a provision could lead to other forms of baggage.
It would allow private insurers to sell insurance in any state as long as they met the minimum requirements for the state in which their business was based. For instance, an insurer could be based in Texas but sell their plans in Maine, as long as they met Texas requirements.
Currently, state insurance agencies set the rules and minimums insurers must meet to sell plans in their states.
Aside from the conflict between Trump’s promise to “give power back to the states” on healthcare and stripping away their ability to regulate plans in their own state, there is also a practical issue with the no-state-lines idea:
It’s been tried, and it hasn’t worked.
Not a lot of interest
A small provision of the ACA allowed multi-state insurance agreements that would allow plans to be sold between states — as long as the two states had an agreement allowing it. Despite five states enacting this provision — Georgia, Wyoming, Kentucky, Rhode Island, and Maine — no insurer has sold between states.
As reported by Georgia Health News last week, the Georgia government passed a bill in 2011 that allowed out-of-state insurers to enter the Georgia marketplace with plans sold outside of the state. Not a single insurer has done so.
Mostly, it seems that the cost of having to negotiate contracts with community healthcare providers makes robust interstate offerings difficult.
In an analysis of the proposal, Linda Blumberg at the Urban Institute noted that the barrier to entry for out-of-state providers would be incredibly high. From the researcher’s study (emphasis added):
“Out-of-state insurers face major barriers to entering new markets because of the difficulty in building provider networks whose payment rates allow them to compete with established insurers. In-state insurers have for years negotiated with doctors and hospitals and, with many covered lives in a given market area, can get significant rate concessions. Out-of-state plans have no market share and thus no bargaining power. The net result would be higher premiums than existing competitors, not lower.”
Put another way, it’s expensive and time consuming to negotiate provider contracts, so it is unlikely there would be any insurers clamoring to jump from state to state.
Or as Blumberg told The Hill in October, “Insurers aren’t interested at this point.”
Lower standards for care
Even if the incentive existed to sell in a variety of states, opponents of the provision fear a worst-case scenario could come in the form of drastically reduced coverage for Americans. Unless there are strong federal requirements for coverage, it would be easy for insurers to drop their plans’ quality to compete and leave patients with poor coverage.
For instance, states could drop their standards to the bare minimum to attract the headquarters of various insurance companies. These companies could sell bare-bones plans in other states. Without recourse to block these plans, it could end up crowding out more robust plans and patients could go without the coverage they need.
The National Association of Insurance Commissioners has come out against the idea of allowing plans across state lines. Among the group’s fears: If insurers begin to abuse rules, it would be difficult for state-level regulators to assist patients across the country.
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