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Plan for interstate insurance sales is a good policy a long time coming

Plan for interstate insurance sales is a good policy a long time coming

Wayne Hoffman
March 10, 2018
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March 10, 2018

Idaho lawmakers may soon answer the question, “If a person is allowed to buy a used car from someone in Texas, why can’t an individual buy health insurance from a company in another state?”

A bill that would allow Idahoans to buy health insurance across state lines appears poised to pass the Idaho House of Representatives and head to the governor for his consideration. The bill won’t magically lower health insurance premiums, and because the insurance and healthcare market is now a colossal mess, it is unlikely to have any immediate impacts. It will, at least, remove a decades-old legal barrier that is directly responsible for the health-insurance cost crisis we are experiencing today.

Some people mistakenly believe that Congress forbids the sale of health insurance across state lines. That's not the case. Decades ago, the U.S. Supreme Court ruled that health insurance is a matter of interstate commerce and subject to national oversight. As a result, Congress declared that insurance should be regulated by each state. That prompted the insurance lobby to aggressively fight for and pass laws in the states to stop the sale of insurance across their borders. Idaho passed its prohibition in 1961.

Over the years there have been attempts to remove state barriers to interstate insurance sales. Some attempts have come from Capitols across the country, others in Congress. In recent years only a handful of states have removed the old sales restrictions. Attempts to remove Idaho’s restrictions have been tried. The most recent attempt was six years ago; a bill passed the House with much support, but failed to get a Senate committee hearing thanks to an insurance-industry-friendly panel chairman.

Opponents of consumer choice often argue that interstate insurance sales may expose people to insurance products that don't contain all the bells and whistles mandated by one's home state. Another objection, insurance customers won’t know which state authority to complain to when something goes wrong.

Critics’ most difficult objection to overcome reflects how badly broken the health insurance system is. Insurance companies and medical providers have created narrow networks that require patients to use only certain doctors in order to avoid higher out-of-pocket costs, therefore, a person might buy an insurance policy that has few “in network” medical care practitioners tied to it. Because of this marketplace reality, insurance companies had little to fear as this legislation made its way through the Idaho Statehouse this time. It passed the Senate unanimously.

Gov. Butch Otter’s insurance director, Dean Cameron, appeared neutral to somewhat favorable about allowing health insurance purchases across state lines during committee debates. Otter might also want to sign the measure, giving him a proactive step as he tried to address the federal government’s stated opposition to his executive order allowing insurers to sell non-Obamacare compliant plans in Idaho.

Repairing years of insurance regulatory malpractice—caused by politicians in Washington, D.C., and in the states—will take years. Allowing people to buy a product wherever they want is just one small start.

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