What I don’t understand about the insurance and state lines thing

Obamacare set up health insurance marketplaces. It didn’t take over health insurance like some would make you believe, but one thing it did was establish a website, not much different from expedia, where people can compare available insurance plans. Of course, it made some rules about the plans that can be sold on this platform, and each state has its own set of plans, so somebody from NY, for example, only gets to shop for plans in NY. Republicans latched onto this, and said that it hurt competition, because insurance companies should be able to sell across state lines. I’m not an expert in health insurance, so I’m sure I’m missing something (maybe something big), but the whole thing always seemed silly to me. I’m the first to warn against anecdote, and I should probably use my own advice here, but every now and then we all ignore the rules (even our own), so here goes.

I was a research fellow at a university in Philadelphia before I took my first (and so far only) faculty job at a university in Buffalo. I was married (and had been for about 10 years) and we had two kids. We had excellent insurance coverage from my university and were able to get medical care from one of the best hospital systems in the world. My new job also had excellent insurance options, but we moved across state lines about two months before the job actually started, and once the job started there was a 40 (or was it 42?) day waiting period before the new insurance kicked in. So we had a pretty long lapse in coverage, especially for a family with two young kids. We were protected in some sense by COBRA, which allowed us to keep our insurance when we moved to Buffalo, but there was a catch…or catches. First, we had to pay the total amount of the premium, without the employer contribution, so the plan was going to be about $1200/month (interestingly, this was more than a decade ago, and it’s still higher than the average family plan today, which is $833/month according to this website). Second, and this is probably the most important part, even if we paid all that money for the plan, we would have been out of network, so we couldn’t have seen doctors anywhere near where we lived. We could have gotten emergency care, which is certainly important, but it would have meant emergency rooms anytime one of the kids (both toddlers) needed an antibiotic or picked up an eye infection from daycare.

The point here is this: selling across state lines was allowed then, and, since 2016, it’s also been allowed now. That last part may come as a surprise to many, but Section 1333 of the Affordable Care Act (which is now 42 US Code § 18053), allows the establishment of “health care choice compacts.” This provision of Obamacare allows states to set up compacts so that insurance companies can sell insurance in multiple states.

So I’m left asking, if this is what insurance companies want, why didn’t they do it before, and why aren’t they doing it now? Here’s where my total lack of expertise could be failing me, but my guess is that it’s not a good business move. It requires coordination and maintenance of a provider network that’s geographically separated from where the insurance company is. It requires complying with a new set of state regulations. I think that’s the more likely reason we haven’t seen plans sold across state lines in the past, or now. Not because it’s against the rules, but because it’s bad business.

Why this doesn’t come up every time a republican raises the issue of selling across state lines is beyond me, but I think it should. Then again, like I said, I could be missing something. Probably am.


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