With health care reform back on the table—and possibly up for a House vote next week—the nation’s attention is turning back to just what President Donald Trump’s long-term plan for fixing health care is. The president has promised a three-phase rollout in which the GOP effort to repeal the Affordable Care Act is only the first step. One of the next steps, which he promises will reduce costs and give more people insurance, is an opening up of the state-by-state insurance system.
The president and his staff have returned to the topic multiple times. During his February address to Congress, the President ticked off his approach to health care reform, ending with a plan to “give Americans the freedom to purchase health insurance across state lines.” Later, within hours of Republicans outlining their legislation for replacing Obamacare—which didn’t include such a provision—Trump tweeted, “Don’t worry, getting rid of state lines, which will promote competition, will be in phase 2 & 3 of health care rollout.” White House press secretary Sean Spicer repeated the promise after the Congressional Budget Office delivered a tough score on the GOP’s original replacement plan.
The president clearly is committed to the state-line policy. If he wants a small win on health care to distract from the challenges of getting a large-scale repeal through Congress, this idea might meet that goal. But there’s one big problem: No one in the health care universe, on either the policy side or the business side, actually thinks selling plans across state lines will make a difference.
How do I know this? I chair the Zetema Project, whose mission is to foster open dialogue and debate on U.S. health care issues. Panelists include Republicans and Democrats, policymakers from the Obama White House and both Bush administrations, current Capitol Hill staffers, and senior executives representing hospitals, insurers, pharma, organized medicine, employers, patients and other key stakeholders. The group comes together in candid, off-the-record meetings not to work out solutions but to argue about issues deeply to make sure everyone understands their differences. You would think that this group couldn’t agree on much of anything, and you’d be right—almost.
At our January meeting, held days before Trump”s inauguration, we discussed more than a dozen potential reform ideas, including all the health care changes you’re hearing about these days: tax credits, block grants, high-risk pools and many others. We engaged in robust discussions, even heated debates, on every issue, save one: selling health insurance across state lines. It was on the agenda. But I couldn’t get the group to generate more than a collective yawn.
That may be surprising. After all, it sounds like a big disruption in a highly regulated insurance system. And it makes business sense that adding competitors to existing markets—which show wide variations in state health insurance costs—should benefit consumers. Back in 2010, Rep. Marsha Blackburn (R-Tenn.) claimed that a New Jersey resident could go to Wisconsin and save 74 percent on an insurance policy, if only the law allowed it.
Still, my group had no interest in this solution, one way or the other: The liberals weren’t worried about it, the conservatives wouldn’t push it, and the industry representatives wanted to move on to something that mattered. To be fair, there was one moment of excitement during that part of the discussion: When one of the authors of Obamacare mentioned that she had written it into the current health care law.
That’s right: It’s already possible to sell insurance across state lines. This key plank of Trump’s health care vision was authorized in 2010 by the very law he’s trying to replace, and it remains in effect. The law leaves the decision up to states themselves, and since then, several states—both red and blue—have passed laws that allow insurers to sell policies in other states with similar laws. But the number of insurance companies that have taken advantage of this exciting new opportunity is exactly zero.
Why? Some say that Obamacare didn’t go far enough to make interstate insurance sales feasible. State-by-state regulation persists. Any proposed sales must meet or exceed Obamacare’s standards and can’t increase the federal deficit. Perhaps what the president really means is that he’ll strip away these regulations and others that allow states to regulate health insurance, making it easier for insurers to sell plans across state lines. Even if this seems antithetical to traditional conservative notions of states’ rights, it certainly would grease the skids for interstate insurance sales. An enterprising insurer in a lightly regulated state could create a bare-bones health plan with limited coverage and very high deductibles and co-payments. The company could offer this plan at a low premium to consumers all over the country. Sure, consumers who didn’t read the fine print when they enrolled would have some unpleasant surprises when it came time to actually get health care, but that’s the reality of a free market, right? (This is what concerns liberal policy wonks: Most recent articles on this topic have focused on a regulatory “race to the bottom” across states should consumer protections be eviscerated in even one state.)
But the members of my group didn’t think these changes would make much difference. Why? Because the primary obstacle to selling insurance across state lines today isn’t regulatory, it’s operational. Think about it: When you buy health insurance today, you gain access to a network of providers in your state. If you are a New York resident and wanted to save money by buying a cheaper policy from Arkansas (33 percent less for family coverage in 2011, just before Obamacare kicked in), a change in law would give you access to doctors and hospitals in Arkansas. For most New Yorkers I know, that would be a nonstarter.
Why wouldn’t that insurer set up provider networks in the Empire State? There are at least two big reasons: First, doing it requires a huge, multi-year undertaking that involves contracting with providers that already have established relationships with other insurers, as well as creating a marketing presence with consumers. Second, there are those New York prices. Why is health insurance so much cheaper in Arkansas, anyway? Are insurers there really 33 percent more efficient than those in New York? More likely, if an Arkansas insurer invested heavily to set up shop in New York State, it would suddenly be facing New York costs—and wouldn’t really be able to offer that cheaper policy that interested New Yorkers in the first place.
This is the real obstacle to interstate insurance sales, and the reason neither side gets exercised about it: It’s unlikely to be profitable. Established insurance companies consistently tell me that they wouldn’t pursue this opportunity under any regulatory circumstances. Even if state and federal legislators were to do all the heavy political and regulatory lifting, at best a few niche startups would try selling stripped-down policies in high-cost states—probably under the intense scrutiny of the dismayed insurance commissioners from those states. And since these changes wouldn’t apply to most people currently covered by their employers or traditional Medicare or Medicaid, or the Veterans Affairs health system, or the Department of Defense, the opportunity for profit is quite small.
Which explains why even the group I convened specifically to argue couldn’t muster the energy to fight about this issue. Not only couldn’t I get any Republicans to support the idea, I couldn’t even find a Democrat to oppose it. The GOP has been pushing the idea for years, but when I ask Republican policy advisers about this, they admit off the record that this really is more of a talking point, and then they change the subject. It’s the same with the Democrats, who quickly segue to something more interesting. There’s just no there there.
Despite the failure to pass the American Health Care Act, Republicans have some ideas truly worth debating. If the president, who prides himself on his business savvy, really wants to score a win on health care, he should skip the notion of interstate insurance sales and focus on issues that really matter.
Mark Zitter is Chair of the Zetema Project.