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  • Keith T. Bishop

Selling Individual Health Insurance Across State Lines is Fallacy

Updated: Apr 7


One of the Republicans’ biggest selling points of the American Health Care Act, i.e. Trumpcare is the plan’s encouragement of individual insurance policies being offered across state lines. While employee-based insurance is widely transacted across states; albeit under different rules, don’t be fooled by Trump's and other GOP leader’s claims that promoting insurance dealings for individuals between states will increase competition, improve access and reduce costs. It is a false narrative. Here’s why:


Below is a summary and link to L.A Times Michael Hiltzik's November 14, 2016 article on why selling individual healthcare policies across state lines is a bogus slogan, not a policy:


http://www.latimes.com/business/hiltzik/la-fi-hiltzik-insurance-state-lines-20161114-story.html


1. Selling INDIVIDUAL insurance policies across state lines is legal today BECAUSE of the ACA - but the practice is not widely utilized because insurance companies don’t like it – it’s not profitable. 2. For selling across state lines to be profitable, distinctive state regulations would have to be overridden; which refutes one of the Republicans most treasured philosophies—state jurisdiction over federal control. If state rules we're superseded, it would spark a race to the bottom as insurance brokers located in states with strict standards and requirements would relocate immediately to states with the lowest standards (exactly what credit card issuing banks did nearly 40 years ago). 3. Vulture insurers would then cherry-pick the best consumers (young, healthy, males?) and deny coverage to the more expensive consumers: women of child bearing age, families, older adults, and consumers with chronic conditions. No longer subsidized by a diverse pool, massive price increases for the most vulnerable segment of society would occur. 4. Since in-state regulators would have no legal control over out of state insurance companies, enforcing grievances against Homer's America First Insurance Company owned by a 400 lb guy sitting on his couch in Hattiesburg, Mississippi would be near impossible. Say good bye to consumer protections. 5. Considering healthcare is almost always delivered locally means insurers already have a relationship with area hospitals and doctors. New guarantors would have to start from scratch building a network – and that takes time and money. In the past, underwriters have proven they will not sustain losses long enough to build a network. Why would they in the future? 6. Multi-state networks for INDIVIDUAL insurance already exist and are successful in metro areas that span different states (this makes sense). But for the vast majority of the country it’s impractical. 7. Georgia, Maine and Wyoming have passed laws enabling purchase from other states. No other states have joined them, and not a single insurer has expressed any interest in taking advantage of them. 8. A Georgetown University study team observed, laws allowing cross-state health insurance sales has no organized champions. Consumers aren’t clamoring for them; insurers aren’t interested in them; doctors and hospitals don’t care; and state regulators aren’t inclined to cede their oversight to interlopers from somewhere else.


The above arguments clearly demonstrate President Trump's and the Republicans’ claims that their plan's elimination of barriers between states would greatly benefit consumers is ignorant at best, an outright lie at worst. Cross-state marketing already exists in the ACA and it has not discernibly increased competition allowing for more consumer options at reduced costs.


What appear to be simple logical answers in our convoluted system are not. What is the solution? You build a solid base and then add more intricate layers on top. How do you build a base? You simplify the system by offering all citizens one of the oldest and most powerful financial concepts known to mankind; universal insurance—better known as single payer.

For thousands of years the underpinnings of universal insurance has funded armies across the globe. Yet here in America when the concept is applied to healthcare, the far-right labels it socialism; killing any consideration by large chunks of society. We need to overcome this “selective” ideology that pure “free market” doctrines are always superior to socialistic principles. Doing so in healthcare would end the one trillion dollar toll we exact on society each year; a toll that generates negligible yields and leaves the vast majority with poorer healthcare outcomes compared to the rest of the western world. Once employed, the single payer option would be our healthcare system’s baseline. From there the free market can work its magic for those able and willing to pay for important ancillary and revolutionary healthcare solutions; solutions that would eventually trickle down to universal coverage. Furthermore, implementing single payer would boost the economy; allowing companies to focus on their core businesses instead of adhering to the unsustainable burdens of doling out healthcare to employees.


The end game? Alleviating the historic income disparity that has destroyed our middle-class and working poor. I ask, what better way to begin correcting these imbalances than to provide basic preventive healthcare that leads to longer, healthier, more productive lives; fair and equal access to quality education? Let’s call it a tie.


To learn more about the one trillion dollar toll extracted from the American public each year, please read my blog post “Income Disparity and the One Trillion Dollar Toll.”


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