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By Alex Ruoff
Oct. 12 — A proposal to permit Americans to purchase health insurance in any state, promoted by Republican presidential nominee Donald Trump and House leadership, would do little to reduce health-care costs for those who need it the most, health policy researchers told Bloomberg BNA.
Trump has made the proposal a central part of his health-care plan, and he touted it during the Oct. 9 presidential debate as a way to reduce premium costs by encouraging more competition in insurance markets. Allowing the sale of out-of-state insurance plans is also part of House Speaker Paul Ryan's (R-Wis.) A Better Way health agenda.
Previous attempts to pass legislation that would permit the sale of health insurance plans across state lines focused on effectively deregulating the market for nongroup health insurance. A bill ( S. 647) introduced in 2015 by Sen. Ted Cruz (R-Texas) would lift the Affordable Care Act's prohibitions on denying covering to people with pre-existing medical conditions and lifetime limits on plans while allowing insurers to sell policies anywhere if they meet certain basic requirements, set by individual states.
Such a change could reduce the cost of health insurance for healthy Americans who want minimal coverage but would also dramatically raise costs for anyone seeking comprehensive coverage, such as those with a chronic health condition or serious illness, Linda Blumberg, an economist and senior fellow at the Urban Institute, told Bloomberg BNA Oct. 12. Without requirements for basic coverage or a prohibition against denying coverage for people with pre-existing conditions, she said, insurance companies will simply charge higher prices to some individual plans and offer minimal coverage to others.
“It would leave sick people to fend for themselves while healthy people would flock to cheaper plans in states that have little regulation,” Blumberg said.
Supporters of the change argue state governments can effectively regulate their own insurance markets and that allowing more competition among plans would drive down costs. For many years states operated high-risk insurance pool programs to help adults who could not gain insurance due to the cost.
The results of the November election will largely determine Congress's health agenda and the future of the ACA.
House Republicans have been steadfast in their promise to repeal and replace the law, which would require a Republican in the White House and a majority in both chambers of Congress. Democrats, meanwhile, have promised to build on the ACA by tweaking some of its requirements, such as the repealing the tax on high-cost health plans and limiting tax deductions for prescription drug companies.
House Republicans have repeatedly called for bringing in more competition-oriented and free market changes to the insurance market, such as allowing people to buy insurance plans licensed in states where they don't live, to reduce health-care costs.
However, many conservative health policy researchers see the push to allow out-of-state insurance sales as lip service to free market ideas rather than an effective tool for fighting rising health-care costs.
Insurance costs are largely driven by the cost of health-care services, which varies geographically, Ed Haislmaier, a senior research fellow at the conservative Heritage Foundation, told Bloomberg BNA. Even if Americans could buy insurance in other states, he said, they'll still seek health-care services where they live.
If people in New York—where per-person annual health-care spending reached $8,341 in 2009—could buy insurance from a plan based in Texas—where per-person health-care spending was less than $6,000 in 2009—they would still be paying New York rates for care, Haislmaier said. Insurers would have to pass that higher cost for services onto beneficiaries, he said.
“People think that because insurance is state-regulated that there's a barrier to competition, but there is no real barrier,” Haislmaier said. “Insurers are mostly passing through the cost of health care, so the barrier is cost.”
Insurance costs are also driven by coverage requirements, he said. In states where insurers must cover a range of services, such as maternity care or complex surgeries, rates are higher than those states with fewer requirements.
Under the ACA, insurance sales across state lines are limited to states that have entered into interstate licensing compacts. The provision was meant to encourage some states to work together to create regional health plans.
However, few insurers offer the same plan in multiple states because of the complexity of designing plans for a wide geographic area, Blumberg said. Insurers must negotiate payment contracts with doctors and hospitals, in addition to defining coverage for beneficiaries, she said.
Insurance premiums have been rising in individual markets across the country recently largely because more sick people have gained insurance in the years after passage of the ACA, Blumberg said. Repealing the ACA—which requires Americans to have insurance and provides subsidies for certain people buying individual plans—would increase the number of uninsured but also lower premiums for the healthy, she said.
The Republican health plan includes a refundable tax credit to help people without employer-provided coverage purchase an individual insurance plan. It also calls for continuous coverage protections, ensuring that people can change plans without being charged more than standard rates.
Conservatives argue that repealing the ACA won't leave more Americans uninsured. Ryan's health plan states that when insurance is affordable, Americans will get covered.
However, whether the Republican health plan can replace the ACA's coverage requirements and insurance mandate is unclear, Blumberg said.
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