SACRAMENTO, Calif. – Allowing insurers to market health care policies across state lines is one of President Donald Trump’s main ideas for bringing down costs.
While supporters of the idea cast it as a way to make insurance policies more competitive, critics said it’s unlikely to result in more affordable plans and could undermine stronger consumer protections in states such as California and Hawaii. Such a “race to the bottom” could leave some older consumers with health problems unable to afford coverage.
And there’s another complication: Trump’s proposal appears unlikely to pass Congress unless Democrats cooperate. Congressional aides involved with health care legislation said the proposal to allow cross-state insurance sales would need 60 votes in the Senate.
In his speech to Congress on Tuesday night, Trump said the nation must turn to new ideas to help control costs.
“The time has come to give Americans the freedom to purchase health insurance across state lines,” the president said.
The estimated 20 million Americans who buy coverage directly from an insurer would be affected. Their health plans are regulated by state governments, which decide the minimum benefits that must be covered and mediate disputes between insurers and their customers, among other consumer protections.
Variation between the states was extreme until former President Barack Obama’s Affordable Care Act, which raised the minimum standards for legal coverage nationwide.
One of the sharpest differences was coverage for maternity care. Mandy Burke of San Leandro, California, who is pregnant with a girl due in May, doesn’t want to go back to a time when it might be more difficult or more expensive to find coverage for pregnancy care.
The costs for repeated prenatal visits, ultrasounds, blood tests and a hospitalization for delivery are insane, said Burke, a 39-year-old musician and music teacher who has subsidized health coverage through California’s insurance exchange. “That was something we had to check out – can we even afford to be pregnant,” she said.
Trump and congressional leaders have vowed to repeal the law and replace it, although the details of their plans remain in flux.
The Trump proposal on cross-state sales would “eviscerate the ability of state legislatures and state governors to decide what the appropriate consumer protections are for their state’s consumers and businesses,” said Dave Jones, a Democrat who regulates some of California’s health plans as the elected insurance commissioner.
The concept of cross-state sales has been around for at least 10 years, but experts said there is a good reason why it hasn’t advanced: It might not deliver as promised.
“Premiums really reflect the cost of care where an individual lives,” said Barbara Klever of the American Academy of Actuaries, a professional group that represents experts who advise on health care and pension programs.
Health insurance is a little bit like real estate, in that costs reflect local conditions. If an insurance company based in a low-cost state such as Utah is allowed to sell policies in a high-cost state such as New York, its premiums for New Yorkers would reflect medical costs in their own state, not Utah.
Economist Joe Antos of the business-oriented American Enterprise Institute, said the idea of cross-state health insurance has an instinctive appeal because Americans have seen competition drive down costs in other areas, from credit cards to air travel.
But Antos said it’s a “faulty analogy” when it comes to health insurance because where the competition really needs to happen is among hospitals and doctors. And they are increasingly consolidating into bigger units, partly to fend off insurer demands to cut fees.
“You have to have competition at the service-delivery level, as well,” Antos said. “The most expensive part of health care is hospitalization, and that is pretty much going to drive the price of insurance.”
Out-of-state insurers also face the challenge of building local networks of hospitals and doctors that would make their product appealing to consumers. And then there’s a conundrum over who would regulate the out-of-state carrier.
“A consumer who had a concern about their claim being denied couldn’t go to their local insurance regulator,” said Trish Riley, executive director of the National Academy for State Health Policy, a nonpartisan group that advises states.
Concerned that repealing the Affordable Care Act would eliminate consumer protections, Democratic lawmakers in some states, including Hawaii and Nevada, have introduced legislation to preserve the act’s consumer protections in state law. Allowing cross-state insurance sales could undermine those efforts.
“We have a small market … and it would take a lot for some company from the mainland to try to come out here and get a foothold,” said Hawaii state Sen. Rosalyn Baker, a Democrat who heads that state’s committee overseeing health care.
Cross-state insurance is popular with conservative lawmakers who believe extensive state-level regulations require people to buy coverage they don’t want or need and drive up costs for consumers, particularly those who are young and healthy.
“If you live in the state of California or New York and you wanted a policy that had fewer state mandates and might be cheaper, I don’t see why you shouldn’t be able to go to the state and find a plan that supports your needs,” said Sally Pipes, president of the Pacific Research Institute, which advocates free-market ideas.
In his speech to Congress, Trump projected a sense of confidence about his health care proposals as he challenged Republicans and Democrats to work together. Sen. Ted Cruz, R-Texas, said there’s a “strong consensus” for cross-state sales.
But behind the scenes on Capitol Hill, there’s lots of uncertainty about whether the proposal will get very far.
There’s doubt it can meet the test for inclusion among budget-related items that Republicans can push through the Senate with just 51 votes under special procedures.
Normally 60 votes are needed to pass contested legislation, and there are 52 Republican senators. That’s why Republicans are planning to use special budget-related procedures to pass most of their “repeal and replace” legislation.
A House GOP leadership document prepared for lawmakers refers to cross state sales as an idea that Republicans will pursue through “regular order.”
The translation: 60 votes would be needed in the Senate.
A legislative referee called the Senate “parliamentarian” will make the final ruling on whether cross-state insurance can be considered under the special procedures that require only 51 votes to pass legislation.