Republicans have been pushing a health care reform idea that is unlikely to work—at least the way the health insurance system is currently structured.
Listen to Ted Cruz speaking at the recent Iowa presidential debate: “Three specific reforms that reflect those principles. Number one, we should allow people to purchase health insurance across state lines. That will create a true 50-state national marketplace which will drive down the cost of low-cost, catastrophic health insurance.”
It’s not just Cruz. Most Republicans include this idea, and they often list it first, which is the problem. Allowing people to buy a health insurance policy available to residents of another state might be helpful, but it’s not a panacea—and it might not achieve anything.
If health insurance were like life or auto insurance, where the insurance company wrote the policyholder a check when an insurable event occurred, then buying a policy available to residents of another state would be fine.
Actually, health insurance was more like that decades ago, before managed care, when health insurers just paid the doctor and hospital bills.
But managed care has changed all of that. Health insurers negotiate discounts with health care providers. Large provider networks are a major asset and selling point of the larger insurers. When you get a health insurance policy you tap into that discount network.
Suppose I live in New Jersey and I find an affordable policy being sold in Kansas. Even if I were able to buy that policy, how would I access that policy’s network of providers WHO WOULD BE LOCATED IN KANSAS?
In general, doctors in the insured’s home state of New Jersey have no obligation to accept the same reimbursement schedule that doctors in Kansas agreed to.
Republicans have been pushing a healthcare reform idea that is unlikely to work—at least the way the health insurance system is currently structured.
Listen to Ted Cruz speaking at the recent Iowa presidential debate: “Three specific reforms that reflect those principles. Number one, we should allow people to purchase health insurance across state lines. That will create a true 50-state national marketplace which will drive down the cost of low-cost, catastrophic health insurance.”
It’s not just Cruz. Most Republicans include this idea, and they often list it first, which is the problem. Allowing people to buy a health insurance policy available to residents of another state might be helpful, but it’s not a panacea—and it might not achieve anything.
If health insurance were like life or auto insurance, where the insurance company wrote the policyholder a check when an insurable event occurred, then buying a policy available to residents of another state would be fine.
Actually, health insurance was more like that decades ago, before managed care, when health insurers just paid the doctor and hospital bills.
But managed care has changed all of that. Health insurers negotiate discounts with healthcare providers. Large provider networks are a major asset and selling point of the larger insurers. When you get a health insurance policy you tap into that discount network.
Suppose I live in New Jersey and I find an affordable policy being sold in Kansas. Even if I were able to buy that policy, how would I access that policy’s network of providers who would be located in Kansas?
In general, doctors in the insured’s home state of New Jersey have no obligation to accept the same reimbursement schedule that doctors in Kansas agreed to.
Indeed, the provider networks are getting so narrow thanks to Obamacare, especially in the individual health insurance market, that it’s hard to find doctors near your home who will take your coverage, much less those who practice in another state.
So why did this idea become part of the Republican reform plan? It started more than a decade ago, before Obamacare.
The issue was state mandates. All states had laws requiring health insurance to cover certain healthcare providers and services. But those laws could vary significantly from state to state, both in number and requirements—and thus how much the mandates raised the cost of health insurance.
The idea was to let someone living in a high-mandate state buy a more affordable policy in a low-mandate state.
For those of us involved in this issue, it was a way of highlighting how state insurance mandates drove up the price of health insurance, and perhaps put pressure on the high-mandate states to reduce the number of mandates, and therefore the cost of health insurance.
State mandates are less of a factor today because Obamacare requires health insurance to cover almost everything—in essence, putting us all in high-mandate states, which is one of the reasons health insurance is so much more expensive now.
Today the cost variations between states have more to do with the cost of living, the networks, and also utilization rates, all of which are state specific and can’t easily be transferred to another state.
That said, allowing cross-state purchases could be helpful, especially where people live and work in urban areas that are close to a state line, and where setting up a provider network in a neighboring state is feasible.
It’s also possible that if people were able to buy health insurance policies in other states, multi-state insurers would eventually figure out a way to address the provider-network issue. Forbes Opinion editor Avik Roy has suggested that possibility, but also highlights some of the difficulties when some states have tried.
In addition, if Republicans were to repeal Obamacare and replace it with legislation that allowed health insurance to evolve into real indemnity insurance, where insurers indemnify patient-policyholders rather than providers, then cross-state purchases would make sense. But we are a long way from that health insurance model.
In short, as long as our health insurance is tied to a provider network created by an insurer approved to sell in a particular state, buying across state lines is likely to amount to little more than a talking point for Republicans. They may want to keep it on the list of needed reforms, but it shouldn’t lead the list.