Selling Health Insurance Across State Lines

A proposal increasingly being touted by politicians, including President Donald Trump, recommends allowing insurance companies to sell individual health insurance policies across state lines, which some say could bring more options.

"It would be a big change, and I would say that it would probably be a welcome change, especially in the state of New Hampshire," says Paula Agrella, a licensed salesperson for life and health products at Foy Insurance in Exeter. "Hopefully, we could get some new products in here that will be compatible with our region that will spread out the risk some more so that carriers won't say they have to raise rates."

Agrella, licensed in NH, Maine and Massachusetts, has worked in the industry for 30 years. She says since the enactment of the Affordable Care Act, NH residents have narrower access to hospitals and physicians and more costly options when shopping for individual health insurance policies. (It's important to note that about 61 percent of people in NH are covered by an employer health plan, and not the ACA.)

A Complicated Proposal

It's important first to have a full understanding of this issue, because it's complicated and because selling across state lines can mean different things," says NH Insurance Commissioner Roger A. Sevigny. "Even without any changes in cur- _ rent law, health insurance companies that are headquartered, or domiciled, in one state can already sell their policies in another state. However, they must be licensed to do so in that second state."

Even given that ability, there still are only eight companies selling major medical health insurance policies to individuals in NH, compared with 120 companies offering private passenger auto insurance in the state, Sevigny says.

"It's funny that with car insurance there are plenty of carriers," says Peter Gosselin, broker and owner of the Gosselin Agency in Hooksett. "The question is, 'If it works on the auto side, why can't it work on the health side?' "

It's partly because health insurance is more complicated. It's not simply a matter of changing a zip code when moving, which is usually all it takes for an auto insurance update. Health insurance requires a local network and providers that the insurers then have to pay, as well as enough customers to create a risk pool (healthy people buypolicies to pay the costs of the sick). Plus, in NH, carriers have to "split up about 50,000 [consumers] among themselves, which is not a lot of business," Gosselin says.

As Sevigny explains, "Health insurance companies' plans must contract with enough health care providers to meet the state's network adequacy requirements. Health insurance companies have better negotiating leverage with health care providers when they have large numbers of policyholders and a company that can't negotiate good discounts won't be able to price its products competitively."

Concerns Raised

Many at the national and state level are critical of opening up the insurance industry. Some argue it could mean the state with the most lax regulations and least oversight will become a haven for insurance companies' headquarters. In addition, states would lose direct oversight of the companies selling policies in their own state.

Licensing now gives a state authority over an insurance company, even if it's headquartered elsewhere. Under current laws, insurance companies licensed in NH submit rates and policies to the Insurance Department for approval before selling policies to consumers. Sevigny says the department reviews the insurance plans, ensuring they comply with state laws, "including laws designed to protect consumers."

Limited Adoption

Only four states already have approved laws to allow the selling of policies across state lines: Maine, Georgia, Kentucky and Wyoming. What may be most telling is that insurers, and adjoining states, haven't been lining up to take advantage of the opportunity to sell in these states. In NH, legislators considered the measure in 2010, and again last year, but it didn't pass the House and Senate. Yet Gov. Chris Sununu says he'd be open to revisiting the issue again in the future.

"The New Hampshire Insurance Department welcomes the entry of new competitors into our markets, so long as the playing field remains level and consumers are not misled into buying coverage that is not what it appears to be," Sevigny says. "Out-of-state companies often sell insurance policies in New Hampshire. However, they must be licensed to do so, and their plans must comply with state laws, including maintaining an adequate provider network in the state."

Interstate Compact?

One possibility that has been considered is an interstate compact, in which several states, for example those in northern New England, "collaborate to regulate health insurance companies under one uniform set of rules," Sevigny says. That would allow a streamlined process for the companies to offer licensed products in each state, he says.

"The Insurance Department sees potential in this concept, but it would take a significant amount of work and legislative change," Sevigny says. "Given the likelihood of changes in federal health laws and the importance of clarity in maintaining market stability, the NHID feels it would be prudent to see what happens at the federal level before attempting to design new initiatives at the state level."