Interstate Insurance Plans Could Become a Reality


January 8, 2018

On Thursday, January 4, the United States Department of Labor released a proposal that would allow interstate sale of health insurance policies. The policies may cost less but would not provide as much coverage as current coverage under plans that are compliant with the Affordable Care Act (ACA). This measure is designed to fulfill one of President Donald Trump’s campaign promises to lower costs of healthcare by allowing the sale of policies across state lines and increasing competition among insurance companies.

Association Health Plans

The new regulation would benefit organizations that sponsor health plans that don’t meet all the requirements set forth by the ACA. Known as association health plans, these types of policies often cost less because they don’t include required coverages like maternity benefits or prescription drugs. Often, the plans are organized around a common interest, which could be a religious affiliation, trade organization or chamber of commerce. Self-employed workers and those running small businesses are among the targeted consumers for these plans.

Selling Across State Lines

Currently, states don’t allow the sale of insurance across border lines because insurance sales – and the industry itself – represents a complicated structure. In some cases, barriers are related to state regulations about what coverages must be offered. Under the proposal, association health plans could be sold across state lines, which would allow insurers to offer their plans to more people, potentially increasing the pool of customers they would otherwise reach. Republicans have repeatedly insisted that selling across state lines is necessary in order to create more competition among insurance companies, which could lead to lower premiums.

Benefits of New Proposals

Many small business associations and other organizations argue that changing the regulations regarding association health plans would give them additional purchasing power, which would boost the healthcare options for many small businesses. They say that because association plans have lower premiums, more individuals would obtain health insurance. It would provide hourly wage earners, farmers and other low- to middle-income individuals with more options for healthcare. Last week, President Trump said that the new regulations could insure “millions and millions” and that selling across state lines would increase competition, potentially lowering premiums.

Negative Impact of New Regulation

Experts say that association health plans have not worked in the past. They claim that insurance companies tend to avoid such policies and that consumers suffer when their insurance plan doesn’t cover minimum benefits. Association health plans also have difficulty remaining solvent, and there has been rampant fraud among them in the past. It’s also possible that association health plans could be exempted from the Obamacare requirement to provide coverage to those with pre-existing conditions. Republicans claim that the new proposals will also keep insurers from leaving the public exchanges, yet many are leaving because they aren’t interested in creating a larger network, especially in rural areas. Some states do allow health insurance companies to sell across state lines, but most insurers aren’t interested in contracting with more doctors and hospitals with no potential customers.

Insurance industry leaders have said they want to further evaluate the impact of the proposal, but they don’t appear to endorse the plan completely. Most aren’t interested in eliminating the protections set by the ACA or measurements of quality health outcomes.