Selling Health Insurance Across State Lines Could Result in Lower Costs

While President-elect Trump mulls the idea of allowing health insurance companies to sell across state lines, many in the industry said it could be hard to implement. But it's a welcome discussion for CEOs and organizations that are continually seeking ways to combat rising health care costs.

Healthcare costs may not be rising as fast as they once were, but it’s little consolation, as they’re still rising faster than inflation and are a continual cost headache for employers.

Here’s the good news: Medical cost increases are expected to hold steady in 2017 at 6.5%. Barbara Gniewek, principal in PwC’s Global Human Resources Services group, says while it’s not the double digit trend we saw years ago, it’s still rising and that companies “will continue to cost shift.”

As CEOs contemplate what may happen to the Affordable Care Act in 2017, some lawmakers—and President-elect Trump—say allowing insurers to sell across state lines would boost competition, bring more choices to market, and reduce premiums. The idea of selling insurance across state lines has been floated for many years and was first introduced in 2005 by two members of the House promoting the Health Care Choice Act of 2005.

“No one should be under the illusion you can dramatically lower the cost of insurance in Los Angeles if you buy an Arkansas policy.

But Linda Blumberg, a senior fellow at the Urban Institute’s Health Policy Center, said that if the ACA were repealed and insurers were allowed to sell across state lines, companies would likely establish themselves in places with little or no regulation. This would then leave an unbalanced risk pool in some states that may cause insurers to dramatically raise premiums on things like Plan G supplemental plan, or leave the market altogether. The National Association of Insurance Commissioners said it would just create “a race to the bottom.”

Critics of the idea also said that insurers would still simply adjust rates to reflect costs in each location anyway. “No one should be under the illusion you can dramatically lower the cost of insurance in Los Angeles if you buy an Arkansas policy,” said Edmund Haislmaier, senior research fellow at the Heritage Foundation.

Insurance executives question whether interstate sales would even create much competition. While there’s a provision in the Affordable Care Act that allows insurers to sell individual policies across state lines through special agreements, there has been little interest or participation.

Gniewek says employers will likely continue the trend of moving more healthcare costs to employees with higher deductibles, switching to high performing providers, offering narrower drug options or higher co-pays. Others may also look more to long-term initiatives such as wellness programs to help save money.

While shifting more costs to employees may be a necessary evil, it can come at the cost of reducing morale. Many large employers are taking an active role in the issue by investing more in the health of their employees. Brian Moynihan, CEO of Bank of America, said that their wellness program is a worthwhile investment and “becoming core to how we create the best workplace for our teammates.” He said it also helps keep annual cost increases lower than average rates across the country and that employees earning less than $50,000 per year have not seen premiums increase since 2012.

Moynihan points to research that shows an employee who decreases their body mass index by one point can reduce healthcare costs by $1,500 per year. “CEOs know that the most important source of company excellence is our people. It’s our responsibility as business leaders to invest in the health and well-being of our employees. Wellness programs are a great way to do that,” said Moynihan.


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