OKPOLICY.ORG
We are following with keen interest legislation introduced this session by Senator Bill Brown that would allow for the issuing of health insurance coverage across state lines. SB 2046, which passed the Senate Retirement and Insurance committee and awaits consideration by the full chamber, is part of a national push to expand access to health insurance by creating inter-state competition. According to a recent New York Times article:
Proponents of the idea say that the tangle of state regulation drives up costs, particularly in states with heavy mandates, and that a quick and easy way to reduce prices would be to allow people in states where insurance is expensive, like New York or Massachusetts, to buy policies in low-cost states like Minnesota.
Senator Brown’s bill explicitly states that “out-of-state insurers shall not be required to offer or provide state-mandated health insurance benefits required by Oklahoma law or regulations in health insurance policies sold to Oklahoma residents.”
Critics warn that exempting insurers from state regulations would gut consumer protections. In a recent op-ed, Jeff Raymond of OKWatchdog.org writes:
States protect policy holders by requiring certain care to be covered, restricting rate increases and accepting applicants. If insurance is sold across state lines, the rules of the state in which the company is located would determine the laws it follows. This guts states’ enforcement powers and their ability to craft legislation to fit their needs.
The example of the financial sector, where credit card companies all relocated to states without usury laws on interest rates, is cited as a cautionary tale for health insurance.
The rationale behind SB 2046 – that state benefit mandates are forcing up the cost of insurance and keeping people from being able to access affordable coverage – is strikingly similar to what was argued last year by proponents of HB 2026, a bill passed by the Legislature that authorized insurance companies to sell insurance to individuals under the age of 40 exempted from state mandates.
There are several apparent fallacies at the heart of both last year’s HB 2026 and this year’s SB 2046. The first is that there is a lack of choice and competition in the state’s insurance industry. That may be true in some states, but in Oklahoma, according to figures supplied by the State Insurance Department, there are 19 companies writing policies in the individual market and over 70 companies active in the group market.
A second fallacy is that insurers are subject to a vast number of onerous mandates. In reality, there are only a dozen or so benefits that must be offered in Oklahoma, and half of those apply only to group coverage or to specific categories of the population, such as children, seniors, or post-partum women. Most studies have found that the impact of mandates on the cost of coverage is quite minimal.
Finally, there appears to be the assumption that Oklahomans are clamoring for insurance coverage that doesn’t cover such mandated services as child immunizations, diabetes supplies, annual ob-gyn exams, or cancer screenings. To cite our blog post on HB 2026:
A number of questions come to mind when looking at this list of benefits that could be waived. How much would the cost of insurance actually be lowered for policies that did not include these services? How many prospective parents would actually select a policy that did not provide a guarantee of 48 hours of inpatient care after delivery or children’s vaccines? Would the health of Oklahomans be promoted by allowing young people to select policies that would not cover them for test strips and insulin following the onset of diabetes?
All of this led us to predict last year that the impact of HB 2026 would be minimal: “The reality is that Oklahoma’s individual insurance market is already very flexible, so passage of these proposals would likely not have an earth-shattering impact one way or another.” Indeed, the Insurance Department reports that since HB 2026 took effect last year, not a single insurance company has chosen to file a product exempt from state benefit requirements. We do not know what would happen if the insurance market were to be opened up to out-of-state companies, since SB 2046 differs from HB 2026 in applying to group as well as individual coverage and across all age groups. However, we are fairly certain that those who continue to pitch the sale of insurance products without benefit requirements as a solution to the problem of affordable coverage are barking up the wrong tree.
One reason America prospered historically ahead of Europe was the banning of tariffs on interstate commerce, which created a large market. This meant innovations could quickly spread and benefit consumers across the country. Why should health insurance be any different?
The goal of catastrophic insurance is to spread risk. The benefit of trans-state insurance pools is that companies may better manage risk with larger pools. Exempting mandates may allow plans to get more people in the plan on the margin, even if they meet the most basic mandates.