Insurance across state lines?

As the Democratic health-reform plans have developed, Republicans have consistently offered one suggestion in opposition: allow individuals to purchase health insurance across state lines. In doing so, the argument goes, persons could shop via the Internet for a policy with a cheaper premium that was being sold in another state, thereby saving money.

This seems perfectly sensible to anyone who has purchased a pair of running shoes over the Internet for a price lower than that available locally. Unfortunately, it won't work with health insurance.

States have regulated health insurance since the 1945 passage of the McCarran Ferguson Act, which, among other things, forbids interstate sale of insurance (health, auto, homeowners). States have regulated insurance ever since. Many insurance companies sell policies in different states but, in doing so, must comply with a given state's regulations. For example, I have car insurance from the same company as my dad who lives in Georgia.Some already purchase health insurance across state lines. The ERISA Act of 1974 allows businesses that self-insure their employees to include all employees in one health insurance pool, even if they live in different states. Self-insurance means that the company is responsible for paying the health expenditures of its employees after the employees have paid the specified deductibles and co-pays. Such companies typically hire an insurance company to process claims and are predominantly large employers who have chosen to self-insure to remove the insurance middleman.

But individuals are prevented from purchasing health insurance across state lines. Allowing them to do so would require a federal law that replaces state regulation of insurance with federal regulation. This is an odd policy prescription for Republicans to champion, because they tend to reject federal regulation in favor of state autonomy.


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