Health Insurance Across State Lines

Many advocate allowing consumers to purchase health insurance across state lines as an important way to reduce costs. It works, we are told, by avoiding some of the more onerous requirements of some states. For example, MN has 63 mandates for policies sold in its state. ID has 13. The policies sold in MN are more expensive than in ID. It is reasoned, if MN residents could buy ID policies, they would spend less.

First, policies sold in MN cost more than those sold in ID for lots of reasons, most of which would be calculated into an ID designed policy sold to MN residents.

Second, how is a policy sold by a company domiciled in ID and not subject to the mandates of MN going to be regulated? Mandates are not the only subject over which MN division of insurance protects the citizens of MN. They also approve premium rates and marketing material, arbitrate policyholder complaints, regulate required financial strength, and insure that policyholders won't be affected when companies approved in MN are unable to fulfill their commitments to customers. If the MN division of insurance has no say over the mandates, it has no say over the rest of its responsibilities to MN policyholders when they buy a policy from an out-of-state insurance company. And the ID division of insurance has no responsibility for policyholders who live in other states.

People who buy under these circumstances will not save as much as they think, and they will be without vital consumer protections.

These consumers would be protected if the federal government regulated insurance, but then all of us would have the same number of mandates, so there would be no reason for attempting regulatory arbitrage.