The idea that we can solve our health care problems by allowing people to buy an insurance policy "across state lines" sounds tantalizingly easy. Unfortunately it's not true. It will make our problems worse and be devastatingly risky for many Americans. Yet the idea has been resurrected in bills proposed by the Republican Study Committee (RSC), Congressman John Shadegg (R-AZ), and Senator Jim DeMint (R-SC).

Don't be fooled: without significant and nationwide market reforms (like those put forth by the committees of jurisdiction in both the House and Senate), selling health insurance across state lines will lead to less-comprehensive insurance packages, higher costs for families, and reduced access to care. It is a step backwards for not only our insurance markets, but also, and more importantly, for the American people who struggle every day to secure quality, affordable coverage.

Last year, New America published a detailed explanation of why this policy is an unviable solution. Our paper and two-page summary can be found here, and previous blog posts can be found here, here, here, and here. But this is the bottom line:

What does it mean to allow insurers to sell coverage "across state lines?"

Insurers could sell their products to Americans in any state. The insurer would have to follow the rules and regulations in the state where it is based or "domiciled" -- not the rules of the state where the consumer or policyholder lives. In the absence of uniform regulations in every state, insurers will in effect choose the state laws they want to follow based on where they domicile. This will lead to de facto deregulation of the insurance market and a race to the bottom.

Insurers who underwrite aggressively (those who spend lots of time trying to figure out your medical history, pre-existing conditions, etc.) would naturally prefer to domicile in South Carolina or Arizona, where there are virtually no regulations placed on non-group insurers. These insurers could then cherry pick the healthy from across the nation and deny coverage to anyone who looked the least bit sick. This leaves the rest of the insurers in more highly regulated states little choice but to migrate, too, to states like South Carolina or Arizona if they want to compete. In turn, individuals who are older or who have pre-existing conditions or risky health histories would be left with nowhere to turn.

Massachusetts' reformed marketplace could be completely unraveled by this sort of thing fairly quickly. Let's be clear: supporters of "across state lines" want to keep the insurance market unregulated and profitable for aggressive underwriters, period. They do not to solve our uninsured and cost growth problems.

How would selling insurance across state lines impact...

• Premiums? Health insurance premiums may decrease for young, healthy individuals. Yet, premiums would likely go up for many other Americans, especially those with health conditions or individuals who prefer comprehensive insurance policies.

• Benefit Mandates? Most benefit mandates would be eliminated by an across state lines proposal.  In fact, selling health insurance across state lines would eliminate any guarantee that important benefit mandates like maternity care would be included in insurance packages in the future. Consumers would get little in exchange. Overwhelming evidence shows that benefit mandates per se are not why health insurance costs so much, so premiums are unlikely to decrease significantly.

• Access to Coverage? Many people would find it more difficult to access health insurance if health insurance were sold across state lines. This is because there would be fewer guaranteed issue policies and because insurers would have an increased incentive to deny people coverage and charge people more based on their health history.

Let's also be clear about an important distinction. The Senate Finance Committee recently proposed allowing states to form "compacts" (see page 12 of the Chairman's Mark) for the purchase of insurance across state lines. This provision would not have the devastating impacts described above because under the Finance bill insurance market rules would be uniform across states. Likewise, the legislation would establish a minimum level of benefits that insurers are allowed to offer, ensuring that every insurance package provides access to necessary services and protects consumers' health and financial needs. 

Simply having an alternative plan to fix our health system is not good enough. The alternative must get serious about solving the problems facing our nation. Selling health insurance across state lines -- without significant market reforms -- falls woefully short of what is necessary to make quality health insurance accessible and affordable for us all.