One of the more contentious issues of last year’s health care reform debate, whether health insurance companies should be allowed to sell policies across state lines, was subject to a congressional hearing last week.

Witnesses before the Health Subcommittee of the House Committee on Energy and Commerce offered opposing opinions on whether interstate sales would help or hurt consumers.

Steve Parente, Insurance Industry Chair of the Health Finance Department at the University of Minnesota, testified that he and his colleague had found hard evidence allowing the purchase of individual health insurance across state lines would reduce the number of uninsured. “The best scenario to reduce the uninsured, numerically, is competition among all 50 states where one or more states emerge as dominant players,” he said.

Parente added that his research indicated that uneven costs are almost entirely due to differences in regulatory burden and mandates between the states.  “In one of the most telling illustrations, we found premium quotes for the same family from the same insurance company for the same insurance benefit to be more than twice as expensive in a New Jersey town, Lambertville, compared to New Hope, Pennsylvania,” he said. “These two towns are separated by a quarter-mile of Delaware River, but their citizens are likely to use many of the same medical providers.” 

Yet, others witnesses warned of regulatory arbitrage and a “race to the bottom” that would ensue if consumers could purchase products across state lines. “Selling insurance across state lines has long been proposed as an option to increase competition and choices in health insurance, but there are serious pitfalls with this approach when it is not coupled with adequate consumer protections,” said Steven Larsen, deputy administrator and director, Center for Consumer Information & Insurance Oversight, Center for Medicare and Medicaid Services.

Stephen Finan, senior director of policy for the American Cancer Society, also raised doubts about how state insurance commissioners would regulate out-of-state companies. “Are state insurance departments or state courts going to give full recognition to the problems of out-of-state consumers, especially in these times of very tight state budgets?  Interstate sales without adequate consumer protections and safeguards could easily become a debacle with grave consequences for our nation’s health and well-being,” he said.

Bill Kenealy writes for Insurance Networking News, a SourceMedia publication

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