Allowing Purchases of Out-of-State Health Insurance

Richard Cauchi, NCSL Health Program 8/1/2018

Association Health Plans & State Actions Report

Insurance firms in each state are protected from interstate competition by the federal McCarran-Ferguson Act (1945), which grants states the right to regulate health plans within their borders. Large employers who self-insure are exempt from these state regulations. The result has been a patchwork of 50 different sets of state regulations and the cost for an insurer licensed in one state to enter another state market is often high. The Affordable Care Act (ACA) set new standards, but retained the strong context of state regulation combined with expanded minimum federal standards.

A number of state legislators have been interested in whether some states allow or facilitate the purchase of health insurance across state boundaries or from out-of-state regulated insurance companies. NCSL's state health insurance research and tracking shows a slowly growing number of states—at least 23 as of fall-2017and state legislators considering this idea during the past ten years.

The result includes enacted laws in six states, and filed bills not passed in at least 17 others. As of late-2017 none of the six states was known to actually offer or sell such policies and no consumer has purchased a policy. For background see NAIC and other views, below.

Association Health Plans: An Old and New Variation

2018 Federal Proposal: In October 2017 President Donald Trump suggested the expanded use of Association Health Plans (AHP) as a way to avoid or pre-empt existing state mandates. On Oct. 12, he formalized the plan by signing an executive order. The White House statement  describes"The order directs the Secretary of Labor to consider expanding access to Association Health Plans (AHPs), which could potentially allow American employers to form groups across state lines.

  • A broader interpretation of the Employee Retirement Income Security Act (ERISA) could potentially allow employers in the same line of business anywhere in the country to join together to offer healthcare coverage to their employees.
  • It could potentially allow employers to form AHPs through existing organizations, or create new ones for the express purpose of offering group insurance.
  • By potentially making it easier for employers to band together, workers could have access to a broader range of insurance options at lower rates in the large group market.
  • Employers participating in an AHP cannot exclude any employee from joining the plan and cannot develop premiums based on health conditions."

"Health Ideas Get a Second Chance" - State Legislatures magazine feature January 2018
Few agree on the best way to increase competition in the health insurance marketplace as an old idea gets a second look. Authored by Richard Cauchi.

Trump Administration Rule Paves Way For Association Health Plans. "The Department of Labor on Jan. 4, 2018 released proposed new rules that proponents say will make it easier for businesses to band together in “associations” to buy health insurance. Full article in Kaiser Health News, 1/05/2018.

Association health plans (AHPs) Report: "will do little to cover the uninsured and will erode state laws that require insurers to cover preventative health care services such as well-child care and mammography screening," insurance and health care groups stated. CMWF Report, May 12, 2018

Administration Push for Alternative Coverage Options: Does It Mean Higher Marketplace Premiums and Fewer Consumer Protections?  Updated analysis from The Commonwealth Fund. 3/29/2018.

Health Insurance & ReformsPowerpoint Presentation at NCSL in California by Justin Giovannelli and Colleen Becker; PDF file-20 pages, 

"President Trump’s Executive Order: Can Association Health Plans Accomplish What Congress Could Not?" Read the full post, by Kevin Lucia and Sabrina Corlette, The Commonwealth Fund. They describe, "Proponents suggest that AHPs will be able to offer lower premiums to members through increased bargaining power and fewer regulatory requirements. However, while some members of AHPs may benefit, this approach would undermine many of the ACA’s protections for people with preexisting conditions and stymie states’ ability to regulate health coverage sold to their residents. In the past, AHPs have taken advantage of regulatory exemptions from important consumer protections, such as guaranteed access to coverage, rating rules, and benefit standards."  Published Oct. 10, 2017.

Health Executive Order Demystified.
Presentations at NCSL Capitol Forum, December 10, 2017 and Commonwealth teleconference January 2018

  • Association and Short-Term Health Plans: What Do Proposed Rules Mean for States and Consumers? [see presentation slides]
    • Slides by Kevin Lucia : These plans potentially will “include individuals and the self-employed while pre-empting state regulation of self-funded multi-employer welfare arrangements (MEWAs).” Research from Georgetown University Center on Health Insurance Reforms.
    • "Update on Federal Health Insurance Policy: Implications for States" slides by Sara Collins, v-p, The Commonwealth Fund.

An analysis by Mark Hall, described in the Washington Post, provides additional history. "A version of these self-insured association health plans first became widespread in the 1980s, but they failed in droves because many were undercapitalized. More troubling, these earlier association plans had a history of becoming what the Labor Department termed “scam artists” and the Government Accountability Office reported were “bogus entities [that] have exploited employers and individuals seeking affordable coverage.” More than two dozen states reported in 1992 that these early association plans had committed “fraud, embezzlement or other criminal law” violations." Published 10/13/2017.

Cheaper Health Plans Promoted by Trump Have a History of Fraud. Records reveal state examples in Florida, Louisiana, New Jersey, South Carolina,Texas and Washington that "fraud and abuse in small-business health plans have left employers and employees with hundreds of millions of dollars in unpaid medical bills."  Published by New York Times, Oct. 22, 2017

State-based Laws Origins and History

All 50 states regulate health insurance and have done so for decades. While laws vary from state to state, they generally provide a structure that combines business regulation, employer incentives and consumer protections and obligations.  The variations can be extensive, especially affecting mandates or required benefits.

United States map of States to allow out-of-state health insurance sales

Signed State Laws Allowing Out-of-State Sales of Health Policies

  • Rhode Island was the first state to pass an out-of-state purchasing law, signed in 2008, to create a regional health insurance compact, similar to the design later authorized by the PPACA in 2010.
  • Wyoming was the first state, in March 2010, to enact a signed law based on the free-market model but also including a multi-state compact related to federal health reform.
  • Georgia, HB 47 - Signed into law May 2011, in the first state with a law drafted and passed since the federal Affordable Care Act became law. 
  • Kentucky HB 265 - Signed into law, 2012).
  • Maine HB 979 - Signed into law, 2011; effective date Jan.1, 2014). 
  • Oklahoma SB 478 - Signed into law, 5/31/2017 *NEW*

In Washington a study order was adopted in 2008, but no binding or further action was taken

In Arizona a bill passed the House and Senate in 2011 but was vetoed by the governor and did not become law.

State-based proposals for out-of-state health purchases before federal health reform:  Eighteen states considered laws to allow this policy prior to health reform; of those, 14 states had cross-border health insurance bills filed in the 2008-2010 sessions.  In most cases, the proposed state laws differ markedly from the newly enacted federal health reform law. 

  • Arizona (HB 2776 of 2008 - did not pass committee)
  • California (AB 1904, SB 65 of 2010 - did not pass committee)
  • Colorado (HB 08-1327 of 2008, HB 09-1256 of 2009; HB 10-1163 of 2010 - did not pass committee)  
  • Georgia (SB 309, S 407, HB 1184 of 2010 - did not pass) - See post-ACA enacted law in 2011
  • Indiana (HB 1152 of 2010; H 1013 of 2013 - did not pass)
  • Maine (SB 540 of 2007, HB 230 of 2009 - did not pass committees) - See post-ACA enacted law in 2011
  • Minnesota (HF 3609, HF 4154, HF 4218, HF 4229, SF 3582, SF 3824 - did not pass)
  • New Hampshire (HB 1431, HB 1585, SB 452 of 2010 - did not pass)
  • North Carolina (2009-2010 - did not pass)
  • Oklahoma (SB 1290, SB 1346, SB 2 of 2010 - did not pass) 
  • Pennsylvania (SB 508 of 2009-2010)
  • Rhode Island (SB 2286 - Signed into law, 2008)
  • South Carolina (SB 986 of 2010 - did not pass)
  • Virginia (HB 31 of 2010 - did not pass)
  • Vermont (HB 697 of 2010 - did not pass; also resolution HJR 39 expressing opposition to out-of-state purchasing - adopted)
  • Washington - study provision only, passed 2008.  No further action was taken.
  • Wisconsin (AB 540 of 2009-2010 - did not pass)
  • Wyoming (HB 128 - Signed into law, 2010)

State-based proposals for out-of-state health purchases after federal health reform: Fifteen states have considered laws to allow this policy after the passage of health reform. (As of fall 2017)

  • Arizona (SB 1593  of 2011- passed Senate and House, 2011; vetoed)
  • Georgia (HB 47 - Signed into law, 2011)
  • Indiana (HB 1043 of 2011 – failed; H 1013 of 2013 – failed)
  • Kentucky (HB 445 – failed; HB 280 of 2013 – failed)*(HB 265 - Signed into law, 2012)*
  • Maine (SB 77 - failed; HB 366 - failed); Maine (HB 979 - Signed into law, 2011)
  • Minnesota (H 1859 and S 349 filed 2015; failed to pass; not re-considered in 2016-17)
  • Montana (H 280 of 2013 - passed by House and Senate; vetoed by governor-failed; HB 445 – failed*
  • New Hampshire (HB 327 - failed; SB 150 - failed;  H 128 & S 131 - failed in 2015-2016)
  • New Jersey  (A 1558, A 4364, S 2806 of 2017); held in initial committees since 2016; (session ends 1/8/2018)
  • Oklahoma (SB 57 - failed; SB 1059 - passed Senate and House, failed in conference committee)
  • Pennsylvania (HB 47 of 2011-12 – failed; S 346 of 2013-14 -failed)   
  • Rhode Island (H 5704 of 2015, failed)
  • South Carolina (SB 185 - failed; SC S 886 of 2014 - failed)
  • Texas (HCR 90 of 2017) Non-binding resolution, urges U.S. congress to authorize sales - failed; adjourned 5/29/2017
  • Washington (S 5540 of 2013-14 – failed)
  • West Virginia (HB 2801 - failed; SB 419 - failed) *

Federal Health Reform Legislation and Actions 

Under the Patient Protection and Affordable Care Act (ACA), Section 1333 permits states to form health care choice inter-state compacts to allow insurers to sell policies in any state participating in the compact.  Two or more states may enter into compacts under which one or more insurance plans may be offered in the such states, subject to the laws and regulations of the state in which it was written. 

The insurer would remain subject to the market conduct, unfair trade practices, network adequacy, consumer protection, and dispute resolution standards of any state in which the insurance was sold, be licensed in each state, and notify consumers that it was not otherwise subject to the laws of the selling state. HHS would have to approve interstate insurance sales, certifying that the coverage would be as least as comprehensive as that sold through the exchange, provide coverage and cost-sharing protections at least as affordable and cover at least as many residents as coverage under Title I, and not increase the federal deficit.1

The Role of Federal Law. Until March 2010 there was no federal law that, in general, either allowed for or prohibited cross-border purchasing of health insurance – only state laws regulate health insurance policies that are “fully insured” – and sold throughout the small employer and individual insurance market in all 50 states. The federal reform law Section 1333 provision enacted in March 2010 (see above) took full effect in January 2016. 

Can states go further?  The idea of states allowing free-market sales across state lines, outside of federal regulation is an untested proposition. This was especially true during the transition period prior to the effective dates of the federal reforms spelled out in section 1333 of the Patient Protection and Affordable Care Act.  Another ACA provision, known as Section 1332, titled "Waivers for State Innovation" separately allows states to seek broader innovations or alternatives.

On a separate interstate topic, as of January 2017, at least eight states have enacted "Interstate Health Compacts", sometimes termed "Freedom Health Compacts" which propose and authorize broader interstate health markets outside of the scope of federal law.  See the separate NCSL report at, www.ncsl.org/issues-research/health/states-pursue-health-compacts.aspx.

Note that “self-insured” or “self-funded” health coverage usually offered by large employers (especially with 500+ employees) is not regulated by states and is guided by the federal ERISA law, administered by the U.S. Department of Labor and some provisions of the ACA. Federally authorized health savings accounts and accompanying High Deductible Health Policies (HDHPs) are exempt from much of state regulation, including some state mandates.

News and Views 2016 - 2017

State Insurance Commissioners Statement: Allowing individuals to purchase insurance across state lines will start a “race to the bottom by allowing companies to choose their regulator,” says the National Association of Insurance Commissioners (NAIC). Some GOP lawmakers are advocating including a provision in their planned health reform package that would allow policies to be sold across state lines. However, the NAIC says mandated benefits in certain states aren’t the reason insurance is more expensive in some states than in others. Approving legislation that would allow cross-border insurance sales would reduce the options available to consumers and restrict the ability of insurance regulators to help consumers, the group says. “While those individuals in pristine health may be able to find cheaper policies, everyone else would face steep premium hikes if they can find coverage at all,” the group said. Read the full statement (12/19/16) at NAIC.

Essential Facts About Health Reform Alternatives: Allowing Insurance Sales Across State Lines.  [read the full brief]
"Under many Republican health reform proposals, insurance companies would be able to sell their policies across state lines. As long as a health plan complied with any one state’s regulations, that plan could then be sold nationwide—without necessarily complying with the regulations in every state." The report examines: 1) If interstate health plans become widespread, bare-bones plans with high out-of-pocket costs would proliferate; 2) Interstate sales could make it harder for older and sicker adults to get adequate coverage at an affordable price. The arguments include: "Conservatives believe allowing insurers to sell policies across state lines would inject competition into the individual market, which would lower costs for consumers. Critics argue that if cross-state sales became widespread, the individual insurance market could become a race to the bottom. Insurance companies, they say, would relocate to states with the most insurer-friendly regulatory environments—in effect allowing national health care policy to be dictated by the most permissive states."  Issue brief by Sara Collins, The Commonwealth Fund, April 2017.

A brief, Selling Health Insurance Across State Lines was posted February 2017 by the National Academy for State Health Policy.  Citing NCSL, it notes that over the last decade 21 states introduced legislation to sell across state lines, only five states enacted such laws, but no insurer has yet to offer. Why? Read their full publication here (PDF, 4 pages)

Insurers not interested in selling ObamaCare across state lines. Full article; Published by The Hill, Oct. 13, 2016
"... For the last 10 months, states have been legally allowed to let insurers sell plans outside their borders. Despite the idea’s enduring popularity, no states have signaled interest in the policy, insurance experts and regulators say. And the federal government never even finished writing the rules for how it would work.
       “Insurers aren’t interested at this point,” Linda Blumberg, a senior fellow on health policy at the Urban Institute, said in an interview. “It’s kind of a lot of effort for no necessary return.”....  Only three states have approved those laws — Kentucky, Georgia and Maine — although none have actually made deals with other states to sell their plans, according to the National Conference of State Legislatures."

Listen to a Teleconference About Buying Insurance Across State Lines | October 2017

There is renewed interest in what it means to allow consumers to purchase health insurance across state lines following the President’s statement that he will sign an Executive Order allowing it. There are a number of ways this policy change could be implemented, but in any scenario there will be substantial impacts on consumers and state health insurance markets. The Commonwealth Fund, in collaboration with NCSL, held a teleconference for media and policymakers on Oct. 4, during which experts addressed key questions such as:

  • How would the administration make this policy change through Executive Order?
  • What does selling across state lines mean, and what specific proposals are on the table?
  • What are the implications for the way states currently regulate their health insurance markets?
  • What are the risks to consumers, such as potential fraud and diminished consumer protections?

Presenters

  • Sara Collins, Ph.D., vice president, Affordable Health Insurance, The Commonwealth Fund
  • Sabrina Corlette, J.D., research professor, Center on Health Insurance Reforms, Georgetown University Health Policy Institute
  • Mila Kofman, J.D., executive director, D.C. Health Benefit Exchange
  • Kevin Lucia, MPH, J.D., research professor, Center on Health Insurance Reforms Georgetown University

NCSL provides this opportunity as part of our ongoing health innovations project, with support from the fund. The opinions expressed by individual national experts speaking during the teleconference are their own, and not a reflection of NCSL policy.

Also see NCSL “Federal Legislation and Action” below.

Enacted State Laws
Georgia
2011 Signed Law

H 47 by Ramsey M (R)

Relates to individual health insurance coverage, so as to authorize insurers to offer individual accident and sickness insurance policies in the state that have been approved for issuance in other states; provides for legislative findings; provides for a definition; provides for minimum standards for such policies; allows insurers authorized to transact insurance in other states to issue individual accident and sickness policies in the state.

(Enacted by House and Senate; signed into law as Act No. 249, 5/13/11)

 

Kentucky
2012 Signed Law

 

H 265 by Rep. Rand (D)

Authorizes the state to seek "to explore the feasibility of an Interstate Reciprocal Health Benefit Plan Compact (IRHBPC) with contiguous states" to allow Kentucky and residents of contiguous states to purchase health benefit plan coverage among the states participating with the compact. The purposes of this compact are, through means of joint and cooperative action among the compacting states to promote and protect the interest of consumers purchasing health benefit plan coverage. The compact generally is authorized in section 1333 of the PPACA.
(Enacted & signed into law as Act No. 144, 4/13/2012)

Maine
2011 Signed Law

H 979 by Richardson (R)

Gradually modifies the community rating provisions for individual and small group health plans; expanding in 3 increments the rating bands from the current ratio of 1.5:1 to 3:1 by January 1, 2014; allows financial incentives except for emergency care services; maintains the requirement that plans must provide reasonable access to services for all members; allows plans to provide financial incentives to members to reward providers for quality and efficiency.  Also provides, “Notwithstanding any other provision of this Title, a domestic insurer or licensed health maintenance organization authorized to transact individual health insurance in this State may offer for sale in this State an individual health plan duly authorized for sale in Connecticut, Massachusetts, New Hampshire or Rhode Island by a parent or corporate affiliate of the domestic insurer or licensed health maintenance organization.
(Enacted & signed into law as Public Law 2011-90, 5/17/2011)

Oklahoma

2017 signed law

*NEW*

 SB 478  [Full Text] - by Senators by Brown and Moore. Approved and signed into law by Governor 05/31/2017

Creates the Health Care Choice Act; stating The Oklahoma Legislature recognizes the need for purchasers of health insurance coverage in this state to have the opportunity to choose health insurance plans that are more affordable and flexible than existing market policies offering accident and health coverage. Therefore, the Oklahoma Legislature seeks to increase the availability of health insurance coverage by allowing insurers authorized to engage in the business of insurance in other states, and not so authorized in Oklahoma, to issue accident and health policies in Oklahoma by granting a limited exemption.'' Authorizes the Insurance Commissioner to negotiate compacts with other states; requires approval of such compacts by the Legislature; specifies how certain examination by the Insurance Commissioner should be conducted; requiring compacting out-of-state insurers to abide by certain requirements in order to offer health and accident policies; establishing conditions required for Insurance Commissioner to approve certain out-of-state insurers to sell health and accident policies in Oklahoma, requiring out-of-state insurers to reapply annually for approval; requires certain policies contain state-mandated health benefits. 

Rhode Island
2008 Signed Law 

S 2286 by Sen. Sheehan (D)

Amends the Health Insurance Market Expansion Act; provides for establishing a regional health insurance market with other New England states to expand opportunities for regional insurers to offer insurance in the state; includes health insurance corporations, health maintenance organizations, nonprofit hospital service corporations and nonprofit medical service corporations; provides for a study of laws to enable insurers licensed in other states to do business in the state without separate licensure.

(Filed and Enacted; signed into law, 6/26/08)

NOTE: This structure resembles the federal Health Reform law enacted in March 2010.  It may be an early example of applying state and federal regulation to a new type of insurance policy.

 

Wyoming
2010 Signed Law

 

H 128 summary and full text by Rep. Simpson (R)

Authorizes the sale of health insurance by out-of-state insurers; provides for more limited regulation of policies; provides for oversight by the insurance commissioner; provides for cooperation by the insurance commissioner with other states with consistent insurance laws; specifies legislative intent to pursue a multi-state consortium to enter into reciprocal agreements to reduce health insurance costs through removal of duplicative regulation.

''The commissioner may approve for sale in Wyoming selected comprehensive individual medical and surgical insurance policies that have been approved for issuance in those other states where the insurer is authorized to engage in the business of insurance so long as the insurer is also authorized to engage in the business of insurance in this state and provided that the policy meets the requirements...'' in this act. [Text added 7/2017]

(Passed House and Senate; signed into law as Chapter No. 86, 3/11/10)

ARCHIVE: Proposed Bills - Not Enacted (2007 - 2011)

Arizona

2008 H 2776 by Rep. Crump (R)

Arizona considered a proposal (HB 2776) which would allow out-of-state health insurers to transact business in AZ if they are subject to the jurisdiction of another state's insurance department.

Relates to purchase of health or sickness insurance; would provide that insurers that issues policies, contracts, plans, coverages or evidences of coverage and that are domiciled outside of this State may transact health or sickness insurance in this State if the insurer provides evidence to the Director that while providing health or sickness insurance the insurer is subject to the jurisdiction of another State's Insurance Department.

(Filed and held in House Health Committee; Failed Adjourned, 2/20/2008)

2011 S 1593 by Sen. Barto (R)

Allows foreign insurers to issue policies relating to health or sickness coverage in Arizona.

(Vetoed by Governor, 4/28/11)

California

2010 A 1904 by Ass. Villines (R)

Allows a carrier domiciled in another state to offer, sell, or renew a health care service plan or a health insurance policy in this state without holding a license issued by the Department of Managed Health Care or a certificate of authority issued by the Insurance Commissioner. Exempts the carrier's plan or policy from requirements otherwise applicable to plans and insurers providing health care coverage in this state if the plan or policy complies with the domiciliary state's requirements.

(Filed and sent to Assembly Committee on Health; did not pass committee, 4/20/10)

2010 S 65 h by Sen. Huff (R)

Allows a carrier domiciled in another state to offer, sell or renew a health care service plan contract or a health insurance policy in the State without holding a licensure issued by the Department of Managed Health Care or a certificate of authority issued by the Insurance Commissioner; exempts the carrier's plan contract from requirements otherwise applicable to plans and insurers providing health care coverage.

(Filed and sent to Senate Committee on Rules; did not pass committee, 2/16/10)

Colorado

2008 H 1327 by Rep. Gardner (R)

"A Bill Concerning Access To Affordable Health Insurance Products For Colorado Residents Through The Elimination Of Certain Regulatory Restrictions That Increase The Costs Of Health Insurance Products For Consumers."   Allow Colorado residents to purchase, and a health insurance carrier, whether or not the carrier is subject to Colorado insurance laws and regulations, to sell in Colorado, a health insurance product that is lawfully sold, offered, or issued in another state without subjecting that insurance product to the requirements of Colorado insurance laws and regulations.

(Filed and sent from HOUSE Committee; Postponed indefinitely,  03/10/08)

2009 H 1256  by Rep. Acree (R)

Authorizes the commissioner of insurance (commissioner), on behalf of the state, to enter into multistate agreements with other states for the purpose of allowing a health coverage issuer (issuer) doing business in another state to offer, sell, or issue in Colorado an individual health coverage plan (plan) that is regulated by another state. Requires the commissioner, in making the determination to enter into a multistate agreement. The agreement would delineate each state's responsibilities with regard to enforcement of applicable laws, etc. 

The bill is modeled after H.R. 2355 from the 109th Congress, by Congressman Shadegg.

(Filed and sent from HOUSE Committee on APPROPRIATIONS; Postponed indefinitely, 04/03/09)

2010 H 1163 by Rep. Acree (R)

Authorizes the Commissioner of Insurance, on behalf of the state, to enter into multistate agreements with other states for the purpose of allowing a health coverage issuer doing business in another state to offer, sell, or issue in this State, an individual health coverage plan that is regulated by another state; requires the issuer is required to submit to the Commissioner evidence of its financial viability.

(Filed and sent from HOUSE Committee on State, Veterans and Military Affairs; Postponed indefinitely, 1/20/10)

Georgia

2010 S 309 by Sen. Hill Ju (R)

Relates to authorization and general requirements for transaction of insurance, so as to provide for legislative intent; authorizes the purchase of health insurance policies from out-of-state insurers; provides for notices; authorizes the Commissioner of Insurance to conduct certain market conduct and solvency examinations; authorizes the Commissioner of Insurance to adopt certain rules and regulations; provides for appeals of claims.

(Filed and sent to Senate Insurance and Labor Committee; did not pass by end of session, 1/13/10)

2010 S 407 by Sen. Hill Ju (R)

Relates to individual health insurance coverage; provides for legislative intent; provides definitions; authorizes the Commissioner of Insurance to authorize insurers to offer individual medical and surgical health insurance policies in Georgia that have been approved for issuance in selected other States.

(Filed and sent to Senate Insurance and Labor Committee, From House Committee on Insurance: Favorably referred as substituted; did not pass by end of session, 4/21/10)

2010 H 1184 by Rep. Ramsey M (R)

Relates to individual health insurance coverage; authorizes insurers to offer individual accident and sickness insurance policies in Georgia that have been approved for issuance in other States; provides for legislative findings; provides for minimum standards for such policies; provides for certain notices; provides for examinations of such insurers; authorizes the Commissioner of Insurance to adopt rules and regulations.

(Filed and sent to House Insurance Committee; From Senate Committee on Insurance and Labor: Favorably reported; did not pass by end of session, 4/14/10)

2011 H 47 by Ramsey M (R) - see above 

Indiana

2010 H 1152 by Rep. Brown T (R)

Relates to individual out-of-state health insurance; allows an accident and sickness insurer that is licensed in certain other states, and is not licensed in Indiana, to issue or deliver an individual policy of accident and sickness insurance to an individual resident of Indiana without complying with other Indiana insurance law.

(Filed and sent to Committee; did not pass by end of session, 1/16/10)

2011 H 1063 by Rep. Brown T (R)

Relates to individual out of state health insurance; allows an accident and sickness insurer that is licensed in certain other states, and is not licensed in Indiana, to issue or deliver an individual policy of accident and sickness insurance to an individual resident of Indiana without complying with other Indiana Insurance Law.

(To House Committee on Insurance, 1/5/11; did not pass by end of session)

Kentucky

2011 H 494 by Rep. Moore (R)

Would require the state Department of Insurance to authorize out-of-state insurers to offer health benefit plans in Kentucky; authorizing the state to conduct market and solvency examinations of such out-of-state companies; and authorizing the exemption of Kentucky state-mandated health benefits from out-of-state health benefit plans.

(Filed and sent to House Committee on Banking and Insurance, 2/15/11; did not pass by end of session)

Maine

2007 S 540 of 2007 by Sen. Smith (R)

Permits out-of-state health insurers, which are referred to as regional insurers in the bill, to offer their individual or group health plans for sale in this State if certain requirements of Maine law are met, including minimum capital and surplus and reserve, disclosure and reporting and grievance procedures.

(House adopts Majority Committee Report; Ought not to pass, 6/15/07)

2009 H 230 of 2009 by Rep. McKane (R)

Permits out-of-state health insurers, which are referred to as regional insurers in the bill, to offer their individual and group health plans for sale in this State if certain requirements of State law are met; includes minimum capital and surplus and reserve requirements, disclosure and reporting requirements and grievance procedures; defines regional insurers as those insurers authorized to transact individual or group health insurance in certain states.

(Senate adopts Majority Committee Report; Ought not to pass, 5/20/09)

Minnesota

2008 H 3609 by Rep. Emmer (R)

Relates to insurance; enacts the Minnesota Freedom to Buy and Sell Act; provides Minnesota employers and residents with the freedom to buy health coverage approved for sale in any state; provides insurance companies the freedom to sell in this state any health coverage permitted for sale in any other state.

(Filed and sent to House Commerce and Labor Committee; ; did not pass by end of session,2/28/08)

2008 H 4154 by Rep. Paulsen (R)

Permits residents to buy health coverage approved in other states; creates a Physician's Council on Health Care Policy to analyze health coverage mandates; provides a tax credit for persons without access to employer-based coverage.

(Filed and sent to House Health and Human Services Committee; did not pass by end of session, 4/01/08)

2008 S 3824 by Sen. Hann (R)

Permits Minnesota residents to buy health coverage approved in other states; creates a Physicians Council on Health Care Policy to analyze health coverage mandates; provides a tax credit for persons without access to employer-based coverage.

(Filed and sent to Senate Health, Housing and Family Security Committee; did not pass by end of session, 4/07/08)

2008 H 4218 by Rep. Dean (R)

"Health plan companies authorized to issue health coverage in other states may issue health coverage in this state under this section." Sets policy goals for health care reform; would establish health savings accounts for state employees; set spending targets for health and human services programs; establish the Minnesota Care "Care for More Families" program; modify assessments for MinnesotaCare taxes; make changes in the tax treatment of premiums and medical expenditures; increase a tax credit for long-term care insurance; limit punitive damages and attorney fees for certain medical liability claims; and oppose a singe-payer system.

(Filed and sent to House Health and Human Services Committee; did not pass by end of session, 4/30/08)

2008 H 4229 by Rep. Paulsen (R)

"Health plan companies authorized to issue health coverage in other states may issue health coverage in this state under this section." Relates to state health care reform; establishes health savings accounts for state employees; etc.

(Filed and sent to House Health and Human Services Committee; did not pass by end of session, 5/01/08)

Montana

2013 H 280 Rep. Smith (R)

Would allow for providing and selling cross-border insurance by out-of-state insurers, including a streamlined process for out-of-state health insurers to issue policies in Montana, including affecting coverage mandates or essential health benefits, would require payment of premium taxes, and provide rulemaking authority to the insurance commissioner. 

(Passed House and Senate, vetoed by governor, 4/5/2013)

New Hampshire

2010 H 1431 & H 1585 by Sen. Renzullo (R)

Would authorize individuals to purchase health insurance from out-of-state health insurance carriers selected by the insurance commissioner; would grant rulemaking authority to the insurance commissioner for the purposes of the bill.  Health Insurance Policies to be Sold Without Mandates.

(HB 1431 and HB 1585 Failed to pass house, 2/03/10)

2010 S 452 by Sen. Bradley (R)

Authorizes individuals and certain businesses to purchase health insurance from out-of-state insurance companies.

(Filed 1/6/10; passed Senate, 3/3/10; did not pass House, 4/21/10)

2011 H 327 by Rep. Garcia (R)

Would authorize individuals to purchase health insurance from out-of state health insurance carriers selected by the state insurance commissioner; including rule making authority to the insurance commissioner for the purposes of the bill.

(Filed 1/6/11; pending-carryover, 3/9/11; did not pass by end of session)

2011 S 150 by Sen. Bradley (R)

Would authorize individuals and certain businesses to purchase health insurance from out-of-state insurance companies.

(Filed and referred to Senate Committee on Commerce; did not pass by end of session)

North Carolina

2009 S 725 by Sen. Berger (R)

Authorizes insurers licensed to sell health insurance policies in other states to offer health insurance policies in this state.

(Filed and sent to Senate Commerce Committee; did not pass by end of session) 3/24/09)

Oklahoma

2010 S 1290 by Sen. Wilson (D)

Relates to insurance; authorizes certain out-of-state health insurers to transact insurance in this state.

(Filed and sent to Senate Retirement and Insurance Committee; did not pass by end of session, 2/02/10)

2010 S 1346, S 2036 by Sen. Gumm (D)

Relates to insurance; authorizes certain out-of-state insurers to issue certain policies in this state.

(Filed and sent to Senate Retirement and Insurance Committee; did not pass by end of session, 2/02/10)

2011 S 57 by Sen. Brown B (R)

Would create the Health Care Choice Act, authorizing the Insurance Commissioner to negotiate insurance compacts with other states; providing that out-of-state insurers would not be required to offer or provide state-mandated health benefits required by Oklahoma law or regulations in health insurance policies sold to Oklahoma residents. Would require "appropriate protection of Oklahoma consumers by allowing the Commissioner to regulate the market conduct and financial solvency of the non-admitted insurers."

(Filed and sent to Senate Committee on Retirement and Insurance- Do pass, 2/22/11; did not pass by end of session)

Pennsylvania

2009-10 S 508 by Sen. Folmer (R)

Authorizes the purchase of health insurance from out-of-State insurers.

(Filed and sent to Senate Banking and Insurance Committee, 3/02/09; did not pass by end of session)

2011 H 47 by Rep. Baker M (R)

Amends The Insurance Department Act of 1921, provides for the right to purchase health insurance sold in other States. Provides that the Insurance Commissioner shall undertake a review of laws and regulations existing on the effective date of this section pertaining to the business of health insurance in to determine how to allow residents the ability to purchase health insurance products sold in other states by carriers not otherwise subject to subject insurance laws and regulations.

(To House Committee on Insurance, 1/19/11; held in committee as of 8/23/12)

South Carolina

2010 S 986 by Sen. Rose (R)

Would allow the department of insurance to offer health insurance policies from out-of-state insurers; would authorize the director of the department of insurance to conduct market and solvency examinations of out-of-state insurers seeking to offer plans; provides language that must be used in an out-of-state health insurance plan offered to state residents; authorizes the director of the department of insurance to conduct market and solvency examinations of out-of-state insurers seeking to offer plans in this state; provides language that must be present in an out-of-state health insurance plan offered to State residents.

(Filed and sent to Senate Banking and Insurance Committee; Failed Adjourned, 1/12/10)

2011 S 185 by Sen. Rose (R)

Would provide that the Department of Insurance shall authorize out-of-state insurers to offer health insurance policies in the state; authorizing market and solvency examinations of out-of-state insurers seeking to offer plans in the state; exempting policies from South Carolina coverage mandates while requiring inclusion of mandates specified by the insurer's home states.

(Filed and sent to Senate Committee on Banking and Insurance, 1/11/11; did not pass by end of session)

Vermont
 

2010 H 697 by Rep. Komline (R)

Would allow state residents to purchase health insurance policies from insurance companies domiciled in other states, provided certain requirements of Vermont law are met, including minimum capital, surplus, and reserve requirements; disclosure and reporting requirements; and grievance procedures.

(Filed and sent to House Health Care Committee; did not pass by end of session, 2/1/10)

2010 HJR 39 by Rep. Poirier (D)

Non-binding resolution, would urge Congress not to pursue legislation authorizing individuals to purchase health insurance across state lines.

(Filed and sent to House Health Care Committee; Passed Senate; Adopted, 3/31/10)

Virginia

2010 H 31 by Del. Marshall R (R)

Authorizes a foreign health insurer to provide a health benefits plan in the Commonwealth if such insurer meets certain requirements.

(Did not pass committee by end of session, 2/16/10)

West Virginia

2011 H 2801 by Rep. Miller J (R)

Would establish the "Health Care Choice Act," providing for out-of-state health insurers to be authorized to sell products in West Virginia, while not being required to offer or provide state-mandated health benefits required by West Virginia law.

(Introduced and sent to the House Committee on Banking and Insurance, 1/24/11; did not pass by end of session)

2011 S 419 by Sen. Sypolt (R)

Same as H 2801.

(Introduced and sent to the Senate Committee on Health and Human Resources, 2/4/11; did not pass by end of session)

Wisconsin

2009-10 A 540 by Rep. Vukmir (R)

Allows out-of-state insurers to offer health care plans exempt from certain laws; provides that such insurers must be in compliance, have a certificate of authority and offer coverage under any plan offered in the domiciliary state; relates to taxation, assessments to fund the Health Insurance Risk Sharing plan, disclosure of personal medical information, unfair marketing practices, required testing for HIV, portability, contract renewal, plain language, discrimination and group health plans.

(Filed and sent to Assembly Health and Health Care Reform Committee; Failed to pass pursuant to SJR1, 4/28/10)

Background and Opinions on Out-of-State Insurance

(NCSL is not responsible for opinions for or against this or other state legislation or laws)

Kaiser Health News has published a series of short videos tagged "Sounds Like a Good Idea" with an early entry titled Selling Insurance Across State Lines.- It illustrates the difficulties with implementation and claims that no insurance company has offered such a policy yet.  Posted 2016.

  • "The Problem With Selling Health Insurance Across State Lines"  | Read the full article, New York Times, Sept. 1, 2015
  • ACA provides options for smaller states to create multi-state or larger risk pools - adopted/excerpted from Frederick Pilot - June 19, 2013 -(c) Health insurance crisis

Individual and small group health insurance markets will be the ultimate deciders of whether the Affordable Care Act’s market reforms and exchange marketplaces make coverage more affordable and valuable. Their experience over 2014 and 2015 will serve as a litmus test.

A major determinant of premium affordability will be a state’s ability to create large and diverse pools of individuals and small employers that enable payers to spread risk.  Beginning in January, 2014, the ACA established two pools: one comprised of individuals and families and another made up of small employers.  The size of those pools is naturally a function of a given state’s population and the heft of those pools has an impact on premiums.  Large states like California have a natural advantage in creating sizable risk pools better able to spread out the cost of medical care. Accordingly, California has opted to leverage the market power of its population to actively negotiate with health plans over terms of coverage and rates for plans sold on its health exchange marketplace, Covered California.  Smaller, less populated states, however, don’t have the law of large numbers on their side.

The Affordable Care Act has built in mechanisms that would enable smaller states to create larger, more robust risk pools:

Section 1312(c)(3) allows states to combine their individual and small employer markets into a single risk pool;

Section 1331(b)(3)(B) authorizes states to negotiate regional compacts with other states to cover low income individuals not eligible for Medicaid in “standardized health plans.”  (The federal Department of Health and Human Services (HHS) has held off issuing regulations for these plans until at least 2015);

Section 1333(a) provides a mechanism for health insurers and plans to pool risk and sell across state lines via “health care choice compacts” starting in January, 2016.  Two or more states could enter into an agreement under which health plans could be offered in state individual markets, subject to regulation by the state in which the plan was written or issued, provided plans comply with the other states’ rules regarding market conduct, unfair trade practices, network adequacy, and consumer protection standards including standards relating to rating and handling of disputed claims.  (The statute requires HHS issue regulations governing health care choice compacts by July 1, 2013);

In addition to authorizing interstate plans, the ACA also appears to contemplate such plans being marketed in multiple state exchange marketplaces. Section 1311(f) allows state exchanges to combine into “regional or other interstate exchanges,” subject to approval by the participating states and HHS.

  • "Let people buy health insurance out of state" Boston Globe Op-Ed,by Jeff Jacoby, 11/19/2014 | Excerpt below; read full article

"In an age when consumers can purchase almost anything from vendors almost anywhere, government policies protecting insurance companies from interstate competition are indefensible. Lawmakers would be laughed out of office, rightly, if they insisted that the only CDs, cellphones, or ceramics their constituents could buy were those manufactured in the state where they lived. All sorts of financial products are routinely acquired without state borders proving an impenetrable barrier: life insurance, service warranties, stocks and bonds, bank accounts, credit cards. Why should a medical plan be any different?

There is no good reason to deny freedom of choice to Americans when it comes to buying health insurance. Yet licensing rules in virtually every state effectively prevent individual residents from shopping for health plans in any other state. Consequently, there is no national market for health insurance. There are only autonomous state markets, many dominated by near-monopolies that can get away with offering lower quality insurance at ever-higher premiums." 

  • The American Legislative Exchange Council in 2010 approved as model legislation the Health Care Choice Act for States (ALEC members only). The following is ALEC’s advocacy opinion:  "This legislation would allow “for the purchase of health insurance across state lines. Critics say that this kind of competition between states and insurance providers will yield a “race to the bottom” in health care. But with legislation like the Health Care Choice Act for States, consumers may purchase basic policies with as few as 13 mandates (in Idaho) or they can also choose to purchase gold-plated coverage (for example, in Minnesota, which has 62 mandates)."  - For sample model legislation see ALEC’s Health Care Choice Act: American Legislative Exchange Council,12/1/07
  • CAHI: Out-of-State InsuranceAccess to affordable coverage can vary significantly from state to state, depending on state regulation. For example, community rating and guaranteed issue have made policies in the individual market unaffordable except for the wealthiest residents of Maine, Massachusetts, New Jersey and New York. If residents living in states with unaffordable health insurance could purchase policies currently being sold in other states, they too would have access to affordable coverage. Source: 2008 CAHI Report 
  • Report Assesses Selling Insurance Across State Lines.  report from Georgetown University, released September 2012, studied laws in six states—Georgia, Kentucky, Maine, Rhode Island, Washington and Wyoming—that “require, encourage or study the feasibility of allowing the sale of health insurance across state lines or the formation of interstate compacts.” These states are the only ones with such laws on the books.  States retain the power to allow and regulate insurance purchases across state lines. The Patient Protection and Affordable Care Act (PPACA) authorizes states to enter interstate compacts for health care choice and establishes some regulatory parameters. The Secretary of the U.S. Department of Health and Human Services must approve the compacts, but states may enter compacts that are not federally approved.
    "
    Selling Health Insurance Across State Lines: An Assessment of State Laws and Implications for Improving Choice and Affordability of Coverage" | Read full report, 14 pp, PDF
  • Interstate Health Insurance Sales: Myth vs. Reality
    Some have suggested that allowing interstate sales of health insurance policies will make coverage more affordable and available. In reality, interstate sales of insurance will allow insurers to choose their regulator, the very dynamic that led to the financial collapse that has left millions of Americans without jobs. It would also make insurance less available, make insurers less accountable, and prevent regulators from assisting consumers in their states. Source: National Association of Insurance Commissioners. 

Archive: Federal Legislation and Actions Prior to the PPACA Law

Senator John McCain of Arizona proposed the following as a presidential campaign platform:
"Insurance reforms should increase the variety and affordability of insurance coverage available to American families by fostering competition and innovation…Families should be able to purchase health insurance nationwide, across state lines, to maximize their choices, and heighten competition for their business that will eliminate excess overhead, administrative, and excessive compensation costs from the system.
- Source: http://www.johnmccain.com/healthcare/ [accessed 3/6/2008]

Congressman John Shadegg of Arizona. sponsored H.R. 2355 in the 109th Congress (2008-09).
The Health Care Choice Act (H.R. 2355) - Bill would allow residents from any state to purchase health insurance from any state. Also see (H.R. 4460):  This bill did not become law. 

NOTE: Other congressional and federal activity is not itemized in this memo. 

NCPA Opinion Brief:

Excessive State Mandates Increase Costs

Differing regulations and mandates among the states cause wide variations in individual health insurance rates.  The federal McCarran-Ferguson Act, which lets states set their own requirements for coverage, has protected state markets from competition, and led to an assortment of mandates— many of which the insured do not want or need, say Devon Herrick, a senior fellow, and Ariel House, a junior fellow with the National Center for Policy Analysis.
For example:

  • About one-fourth of states require health insurance to cover acupuncture and marriage counseling.
  • More than half of states require coverage for social workers and 60 percent mandate coverage for contraceptives.
  • Seven states require coverage for hairpieces and nine for hearing aids.

In all, there are more than 1,900 state mandates across the United States.  Some legislators contribute to this excess by giving in to special interest demands that insurers cover their specific services and providers.  The result is higher premiums for consumers -- pricing an estimated one-fourth of the uninsured out of the market, say Herrick and House.  

Representative John Shadegg (R-Ariz.) has proposed interstate competition at the  federal level with the Health Care Choice Act (H.R. 4460):

  • The bill would allow consumers to shop for individual insurance on the Internet, over the telephone or through a local agent.
  • Residents of any state would be free to choose among policies from insurers in any state.
  • The policies would be regulated by the insurer's home state.
  • If consumers do not want expensive health plans that pay for benefits they do not need -- such as acupuncture, fertility treatments or hairpieces -- they could buy from insurers in states that do not mandate such benefits.

With interstate competition, consumers would be more likely to find a policy that fits their budget, giving more people access to affordable insurance, say Herrick and House. 

- Source: Devon Herrick and Ariel House, "How to Make Health Insurance Affordable: 2008," National Center for Policy Analysis, Brief Analysis No. 630, September 2008.

States do not have legislation to exempt entire health insurance companies from state regulation.  In part this is because states can assert that mere regulation by the state is not inherently against, as some say, "fostering competition, cost and access issues."

1) An in-state insurance company could choose a business model that offers plans and products that are always exempt from state regulation, for example Medicare PDPs and ERISA self-insured plans for large employers. On paper they would be examples, but in fact this would be really nothing particularly new in law or regulation.

2) The larger federal discussion about Association Health Plans (AHPs), if enacted, could create a larger market.

3) Finally state "deregulation" efforts up to now have been relatively quite modest -. Mandate rollbacks have all been a small percentage change - going from 32 state mandates to 25 (not 0).
- Source: Devon Herrick and Ariel House, "How to Make Health Insurance Affordable: 2008," National Center for Policy Analysis, Brief Analysis No. 630, September 2008.

All of the comments above are general observations and not a legal judgment.

Additional Resources

Rhode Island Law Text

Chapter 099
2008— S 2286 SUBSTITUTE B
Enacted 06/26/08

AN ACT RELATING TO INSURANCE -- HEALTH INSURANCE MARKET EXPANSION 

Introduced By: Senators Sheehan, Perry, Sosnowski, Paiva-Weed, and Walaska 
Date Introduced: February 07, 2008
 

It is enacted by the General Assembly as follows:
    SECTION 1. Sections 27-67-2, 27-67-3 and 27-67-4 of the General Laws in Chapter 27- 67 entitled "The Health Insurance Market Expansion Act" are hereby amended to read as follows:

    27-67-2. Findings. -- The general assembly finds and declares that:

    (1) Rhode Island has a proud history of health insurance companies including health insurance corporations, health maintenance organizations, nonprofit hospital service corporations, and nonprofit medical service corporations doing business in this state;

    (2) Nationally and regionally, insurance corporations, health maintenance organizations, hospital service corporations and medical service corporations, are being consolidated or are departing from some state insurance markets. Rhode Island is one of twelve (12) states with three (3) or fewer health insurers active in the group insurance market;

    (3) One reason cited for the departure of health insurers from the state of Rhode Island is the size of our population. States with larger populations offer a greater opportunity for competition and profit; and

    (4) A regional approach to health insurance that joins Rhode Island's health insurance market with those of the other New England states Massachusetts' regulations would may expand the opportunities for regional insurers to offer insurance in Rhode Island.

    27-67-3. Definitions. -- (1) "Department" means the department of business regulation;

    (2) "Director" means the director of the department of business regulation;

    (3) "Health insurance corporation, health maintenance organization, nonprofit hospital service corporation or nonprofit medical service corporation" "Health insurer", means the health insurance corporation, health maintenance organization, nonprofit hospital service corporation or nonprofit medical service corporation as defined in chapters 1, 18, 19 and 20 of this title.

    27-67-4. Establishment of a regional health insurance market. - (a) The director The health insurance commissioner shall undertake a review of the existing laws and regulations pertaining to the business of health insurance in this state , and in other New England states the commonwealth of Massachusetts . On or before March January 1, 2005 2009 , the director the health insurance commissioner shall submit a report to the general assembly on what changes would be necessary to the laws and/or regulations of Rhode Island in order to meet the goal of enabling health insurers licensed in other New England states to do business in Rhode Island without a separate application for licensure in Rhode Island. The report shall address the extent to which licensure is a barrier to bringing other health insurers into the Rhode Island market. The report shall further address the manner in which licensure can be automatically granted to those insurers licensed in other New England states while still requiring that such insurers otherwise remain bound by the non-licensure related laws and regulations governing the administration of health insurance benefit plans in Rhode Island. recommending needed revisions in Rhode Island law to reconcile with that of Massachusetts. The director shall also delineate a timetable for regulatory change and cooperative agreements with the insurance commissioner in Massachusetts to effectuate a seamless health insurance market incorporating both states. The report shall include an analysis of barriers to the creation of a regional health insurance market and a proposed timeline for implementing all changes that would be needed to establish a regional health insurance market. 

 NOTES

1 - NAIC. Memorandum: "State Insurance Regulator Responsibilities Under Health Reform" (as of March 23, 2010) 

The original version of the memo was compiled in December 2007; material has been added periodically as legislative actions have evolved.