KAILUA-KONA — A proposed plan allowing insurance to be sold across state lines could, depending on who you ask, increase competition and drive down premiums. Or, others say, it could create a “race to the bottom” and undermine local laws that regulate Hawaii’s market.
The proposal isn’t included in the recently introduced American Health Care Act, part of Congressional Republicans’ efforts to replace the current Affordable Care Act.
But erasing state lines when it comes to insurance sales is still very much in the cards.
On March 7, President Donald Trump tweeted that “getting rid of state lines, which will promote competition, will be in phase 2 &3 of healthcare rollout.” In a speech outlining the plan, Republican House Speaker Paul Ryan said interstate insurance purchases, along with all “the bills that we want to pass” that can’t go through reconciliation, is phase 3 of the plan.
Supporters of the recently introduced bill, or “phase 1,” want to pass that bill through reconciliation, a legislative process that can’t be filibustered.
Because the specifics of the policy haven’t been officially proposed in Congress, exactly what lawmakers’ idea of “getting rid of state lines” entails is uncertain.
The U.S. Department of Health and Human Services did not respond to West Hawaii Today’s inquiries about what effects getting rid of state lines for insurance purchases could have on markets.
But in speaking about it, proponents have repeatedly argued that doing so would increase competition and therefore drive down costs for consumers. Republican Texas Sen. Ted Cruz, in a column for Politico, wrote that opening up cross-state insurance sales “would create a true 50-state marketplace, driving down costs for everyone.”
Tom Price, secretary of Health and Human Services, likewise brought up the issue when speaking to reporters during a March 7 press briefing.
“The American people understand the commonsense nature of purchasing across state lines, and it increases competition,” he said.
Joe Antos, an economist with the American Enterprise Institute, said increasing competition at the health care system’s delivery level — physicians, hospitals and other providers — can’t be ignored in favor of simply focusing on insurance coverage.
“The problem with health insurance is that the cost of health insurance largely is driven by the cost of health care,” he said; people who live in costly places, are still going to be subject to those high costs regardless of where their insurance comes from.
So even if someone has a cheaper, less comprehensive policy from a state with low regulations, they’ll still face Hawaii prices at the doctor’s office.
“You need competition among insurers, but you also need competition among providers,” said Antos. “I think that’s ultimately our problem.”
Antos said there’s been a lot of consolidation within health care delivery in areas around the country, with not just vertical integration — hospitals buying up physician practices and expanding out to nursing facilities — but also horizontal integration, with large hospitals buying other hospitals.
“So you have a situation,” he said, “where … at least in the big cities, you don’t see as much competition at the provider level,” leading to situations where one big hospital with a monopoly over health services can demand very high prices from insurers.
Impact on local law?
One big unknown is whether a change in federal law would affect local regulations of policies in Hawaii, such as the state’s Prepaid Health Care Act, which has been a big factor in the state’s health care system since 1975. That law sets minimum coverage standards for workers by requiring most businesses to offer health insurance to employees who work more than 20 hours a week for four or more consecutive weeks.
The law dramatically reduced the uninsured rate in the state, according to a 1993 article published in The Journal of the American Medical Association.
In 1971, four years before the law’s implementation, 11.7 percent of the state’s population lacked hospital coverage and 17.2 percent lacked physician coverage.
Although the article states that the number of people insured because of the new law wasn’t directly measured, it cited one anecdotal report that said at least 46,000 people were immediately covered.
The Kaiser Family Foundation, looking at a time-frame of 2015, put Hawaii’s uninsured rate at 5 percent during 2015, the third lowest in the nation behind Massachusetts and Washington D.C.
The president of the state’s largest insurer previously told West Hawaii Today that superseding the local law could be calamitous for the state.
“Anything that would impact our Prepaid Health Care Law would be a disaster for Hawaii, we think,” HMSA president and chief operating officer Michael Stollar said in January.
The law isn’t perfect, he said at the time, “but it has a history of ensuring broad and very deep coverage. And I think that is one of the reasons Hawaii has such a healthy population.”
This past week, Stollar noted that Hawaii is consistently ranked as one of the healthiest — if not the healthiest — states in the country.
At the end of last year, the United Health Foundation named Hawaii the healthiest state in the country for the fifth consecutive year, according to USATODAY. It specifically identified the low percentage of the population without insurance as one of the state’s strengths.
Superseding Hawaii’s law, Stollar said, could seriously damage the state’s ability to maintain a healthy public.
It’s a case that can be illustrated, for example, by someone who is prediabetic. That person, Stollar said, needs regular checkups, programs and physician visits — all of which can come from a plan that goes beyond catastrophic coverage.
But if that person has less-than-comprehensive coverage, access to that sort of care could be hampered by high-deductibles or unavailability, meaning that person won’t go to the doctor or keep his or her prediabetes under control, making an already bad situation worse.
Now, prediabetes turns into diabetes, which brings with it a slate of other health issues.
“So you had a very inexpensive health plan, but your health deteriorated,” he said. “So now all you have coverage for is when you have that heart attack or that stroke — wonderful, you have coverage but you could’ve avoided all of that.”
Stollar said that while there still isn’t any specific proposal about selling across state lines in actual legislation, they are seeing “a lot of emphasis on the ability of states to make their own policy.”
One issue though that they are watching is effects current proposals might have on Medicaid and the state’s QUEST program.
In Hawaii, the state’s fee-for-service Medicaid program generally covers people over age 65 or are blind or disabled, according to the program’s website. QUEST provides coverage through plans made available to eligible residents.
Stollar said they’re currently working with the state’s Med-QUEST division to determine how cuts to Medicaid could affect residents.
“Some of those people will lose with cutbacks,” he said. “The issue will be how many people lose coverage and what if any are the benefit cutbacks for those that remain.”
Because they don’t know what the exact cutbacks or mechanism of funding will be, he added, there’s “still lots to try and figure out and get information about.”
Lawmakers from the Aloha State made clear their intentions to protect the state’s current laws.
Democratic Sen. Brian Schatz told West Hawaii Today that even though getting rid of state lines is not in the current bill, “it’s still a bad idea.”
“Every state is different and every state regulates health insurance differently,” he said. “Some states like Hawaii have strong laws to protect consumers and hold insurance companies accountable for the coverage they provide, while others don’t.”
Schatz said allowing purchases across state lines could undermine that law’s “strong protections.”
It would “create a race to the bottom,” he added, by encouraging insurers to move to states with loose regulations and flood markets in every state with “weak plans that offer less care.”
“Hawaii has the best health care standards in the nation,” he added. “We should not let weaker, out-of-state insurers threaten those standards.”
Rep. Tulsi Gabbard said she supports the proposal of allowing the sale of insurance policies across state lines while also implementing guidelines to avoid that “race to the bottom.”
“Our national health care system is broken, and it’s harming those who need it most,” she said.
Allowing interstate policy sales could improve choices for consumers and increase competition, thereby making insurance more affordable, Gabbard said.
Additionally though, she said she supports implementing guidelines that “ensure that the quality and scope of services are not increasingly sacrificed in a ‘race to the bottom’ that results in inadequate coverage and care for our people.”