What is the logic for not allowing purchase of health insurance across state lines? Who is responsible for this situation? And why did they do it?
It started in 1851 when states began regulating insurance:
The "logic" was basically deciding to regulate it as there was no consistent regulation prior. Once one state started it, the rest followed suit.
An insurance company can operate across state lines (for example, many large health care insurers sell plans in multiple states), but any policy they sell in a particular state currently has to adhere to that state's regulatory requirements. You could say insurance can be purchased across state lines but specific plans can not.
So, why can't one buy a plan for a separate state?
The regulatory answer is that they aren't regulated by the state you are in. That's the red-tape issue.
But there's a much larger issue and that is health care, as a whole, is heavily regulated, so there are divisions along state lines there as well. And how insurance plans work in the US is that every procedure is negotiated with every doctor, hospital, pharmacy, etc. They are incredibly complex financial negotiations.
The reality is that even offering more plans across state lines wouldn't necessarily 'fix' problems. It could improve things, but there's no guarantee.
The biggest obstacle at the moment to making insurance options more competitive and ultimately benefiting the consumer is the opaqueness of the options. There simply is no way for a US citizen on a private health care plan to actually know what they are getting prior to the procedures actually being performed and, in hindsight, billed to the particular plan.
While there are federal health care laws that must be followed, many of the rules, regulations and laws regarding health care, itself, let alone health care financing differ from state to state:
- Liability limitations ($ amounts)
- Liability protections (what you can be sued for)
- Standards of guilt/innocence/liability in court cases
- Licensing requirements and restrictions
- Treatments that are legal
etc etc etc.
Then you have insurance, which has it's own set of rules, regulations, licensing, requirements, restrictions, based on state laws.
For larger insurers, you CAN essentially cross state lines and buy from a larger insurance company, but they have separate, state-level entities to deal with the specifics of each state.
Allowing a singular entity to sell across state lines would essentially mean that the state with the least restrictions/protections/cost would get to overrule the states where they are doing business. If you say "No, they'd still have to follow the laws of the individual states," then you'd have a patchwork of state level operations, which is what exists now.
The "selling across state lines" argument is a phony one, that essentially is an attempt for companies to try and avoid state-level regulations. It's much cheaper if you only have to buy a handful of legislators and one governor in a single, small state (why do you think so many credit card bank operations are HQ'd just in Delaware or Nevada) to make "regulations" that allow a company to do whatever they want.
Regardless of state laws about state regulations, there is a problem that supporters of selling across state lines haven't thought about.
Insurance companies won't do it.
Because hospital systems won't cross state lines. And Insurance products are tied to the contracts they establish with the hospitals. So in order for this to work, politicians need to realize that they would have to free hospitals from state regulations as well and then force hospitals to negotiate with insurance companies that have no leverage in that area. Currently there is a rather bad miscommunication between the exaggeration and hype of the subject and insurance companies.
Aetna CEO recently called the concept outdated saying that if consumers where to buy a policy in another state, they would have to travel to that state for coverage due to the way product is tied to regional hospital networks. http://video.cnbc.com/gallery/?video=3000589179
It isn't to say that nation wide policies don't exist. They do. Companies that self-insure their employees typically have nation wide plans. The disadvantage of this is such companies often have to pay more for individual health expenses and they can require people to travel hours for some medical care. Walmart is an example of a company that frequently self-insures many of its employees. And for some surgeries a Walmart employee may have to travel several hours to find a covered surgical center. The upside to such plans is there is very little overhead administrative costs. Often self-insured companies come out ahead financially.