Drawing the Line



Texas Physicians Skeptical of Interstate Health Insurance Sales

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Economics Feature — July 2017

Tex Med. 2017;113(7):45-50.

By Joey Berlin
Associate Editor

Fifty states, 50 insurance authorities, and 50 regulatory environments. If health plans could sell any insurance product anywhere and everywhere in the United States, what would happen? 

No real history exists to act as any sort of guide. When it comes to selling health insurance across state lines, analysis and prognostications are all there are to go on.

Some politicians have a long-standing love affair with the idea, believing it will increase consumer choice and competition among health plans, thereby lowering the cost of coverage. President Donald Trump touted interstate health plan sales on the campaign trail, and he was far from the only 2016 candidate who was in favor of it. With federal health care reform continuing to loom, interstate health insurance is a regular talking point in Washington, DC.

But finding a Texas physician who supports the idea is much harder than finding a national politician who does. In fact, John Carlo, MD, of Dallas, chair of the Texas Medical Association Council on Socioeconomics, calls the prospect of selling health insurance across state lines "scary."

"We already as physicians have challenges with the networks being tiny and hard to participate in — just paperwork, contracts, all the stuff that goes from the administrative components of health plans," said Dr. Carlo, chief executive officer of Prism Health North Texas, the largest nonprofit agency in the area, providing HIV prevention and treatment. "I can't even begin to think about if it moved from just my state health insurance plans, which are now numerous and all over the place, to all of a sudden having to try to figure out the network for a health plan from Iowa."

TMA staff expressed that concern, among others, in a staff report prepared for the Council on Socioeconomics ahead of TexMed 2017. At its annual meeting, TMA's House of Delegates adopted policy calling for minimum standards for interstate health plans if they ever become reality in Texas.

State Sen. Dawn Buckingham, MD (R-Lakeway), says she wants consumers to be protected, but she also supports a competitive marketplace.

"We're all for having more affordable insurance and being able to increase the competition for insurance," Senator Buckingham said. "On the flip side, if you're in Texas and you buy insurance from a company in Rhode Island, what recourse do you have if they don't behave?"

What's Allowed Now

As the New York Times' Upshot blog noted in 2015, health insurance sales across state lines have become a major part of Republican health care reform proposals at the national level. In 2005, .S. Rep. John Shadegg (R-Ariz.) introduced a bill to allow it. All three GOP presidential nominees since then have championed it. Upshot noted that other candidates have as well, including 2016 presidential hopefuls Sens. Ted Cruz (R-Texas) and Marco Rubio (R-Florida) and Wisconsin Gov. Scott Walker.

The version of the GOP's American Health Care Act (AHCA) that passed the House of Representatives in May didn't have any language that further opens the door to interstate health insurance. But as the Senate prepared to look at and potentially modify AHCA, Senator Cruz said allowing health insurance across state lines was a priority for him, according to the Washington Post.

At a speech in Jacksonville, Fla., in March, Vice President Mike Pence said that under the leadership of President Trump, "we're going to give the American people the freedom to buy health insurance across state lines — the way you buy life insurance, the way you buy car insurance." In a fact-checking column, the Post later noted that "all insurance products are sold state by state, overseen by state insurance commissioners."

"You want low cost, but you also want high quality in a perfect world," Senator Buckingham told Texas Medicine. "Our official stance is, we're waiting to see what the details look like and what the language actually is before we can make a full assessment."

Could It Work?

In one way, though, states can already sell health insurance across state lines under the Affordable Care Act. ACA allows two or more states to enter into "health care choice compacts" in which health plans can be offered among those states. Those plans would be subject to the laws and regulations of the state where the plan was written or issued. States have to enact their own laws specifically authorizing interstate compacts.

But even with that option in place, there's no known history to indicate whether health insurance products across state lines would work. As the TMA staff report to the Council on Socioeconomics noted, after passage of ACA, several states passed laws to permit interstate health insurance sales. Connecticut, Maine, New Hampshire, Rhode Island, and Wyoming all allow insurers to sell group coverage across state lines, TMA's research found, and Georgia allows for the interstate sale of non-group coverage.

"However, to date," the report said, "not one insurance company in any of these states has offered a product to sell for this purpose."

Should it ever come to fruition in Texas, physicians on the Council on Socioeconomics are skeptical about the idea. Dr. Carlo tried to play the scenario out in his head, imagining what would happen if a local resident came in for care with a health plan from another state.

"I think the immediate concern I would have is, what happens if that patient needs care I can't provide?" he said. "And then also, let's say you have to refer that patient for a laboratory study, or an imaging study, or you write a prescription. Anything that you do could get tripped up because that health plan does not have an adequate network for pharmacy in the area, or imaging, you name it."

TMA's report noted the physician reluctance that would be inherent in such a situation.

"New, unestablished or unknown health insurance companies that plan to enter a new market created by the opening of state borders have an uphill climb in recruiting physicians for their networks, unless they are willing to reimburse the physicians a greater amount than typical due to less steerage and an unknown administrative capability," the report said. It also noted that physicians would likely be uncomfortable contracting with an unknown insurance company, especially one located in another state, unless they feel assured that they'll receive payment in a timely fashion "with little or no administrative hassles."

Frisco internal medicine physician John Flores, MD, also a member of the Council on Socioeconomics, says it's important that any interstate insurance offerings "aren't simply scaled-down products" that will leave patients with inadequate care.

"We don't let people buy products that are going to harm them if we can help it. And I think this is something else that they've got to realize, that we want to make sure they get quality insurance. The things they're going to be up against — issues maybe not this year, but next year or five years from now — [should be] covered, so that they don't look back and say, 'Why did I buy that policy? Why was I allowed to buy that policy?'"

Many legislators, Dr. Flores noted, think everyone should be able to have catastrophic coverage, as opposed to high-quality insurance that costs more.

"Catastrophic care, for me, is a terrible choice," he said. "Because as a primary care doctor, I know that if I do my job right and I've identified those things that will make people sicker and put them in the hospital, and I control that and I start preventing those things when they're in their 30s and early 40s, they won't need to see the inside of a hospital for decades.

"We want to make sure that with the products that come across, we have the ability to say, 'No, that's not quality, you're not able to sell that.'"

Why No One's Trying It

Health plans, meanwhile, have plenty of reasons of their own for their reluctance to try interstate compacts. 

One problem researchers have noted, according to TMA's report, is that lawmakers and insurance departments generally don't have a consensus on insurance company regulations, how to treat insured populations, which mandates to require, and how to determine an insurance company's appropriate financial health.

Actuarial environments are another big factor. Local issues such as physician availability and population demographics form the basis for health care costs, so "working with other states creates an actuarial uncertainty that most insurance companies are unwilling to risk," TMA's report noted. Setting up networks would be costly for out-of-state insurers, the report said, and they would recoup those costs with higher premiums.

"The challenge for the health plan is all health care is ultimately delivered locally, so it's priced locally," said Graham Thompson, executive director of the Georgia Association of Health Plans (GAHP). Georgia passed its law allowing for interstate sales in 2011.

GAHP's members include Aetna, Blue Cross and Blue Shield, Cigna, Humana, and Kaiser Permanente. Most of the plans GAHP represents are "national in their offerings," so interstate health plan sales are "certainly a tool in the toolbox that they would like to consider," Mr. Thompson said. But because each state insurance department sets its own rules — including product requirements, rates, and access in rural communities — the factors involved make it difficult.

A "chicken-and-egg" concept has been in play when insurance companies have tried to build networks in other states, TMA's report said. Insurance networks must have enough members to allow the health plan to negotiate successful contracts with physicians and other practitioners, but they also have to show would-be insurance buyers that an adequate network exists.

Then, of course, there's regulatory authority. TMA's report wondered whether the regulator of a particular plan would be the state where the insurance company has its permanent residence or the state where the insured person lives. But regardless of the answer to that question, critics of an interstate proposal believe it will be difficult for a policyholder "to get relief from their problems with the insurance company, due to the very nature of the transaction."

"For example, regulators in Texas may find it difficult to effectively intervene on behalf of the insured person when the company that person has purchased from is not licensed in Texas and thus has no fear of meaningful sanctions from the out-of-state regulator," the report said.

In a joint release titled "Interstate Health Insurance Sales: Myth vs. Reality," the National Association of Insurance Commissioners and the Center for Insurance Policy Research tackled what they said were myths about the benefits of interstate health insurance. Rather than giving people access to coverage at lower premiums, the release said, interstate sales would "start a race to the bottom by allowing companies to choose their regulator."

The organizations also claimed interstate sales actually would reduce, rather than increase, consumers' options for health insurance. They say out-of-state insurers would lure healthy people away from existing risk pools, driving those risk pools toward failure as people get sicker and plans become more expensive. And insurance policies would offer less and less coverage, the release said, as "insurers try to design policies that discourage the sickest customers from applying." 

Preparing for a Potential Change

Austin internal medicine physician Tony Aventa, MD, a member of the Council on Socioeconomics, says proposing interstate health insurance sales is another attempt by "very smart people who are trying to come up with some types of solutions to the ever-growing cost of medical insurance and patient premiums." But he likens that problem to the presence of "a lot of different diets out there, and there's no one good solution."

"If we had an insurance company coming out of Georgia that was excited about paying providers for their service, paying for patient procedures, minimal prior authorization challenges, and being able to provide good primary care as well as specialty care, I don't think anybody would be against that," he said. "But I think if there's such a narrow margin with a lot of these insurers, then having to take into account the regulatory processes of different states wouldn't necessarily lower prices. It would probably increase pricing."

At TexMed 2017, the TMA House of Delegates adopted an amended resolution that originated with the Harris County Medical Society on minimum standards for interstate health insurance. It calls for TMA to adopt policy on interstate health insurance products sold in Texas that would support, at a minimum, these standards: 

  • Products with in-network/out-of-network distinctions must meet Texas network adequacy standards;
  • Products must adhere to Texas prompt pay requirements;
  • Each company or HMO must meet Texas' minimum financial solvency standards; and
  • The jurisdiction for all legal challenges would be determined by the location of care. 

The house also directed the Texas delegation to the American Medical Association to take a resolution to the AMA House of Delegates requesting that it establish minimum federal standards that would not "weaken any states' requirements on network adequacy, tort, and other insurance plan regulations." The AMA Annual Meeting of the House of Delegates was scheduled for June 10–14.

"Really, we want to make sure we don't lose what we have in our state in terms of prompt pay and regulations," Dr. Carlo said. "We've fought long and hard to have all of those systems in place, and we like the fact that we have a prompt pay system in the state of Texas that enables us to get paid in a reasonable amount of time.

"If you start doing business with interstate insurance plans, who maintains the regulatory authority? What could we stand to lose?"

To Dr. Aventa, the fact that insurance companies haven't pushed for it in the states that already allow for interstate sales is telling.

"I think it's kind of more of a — some people use the term 'silver bullet' — to try to fix an issue with insurance prices and insurance costs," Dr. Aventa said. "But so far, we haven't seen that [to] be beneficial."

Joey Berlin can be reached by phone at (800) 880-1300, ext. 1393, or (512) 370-1393; by fax at (512) 370-1629; or by email.

SIDEBAR

Questions to Consider 

In February, the National Academy for State Health Policy released a paper titled "Selling Health Insurance Across State Lines: Lessons for States and Questions for Policymakers." The report's questions for policymakers to consider included: 

  • Consumer protections: Will consumers in one state who buy coverage through another state know what, if any, consumer protections are available and what coverage is provided?
  • Potential unintended consequences: If healthy people purchased coverage in a lightly regulated state and sicker people remained in a state's more regulated market, how would that affect premiums and market viability?
  • Evidence that insurers would pursue the opportunity: Could insurers administer robust networks in faraway states?
  • How roles of state and federal regulators would change: What authority would states have to protect consumers who reside in their states?

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