The most popular plank of the GOP's healthcare reform platform may lead to higher premiums for some consumers, the reverse of what Republicans are hoping to achieve, according to a report from a left-leaning think tank.
House Republicans released their long-awaited Obamacare replacement plan earlier this month, and a key part of it would let consumers buy an insurance plan licensed in another state. Presumptive GOP nominee Donald Trump has proposed a similar policy, as have prior GOP nominees John McCain and Mitt Romney.
A report from GOP leadership said it's a step toward "making the insurance market more competitive, and giving you the power to shop broadly for more affordable prices."
Obamacare already allows states to sell plans across state lines, but only if plans meet broad consumer protection guidelines. Those protections would presumably go away, since Obamacare would be repealed as a result of the GOP's healthcare plan, according to a briefing from the think tank Urban Institute that was released Wednesday.
That means buyers should beware if Obamacare is gone and people are still allowed to shop in other states. If Obamacare provisions dealing with the sale of insurance along state lines are eliminated, it could lead to insurers flocking to states that have "little regulation of nongroup insurance markets."
Healthy people who are in a state that requires more sharing of healthcare risk between the healthy and sick would want to get a plan in another state that has less sharing. While this could lead to healthy people paying less for insurance, prices for sicker people would rise, the study predicted.
"Sales across state lines would reduce premiums for those who are healthy at a given time while increasing premiums and reducing access to coverage for those with current or past health problems," it said.
It added that another quandary is how to enforce state regulations against companies located in other states.
"Say an insurer violated the laws or regulations of the state of sale," the briefing said. "Insurance regulators in the purchaser's state would undoubtedly find it difficult, if not impossible, to enforce their laws on an insurer that may not even be licensed to sell coverage in their state."
Insurance regulators in the state where the insurer resides might not have enough money or incentive to protect residents in another state too, the briefing noted.
The study noted that the brief only focuses on insurance plans for small groups or insurance sold on the individual market, which is for people who don't get plans through their job.
According to the Urban Institute, there is already an option in the Affordable Care Act that lets insurers sell across state lines, although it does require these plans have broad consumer protections, which includes requiring insurers to take in patients with pre-existing conditions.
Insurers in one state can sell plans to people in another state, but only when those states have entered into a healthcare choice compact. Under those agreements, a healthcare plan sold in another state abides by the laws and regulations of the state where it was written or issued, as opposed to the state where it is purchased.
"However, under the ACA, plans sold must still comply with some of the laws of the purchaser's state, including those on market conduct, unfair trade practices, network adequacy and consumer protection (such as rules related to premium rating)," according to the Urban Institute.
So far, no state has agreed to a healthcare compact, and no state has taken advantage of Obamacare's option. That's because the insurance regulation creates a steep hill for out-of-state insurers to climb to ensure their rates compete with established insurers.
An in-state insurer has negotiated with local doctors and hospitals for years, while an out-of-state insurer doesn't have such a history.
"Out-of-state plans have no market share and thus no bargaining power," the institute noted. "The net result would be higher premiums than existing competitors, not lower."