Crossing State Lines: Crossing the Line?

In the search for reducing healthcare costs, some public policymakers have suggested allowing consumers to purchase health insurance across state lines. Theoretically, this would allow families to shop around for the best insurance deal, even if they aren’t a resident of the state in which the insurance is sold or regulated.

In general, increased access to choices drives down prices and increases competition; given the proliferation of online shopping for all kinds of other products, you might indeed find a great deal in another state. Even some state-based financial products, like 529 college savings plans, are marketed across state lines, allowing flexibility and consumer choice.

However, I’m opposed to selling health insurance plans across state lines: out-of-state insurance plans (including ERISA plans) can thumb their noses at a state’s consumer protection laws.

Here’s an example: Tennessee mandates that newborns be covered from the moment of birth to 30 days of age without any special action required on the part of the baby’s family (TCA 56-7-2301.) This is a good idea: moms shouldn’t have to call their insurance company’s 800 number in between contractions to ensure her baby gets added to her policy. The thirty-day rule gives families a short grace period to get their paperwork in order.

However, Tennessee law doesn’t apply to all infants born in Tennessee. Families who are employed by a big-box corporation headquartered in another state often have an insurance plan domiciled in that state. If mom and dad have, say, Blue Cross Blue Shield of Alabama — the company does not have to follow the 30-day rule of newborn care. They’re shocked to find out after their child is born (and too late to make other arrangements) that they owe hundreds or thousands of dollars to doctors and hospitals. It’s even more depressing when you realize these costs are incurred during a period when moms are taking time off work and family incomes are tight as a result.

Tennessee law also requires insurance companies to be transparent in their dealings with doctors: to pay clean claims promptly (56-32-126); to credential doctors fairly (56-7-1001), and to be up front about what doctors will be paid for their services ahead of time (56-7-1013). These laws protect employers, patients, and doctors from unfair insurance company tactics – but again, only as long as the company is an in-state company.

Our practice already spends a lot of resources policing our own state’s insurance companies. If they violate regulations, we can appeal to our state’s Department of Commerce and Insurance, our state’s legislature, and our state’s judiciary, all of whom are accountable to voters for their actions. Yet insurance companies in other states can blissfully ignore directives from our state, even though they’re insuring our state’s citizens. At last count, there were over 1300 out-of-state insurers during business in Tennessee; until consumer protections are more consistent, we need less of this, not more.

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