Tuesday, December 8, 2009

Selling Insurance Across State Lines--Now the Dems Are Pushing the Idea--Why It Won't Work

A favorite Republican health care soundbite calls for making the health insurance system more efficient by letting health plans sell across state lines.

Now Democrats are jumping on that idea. The latest public option idea would have the Office of Personnel Management (OPM) contract with national not-for-profit health plans and introduce those plans into local insurance exchanges--that would be set up under the proposed House and Senate bills. Supposedly, these outside health plans would bring a new dimension of competition to local markets.

OK, here's a health insurance 101 question. Besides buying health insurance to cover expensive health care (pure insurance), what is the most important thing you buy when you buy a health insurance policy?

Answer: The provider network. Without an in-network discount from an HMO or PPO you might pay 30% or 40% more for your health care--in higher premiums or higher out-of-pocket costs. You definitely never want to pay retail at your doctor's office or hospital.

Beyond the discounts, agreements between providers and health plans also establish managed care protocols that save lots of money and keep the cost of insurance down.

By definition an out-of-state health plan--one that does not operate in a given state--does not have a local network. If it did, it would already be doing business there.

Today there are reports that the new Democratic public plan idea would have OPM contract with Blue Cross plans, or say Kaiser Permanente, to provide another not-for-profit health insurance option to compete with local plans in the local insurance exchange.

Think about that for a minute.

So, Kaiser Permanente, which operates with highly organized and capital intensive networks in its markets, would now come into a state where it has no networks and offer a plan? Blue Cross of Nebraska might offer an individual and small group plan in Rhode Island? Tufts Health Plan out of Boston might offer a plan in Oregon?

Based upon what network of providers in those places where they do not now do business?

Where do they get these screwball ideas?

It is not just the Democrats.

Republicans have been suggesting for some time that health plans not now doing business in a state should be allowed to cross state lines and offer policies there. Other than gaming one state's mandates and other regulations by domiciling in a less restrictive state, just what value would a health plan that did not have a network in a particular state bring to that state?

Again, an out-of-state health plan by definition isn't going to have a local provider network and will have health care costs that are a lot more expensive than a local plan that does have discounts and managed care protocols negotiated with providers.

Well, at least neither side--Democrats or Republicans--have the upper hand on this issue.


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