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Selling Health Insurance Across State Lines: What's the Big Deal?

By Meredith Ledford on February 25th, 2010
Health Insurance

As the health reform debate heats up again, there seems to be particular concern surrounding health insurance policies sold across state lines.

Currently, you can only purchase a policy from insurers licensed in the state in which you live. But it makes sense to be able to purchase a health insurance policy sold in any other state--right? Surprisingly, the answer might be no.

As with many health insurance concepts, broadening the medical insurance market across state lines is a complicated issue.

More Choices Doesn't Necessarily Mean Better Coverage

In health care, more choices aren't always a good thing. For example, research regarding prescription drug coverage shows that people prefer two or three choices--four or more choices often leads to confusion.

There is also a concern that consumers may be attracted to the least comprehensive policy offered because it is the cheapest. Meaning, you could buy an out-of-state policy that doesn't mandate coverage of a certain service you need, such as diabetic supplies, and not realize that there is a gap in coverage until it is too late.

Your Rights May Be Limited Out-of-State

Each state regulates its own health insurance market, and has its own consumer protections and appeals process for disputes or denied claims. However, if a company is out-of-state, you may have a difficult time resolving a dispute.

Risk-Sharing May Be a Thing of the Past

Insurance agents selling policies across state lines have the potential to market policies to younger, healthier individuals. If you are older, and perhaps sicker, you could face ever-rising rates--or face being turned down all together--because there would be fewer healthy individuals to share the risk of claims for the health insurance coverage you prefer.

Location Matters

Like other goods and services, the cost of health care varies by location--meaning health care services in New York may be more expensive than health care services in South Carolina. For this reason, health insurance purchased in one state might not cover as much of the cost of care in a more expensive state.

Compare Quotes

It is still unclear if health insurance may be sold across state lines. In the meantime, be sure to get a free health insurance quote to compare policies available in your state.

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