By Ronald E. Bachman
A multi-state market attractive to insurers selling new, lower-cost comprehensive products is a market-based tool that states can embrace without the heavy hand of federal intervention. In Georgia, Governor Sonny Perdue is showing the way on how to implement such cross-state sales through individual health insurance. States can voluntarily enter into reciprocity agreements with like-minded states.
The cross-state concept has been accepted by Republicans and Democrats as a good starting point for national bipartisan reform. Studies have shown that up to 12 million Americans would become insured with effective national legislation for cross-state selling. While Congress debates, however, Governor Perdue innovates. His push for free-market insurance reform is embodied in bills making their way through Georgia’s House and Senate. The slight differences will likely be ironed out when the two bills are merged.
Georgia’s legislation has two major components. First, it promotes a unilateral acceptance of comprehensive individual health policies from other states. As a show of good faith, Georgia would accept individual health policies approved in other selected states without the requirement that they accept policies approved here. There are, of course, minimum standards and consumer protections governing the acceptance of such policies.
Second, the real power and value of the cross-state selling concept is to establish a coalition of states with a combined large consumer base that will encourage insurers to develop and bring new, low-cost and affordable plans to Georgia. Currently, the 50 state-specific state filing processes take insurers years and millions of dollars in development costs, administrative mandates, filing requirements and fees.
Georgia is not usually in the top tier of states for early release of newly developed products. States with larger populations get priority. Being part of an expanded, multi-state market covering a population of 30 million to 40 million will enhance the state’s ranking and attraction as a key market for existing and new insurers. Georgia’s proposed cross-state legislation directs the state Insurance Commissioner to take the lead in creating a multi-state coalition with reciprocal health insurance policy approvals.
There may be concern that the legislation would circumvent existing coverage mandates. Both proposals would require that policies provide comprehensive medical and surgical coverage; both specifically exclude limited-benefit plans and restrictive policies. Advocates for cancer screenings, for example, would see policies with the Georgia-required cancer benefits sold in coalition states, and those buyers would get cancer screenings provided by all policies sold under Georgia law.
Of course, arguments on mandated benefits go both ways: The National Business Group on Health believes that the Georgia mandate for colorectal cancer screenings is a cost-effective mandate; the Council for Affordable Health Insurance cited 41 state-mandated benefits in Georgia in 2008, some of which can increase costs.
There is no doubt, however, that free and open markets always benefit the consumer by offering more choice and lower costs. The competition also inspires insurers to improve their product and services. However well-intentioned and unintended, a few carriers dominate the individual insurance market in Georgia.
Governor Perdue’s efforts will produce a win-win-win. Insurers win by lowering their overhead expenses for product development and gaining access to more customers. Employer plans benefit when cost-shifting is lowered because more of the previously uninsured will have access to affordable coverage. Hospitals and doctors will have fewer bad debts and less uncompensated care. Most of all, Georgians win by being able to choose from among more options of affordable, comprehensive and portable individual insurance.
This is the year that Georgia can blaze a trail in the Southeast and across the nation and Georgians can get a head start in consumer choice, through the cross-state/multi-state concepts with full and adequate consumer protections and broad-based comprehensive coverage.
Ronald E. Bachman FSA, MAAA, is a Senior Fellow at the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. He is also a Senior Fellow at the Center for Health Transformation, an organization founded by former U.S. House Speaker Newt Gingrich, and a Senior Fellow at the National Center for Policy Analysis (NCPA). Nothing written here is to be construed as necessarily reflecting the views of the Foundation, the Center for Health Transformation or the NCPA, or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.
© Georgia Public Policy Foundation (March 12, 2010). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.