The Patient Protection and Affordable Care Act (PACA) includes provisions that allow the purchasing of health insurance across state lines. However, these provisions are structured somewhat differently than earlier proposals. The differences are intended to provide states with more consumer protections from having those regulations undermined by cross state sales of insurance. The most important differences between the PPACA compact provisions and earlier interstate sales provisions are that the PPACA requires all states to comply with a minimum level of insurance regulation, and cross state sales would not be permitted in a state unless that state affirmatively joined a compact with one or more other states.
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The Patient Protection and Affordable Care Act (PPACA) does include provisions that will allow the purchasing of health insurance across state lines. However, these provisions are structured somewhat differently than earlier proposals advocated by some members of Congress and Senator John McCain during his 2008 presidential run. The differences are intended to protect states with more consumer protections from having those regulations undermined by cross-state sales of health insurance.
Under the earlier proposals, insurers could sell coverage to residents of any state, with the insurer complying with insurance regulations in the state in which the company was based, instead of the regulations of the state in which the consumer lived. Several researchers analyzed these proposals within the context in which they had been proposed—that is, without other insurance market reforms or significant subsidization of coverage for the low-income population.
All three analyses reached similar conclusions. State laws vary considerably in how strictly they regulate the premium rating and rules of issue governing the sale of health insurance. As a result, many insurers could, and likely would, base their companies in the least regulatory states. In this way, insurers could continue to medically underwrite coverage and deny applicants based on health status, even in states that otherwise require guaranteed issue and community rating. Insurers could sell policies with limited covered benefits, even in states that mandate the sale of more comprehensive coverage. Any insurer in a state maintaining regulations requiring broader pooling of health risk would attract the higher-cost enrollees unable to obtain coverage elsewhere, compromising the viability of those insurance pools and leading states into a regulatory race to the bottom. State insurance regulations could be expected to be eliminated to a great degree, and states would eradicate many, if not all, state benefit mandates. In addition, as Kofman and Pollitz pointed out, legislation that prohibits states from enforcing their own laws and relies upon states to enforce laws in other states raises a host of questions regarding constitutionality and practical enforcement.
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