When I worked at UPMC Health Plan, our core business area was Western Pennsylvania with a slow amorphous growth to the eastern portion of the state. We were a Pennsylvania focused company but we would sell across state lines. Some years we sold Medicare Advantage in West Virginia and Ohio and other years, we would only be a Pennsylvania company. How does this happen and how do insurers sell across state lines?
UPMC filed its plans for regulatory approval in Pennsylvania. Commercial plans needed a different (and far lighter) approval process than Medicare plans which needed a different approval process than Exchange plans which needed a different process than Medicaid and CHIP. The state regulators would come back with questions and comments for our initial filings. We would respond to those questions and comments with more data, tweaked networks, clearer policy statements and whatever else was needed. After a few months of back and forth, our plans would be approved and someone who got paid a lot more than me would make the decision as to what we would sell.
The same process applied to Ohio and West Virginia. Unique plan submissions would be prepared, we would promise that our claim system could handle the unique to the state rules in Ohio and/or West Virginia and that we could produce the reports that they wanted to see on a timely and accurate basis. Their regulators would usually come back and ask for an update or a tweak, we would supply it to them and then we would go to market. West Virginia had a particular interest in primary care provider network adequacy so I had to prep a complex quarterly report for them.
In order to sell a plan in a different state, the claims payment system would have to be tweaked to allow for exceptions to be enforced (either additional benefits that had to be paid or benefits that Pennsylvania required and another state did not require at the same level.) The vast majority of the time, this was merely a matter of updating a set of reference tables. Occasionally, it meant doing a comprehensive code development cycle.
This is how insurers currently sell across state lines. They comply with the regulatory structure of each state that they sell in even if all of the work is done at a single central location. There are three other models for selling across states lines.
In the ACA there is the Section 1333 interstate compact model. States can choose other states that they share a common regulatory framework. They’ll form an opt-in compact so a plan that is approved in State A can sell in State B using State A’s regulations. This allows states to choose trusted regulators. Massachusetts might believe Rhode Island or Vermont offers sufficiently comparable regulation and Rhode Island might believe Massachusetts and Vermont are good partners and Vermont might believe that Massachusetts and Rhode Island are tight enough to have a common interest in slightly expanding market scope and minimizing insurer regulatory burden. But they all agree that Mississippi has a different intent that they don’t want for their state’s residents.
So far no state has gone this route.
Maine and Georgia have both passed laws that allow out of state carriers to use their out of state regulatory registration as the Georgia or Maine license. These laws have been around long enough that insurers would be able to get good data on the local markets.
No insurer has gone this route.
The final pathway is the opposite of the voluntary interstate regulatory framework of the 1333 ACA method. It is the traditional Republican plan of allowing a single state regulator be the de facto national regulator like South Dakota was the national regulator for credit cards pre-CARD ACT and Delaware is the national corporate law regulator. Here any plan that is qualified to sell in one state would be qualified to sell in all states. It would only need to meet a single state’s benefit requirements, network requirements and complaints and grievance requirements. It would be a race to the bottom.
Those are the three alternative methods of selling across state lines from the status quo. The first two operational examples have little uptake while the last is massively disruptive.