Selling three ways across state lines

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.

14 replies
  1. 1
    Jerzy Russian says:

    I thought “three ways” would be related to the hookers and blow theme. Boy am I disappointed.

  2. 2

    @Jerzy Russian: I try, I really do try to know my audience :)

  3. 3
    lgerard says:

    This “solution” has never made sense to me. The first thing you are buying is entree into the local health care system.
    There are pretty substantial cost differentials between states, partly because of the differences in the cost of living, partly because of the greater investment in facilities, education and training. Health care in Massachusetts is more expensive then in Mississippi, it is also light years better.
    It is like saying you can solve the housing crisis in New York City by letting people buy houses in Arkansas.

  4. 4
    Ned F says:

    Thanks for that, I knew that Insurance companies already sell across state lines the way Blue Cross, Aetna, Humana and others sell all over the nation, but I didn’t really understand what the republican fetish of “selling across state lines” (sounds so simple) actually meant. But to do this, wouldn’t states have to relinquish their own regulatory control? What if you have a state with a large population of older, sicker and poorer citizens, would anyone really sell to them?

  5. 5

    Possibly stupid question: what’s in it for the state that becomes the regulator of choice? Delaware benefits because companies that incorporate there have to pay money for the privilege; South Dakota actually got banks to relocate there. Would insurance company headquarters actually have to move to Mississippi or wherever to take advantage of their regulations, or could anyone play? Because if companies don’t have to do something beneficial for the state where they’re regulated, it sounds like something the state would want to avoid: they have to pay a bunch of money for extra people to review applications but don’t get any tangible benefit for it.

  6. 6

    @Roger Moore: 2 major benefits —
    a) Some number of jobs would be relocated there
    b) plenty of opportunity for state legislators to either personally become consultants to the insurers or recommend family/friends as consultants to insurers

  7. 7
    tisalaska says:

    Alaska has the highest healthcare costs in the country. We currently have ONE insurance provider in the state for the ACA and extremely limited options for private plans. Luckily a majority of residents are employee covered, have medicare (although its tougher and tougher to find a doctor that takes it), are covered by medicaid expansion for which our governor had to override the GOP legislature and a law suit or has federal native health benefits. Being a red state we hear the screaming of the echo chamber about selling across state lines but it’s very unlikely to help a damn thing. You can’t get anything for the same price here that you do in any other state here. Population, geography and good old american greed of the medical profession, hospitals, insurance companies will keep prices up (starting orthopedic surgeon $1.3M a year) until they break the ceiling or we get national healthcare which died the last election. Luckily climate change hasn’t melted all the ice flows to crawl on but that option will be gone soon too. I miss Obama.

  8. 8
    FlyingToaster (Tablet) says:

    @tisalaska: You’re at the end of the pipe, and not densely/heavily populated. There’s no way outside of federalism to reduce that overhead.

    I’m in Massachusetts, and we get the benefits (from Romneycare and then Obamacare) that up to now have slowed price rises and begun to drive some efficiency-based better practices. We’re still highly priced because a huge number of our physicians are medical-school affiliated (all of my family’s doctors are clinical instructors), but we reap the benefits by having fewer return visits and better chronic condition management.

    Massachusetts won’t give up our health system. We’ll spend the next four years in court.

  9. 9
    MobiusKlein says:

    @Roger Moore: 3) cheaper to buy off one legislative body than 50?

  10. 10
    tisalaska says:

    @FlyingToaster (Tablet): Exactly right about the population. It is the reality that we have and will for many years be dependent on the feds which makes it really annoying to hear the “federal over-reach” mantra so often. The lack of affordable health care is probably what will drive me out after more than 40 years here along with many others when the reality hits them.

  11. 11
    jerri says:

    I worked for major corp ins co for almost 25 years. They administered ins for large corp clients with employees in multiple states. Tracking and applying the various state laws was reduced to simple programing. The reason none of the major ins co did not move into Ga or Ma….everyone who could afford ins was insurred. Ins co only operate in markets where they have developed the networks for their PPO/HMO products. Thus, the cost of developing a network was not going to generate the kind of profit they require.

  12. 12
    laura says:

    Just my own opinion, but I have come to believe that the desire to sell across state lines was that it much easier to sell gross and inferior plans, and almost impossible for a consumer to get access to care.
    I’ve never seen any focus on venue or choice of laws and so am convinced that a consumer would have zero opportunity to effectively challenge the limitations of an out of state plan.
    I’d be very glad to be proved wrong in this assumption.

  13. 13

    @laura: No, you’re right. The Republican plan is to encourage a race to the bottom.

  14. 14
    laura says:

    @David Anderson: I usually like being right. This just sucks and reinforces my belief that the desire to sell shit to people who believe they’re making an informed choice with their scarce health care dollars only to find out they’d be better off just burning that cash in the gutter makes me want to shiv a Tom McClintock.

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