Health insurance across state lines, coercion or consent

As of last week, states could form interstate health insurance compacts to allow for a single state to approve insurance that can be sold in all compact member states.  This is part of PPACA, as Charles Gaba has been digging into this week.  Kimberly Leonard of US News and World Report has details:

The little-known provision, found in section 1333 of the roughly 1,000-page Affordable Care Act, allows for states to create “health care choice compacts” permitting insurers to sell policies to consumers in any state participating in the compact, as long as they follow specific rules. Five states – Georgia, Kentucky, Maine, Rhode Island and Wyoming – already have enacted interstate compact statutes,according to the National Conference of State Legislatures.

An interstate compact is a voluntary agreement between states that has the approval of Congress. The most common compact type according to WIkipedia is some type of watershed and littoral water management compact such as the Port Authority of New York and New Jersey or the Great Lakes Commission.

There could be several potential compacts.  Massachusetts may decide that they are happy with the regulatory approaches of Rhode Island, New York, California and New Mexico and those states could form a compact.  On the other hand, Texas could join with Oklahoma and Louisiana for a de minimis compact.  The key aspect is that each particular state could choose what the minimal regulatory level would be appropriate for the home state.  It is a compact of consent.

This is markedly different than the Republican idea of selling insurance across state lines.  In that idea, the federal government would proclaim that a license in a single state is a license for all states.  The insurance industry would become an isomorph of the credit card industry.  The state with the weakest and most easily bought regulatory structure would have 98% of the viable insurance companies headquartered there within nine months of the law being passed.

It would be a race to the bottom for coverage requirements.  Currently, some states require insurers to cover a single wig for people who are receiving chemotherapy.  That requirement would still be in effect for any policy initially approved in that state, but no policy would be approved there.  Instead, a Plains state would have not have a wig coverage requirement.  More commonly, states vary in the required length of state after a non-complicated vaginal birth.  Some states may require 24 hours, other states require 36 hours, while other states require 2 midnights and a few states require 48 hours in the hospital after delivery.  Under the Republican schema, all these requirements would remain on the books, but the only plans offered across the nation would have either no maternal stay requirements or the shortest possible maternal stay requirement.

It is coercive federalism that sets the national standard at the lowest and least protective level as determined by a single state which is easily bought out.  Massachusetts would be regulated by Mississippi or South Dakota or Wyoming or Delaware.