Buying Health Insurance Across State Lines

Tamsen Butler
Question
Learn about health care reform.

Each state regulates the way insurance companies do business and which products they can offer to consumers, so you may wonder if buying health insurance across state lines is possible. There is a lot more to this topic than you may realize.

State Regulations

Insurance companies wanting to offer products to consumers within certain states must acquire a license and adhere to the regulations of that state. Some state regulations are so prohibitive that some insurance companies choose to not offer services within that state, or they only offer limited products within the state.

It is the policies that are not offered within certain states that prompt debate among consumers. Many people wonder why there are health insurance policies offered to residents of other states that cost less and offer better coverage, and why these same products may not be available in every state.

While it is possible to purchase health insurance from a company that is not headquartered within your state, it is not generally possible to purchase a health insurance policy that is not offered in your state at all.

Not Available In All States

When shopping around for the best health insurance policy, many consumers immediately notice the disclaimer of "Not available in all states." This can be an incredibly frustrating disclosure to stumble upon after having found an insurance policy that otherwise appears perfect.

You will not be able to talk an insurance company into issuing a health insurance policy to you that the insurance company is not licensed to issue in your state. Insurance companies are well aware of the regulations in each state, and do not want to encounter the costly penalty fees and other potential punishment associated with trying to do business in a state where the insurer is not legally licensed to sell a specific product.

The Debate

The topic of buying health insurance across state lines has been hotly debated. There are both potential pros and cons on both sides of the argument. Although all of the debate is theoretical, there is merit to both views.

The Pros

The obvious benefits of granting consumers the ability to purchase health insurance outside of their own state is that this grants them the ability to do a widespread search for the very best policy at the lowest cost. The cost of living varies from state to state, as does the average cost of health insurance premiums. Grant a consumer living in a notoriously expensive state the ability to purchase a health insurance policy anywhere, and that consumer will more than likely be able to find a much less expensive health insurance policy issued in a state that does not have a very high cost of living.

For some consumers, the ability to purchase a health insurance policy across state lines will not merely save a little money; it will result in profound savings. The variety of policies available will also increase exponentially, allowing consumers more variety when deciding on what coverage they want.

The Cons

Opening up all health insurance policies to everyone regardless of the state they reside in may result in some economic problems, both for the states with high premiums and the states with the lowest premiums.

For the states with the lowest health insurance premiums, a sudden influx of new policyholders may force the premiums upward, hurting the citizens of that state. For the states with the highest health insurance premiums, a sudden loss in income from citizens taking their health insurance business out of state can be detrimental to the state's economy. Opponents also fear that health insurance companies might start limiting the policies they offer to people with health problems because the companies will start to court healthy policyholders from all over the country.

The Future of Buying Health Insurance Across State Lines

This issue will likely continue to be debated, especially as health care reform remains a hot topic. To allow residents to purchase health insurance across state lines would involve major changes to insurance policy, so this is certainly not a change that will occur swiftly, if at all.

Buying Health Insurance Across State Lines