If I live in Oklahoma and my health insurance policy costs $597 but a similar policy in Arkansas costs only $379, why can't I buy the out-of-state plan?
That consumer lament is at the core of a health policy idea being batted around today--once again.
President Donald Trump signed an executive order in October resurrecting "Association Health Plans" to promote competition in health care markets and to limit what he calls "excessive consolidation throughout the health care system." The aim of these plans is to make it easier for trade groups and small businesses to band together--especially across state lines--to negotiate better and less expensive health plans from insurance companies. By increasing competition, supporters say, these plans will help push costs down, give consumers more choice and improve access to care.
The executive order states these plans will help small businesses overcome the competitive disadvantage they have with large employers who can spread risk and administrative costs across more employees. Association health plans will also allow more small businesses to avoid "many of the PPACA's costly requirements," it says.
The idea isn't new, however. It originated at least 30 years ago. And some argue the plans are no solution. "They failed in droves because many were undercapitalized," says Mark Hall, a professor of law and public health at Wake Forest University. "These earlier association plans had a history of becoming what the U.S. Labor Department termed 'scam artists.' The Government Accountability Office reported that they were 'bogus entities that have exploited employers and individuals seeking' more affordable insurance policies," Hall says.
States Regulate Insurance
States have a precedent as the primary regulators of insurance and guardians of consumers' rights. The first self-insured association health plans marketed in the 1980s, however, sometimes evaded states' consumer regulations. In 1992, at least two dozen states reported association plans had committed "fraud, embezzlement or other criminal law violations," Hall says.
By 2000, association plans had become much less significant, an experiment gone wrong, many said.
More than 40 states had enacted new "patient protection" statutes and mandated coverage for individuals and small employers, but these efforts had limited effect on keeping down costs and equalizing insurance rates. In fact, the patient protection requirements differed from state to state...