What if health insurance companies were allowed to sell across state lines?

1May/119

What if health insurance companies were allowed to sell across state lines?

Question by Jimbo: What if health insurance companies were allowed to sell across state lines?
My friend who is an MBA said that if this were implemented, all the insurance companies would just move to South Dakota, because they have the weakest laws, and then they would be able to sell insurance to everyone and ignore all the other states' laws. Is that true?

Best answer:

Answer by Lois Griffin
That would be a very good thing because it can enable people to buy insurance at a cheaper price from other states.

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regular american
May 1st, 2011 - 02:01

it’s a free country. isn’t it?
9-12'er
May 1st, 2011 - 02:04

Which laws is he worried about?

And why not?
Bethy
May 1st, 2011 - 02:55

Perhaps some of those State’s to keep their insurance companies would deregulate some of their more draconian laws?
coldfuse
May 1st, 2011 - 03:11

What your friend is missing is a good economice education. They cannot ignore is the marketplace and competitive pressures on prices.

Suppose you want to buy a car. Do you go to one dealer and check out his list price, or do you bargain with several dealers – maybe even one in a nearby city, or online – to get the lowest possible price?
Lex
May 1st, 2011 - 03:25

However, they would have to compete with all the other companies. That means they would be under more pressure to make better offers at better prices, even if they do move to South Dakota. Also they’d have to worry about retention of current customers. But of course that’s all in theory. Your friend could very well be right, and we’d be seeing a decline in quality. I personally don’t see how it could possibly hurt opening the borders.

I worked in auto insurance, and will be returning to that career. But there were seriously some insurance companies that had a basic monopoly in some states. Who’s to challenge them?
whiteflame55
May 1st, 2011 - 03:46

Well, it definitely wouldn’t work. Not only is that already basically implemented in the status quo, but if it were to be implemented in totality, we would see little if any change. The major health insurance companies have already divided this country, that’s not changing anytime soon. As for them moving to South Dakota, I sincerely doubt that. They’ve got too much infrastructure in the places that they currently are, and the incentive is too low.
yellow.45
May 1st, 2011 - 03:48

that is what corporations do. if there is a way they will find it.
Saraph!
May 1st, 2011 - 04:08

Just like the Credit Card companies did.
Suzy
May 1st, 2011 - 04:53

It wouldn’t matter where they were located, once they had to compete with each other for customers, premium costs would go down and they would increase what and who they covered. I could see them having special riders on their policies to cover different things like abortion insurance so they wouldn’t have to cover everyone for thing they didn’t need like home and car insurance do. We could still require them all to take people with pre existing conditions and not allow them to drop people with catastrophic illnesses. The free market is what will make this work. Right now the insurance companies have protected groups of customers. By forcing people to only buy insurance in their own state, the insurance companies are able to charge high prices and limit coverage.