“Under President Trump’s leadership, we’re actually also going to finally allow Americans to purchase health insurance across state lines — the way you buy life insurance, the way you buy car insurance.”
— Vice President Pence, speech in Louisville, March 12, 2017

“Who could be against allowing insurance to be sold over state lines? It’s something that you can do your car insurance.”
— White House press secretary Sean Spicer, news briefing, March 14

“We’re going to give the American people the freedom to buy health insurance across state lines — the way you buy life insurance, the way you buy car insurance.”
— Pence, speech in Jacksonville, Fla., March 18

“President Trump’s vision is very simple . . . allowing the American people to purchase health insurance across state lines the way you buy life insurance, the way you buy car insurance.”
— Pence, speech to the Club for Growth, West Palm Beach, Fla., March 19

One of President Trump’s signature promises is to allow the purchase of health insurance across state lines. This was supposed to be tackled in “phase three” of the administration’s plan to repeal and replace the Affordable Care Act, now in doubt because of the failure on Friday to advance the “phase one” bill in the House.

Many experts are skeptical about whether buying health insurance across state lines would actually work — more on that below — but we were interested in claims made by administration officials such as Vice President Pence and White House press secretary Sean Spicer that this would be similar to buying life insurance and car insurance.

The way they talk about it, we have to wonder whether administration officials even understand how insurance is bought and sold in the United States.

The Facts

In 1945, Congress passed the McCarran-Ferguson Act, which exempted insurance companies from aspects of federal antitrust law and ensured that individual states remained the primary regulators of insurance. That had been the case since 1868, but a Supreme Court ruling had placed the state role in doubt until Congress reaffirmed it. So insurance companies must be licensed in each state.

In other words, this standard exists with all insurance products. Generally, there are two types of insurance companies — life and health insurance companies and property and casualty insurance companies. The latter sell products such as homeowners’ insurance and automobile insurance.

There are obviously big differences among the products. Car insurance is strictly limited to a period of time, and rates depend on the value of vehicle, the use of the vehicle, the driver’s record and so forth. Health insurance, by contrast, is heavily regulated at the federal level (especially after the Affordable Care Act mandated that all plans cover a group of essential benefits). And health insurance companies are required to set up provider networks and negotiate prices.

But the bottom line is that all insurance products are sold state by state, overseen by state insurance commissioners. You may be able to get Geico car insurance in both Virginia and California, but the products may be different, depending on state regulations. Similarly, you may buy Aetna health insurance policies in each state, but again they are subject to state regulations and obviously have different provider networks.

Essentially, if Trump were to push through a plan to sell health insurance across state lines, he would need to repeal all or part of the McCarran-Ferguson Act. But as we mentioned, that act applies to all insurance products.

“Insurance is regulated at the state level in accordance with the McCarran-Ferguson Act, which has been in place for 64 years,” said Lynne McChristian, executive director of Florida State University’s Center for Risk Management Education and Research. “It is not accurate to say that car insurance and life insurance are regulated across state lines. In fact, it is false.”

She said that many people may not realize that when they call an insurer that has an out-of-state location, they are talking to someone who is licensed to contract business in the prospective customer’s state of residence. If you move to a different state, you might stick with the same company, but your policy is updated to reflect the laws of the new state — and your premiums are likely to change.

Five states have passed laws that have either allowed interstate health-insurance sales or encouraged the concept of forming a compact, allowing for products to be sold in a group of states. But no insurance company has shown much interest, in part because entering a new health insurance market is time-consuming and difficult.

An official at the National Association of Insurance Commissioners said the concept was especially unworkable for health insurance because different states may mandate different coverage, leading to fewer people getting insured, reducing insurance options for consumers and preventing regulators from protecting consumers in their states.

For example, one state might require coverage of autism, while another would not. If insurance could be bought across state lines, people seeking autism coverage would flock to the product with coverage. That in turn would make the risk pool unbalanced and force premiums up. Moreover, when people have complaints about insurance coverage today, they can seek redress from a state insurance commissioner. That would be more difficult if someone bought a product from another state.

The ACA, in section 1333, actually encouraged the formation of such regional compacts after January 2016, although as far as we can tell, no regulatory guidance was issued by the Obama administration. Chris Jennings, a health-care consultant who worked for presidents Bill Clinton and Barack Obama, says the provision — which allows two or more states to form a regional health-insurance compact — was inserted by a Republican lawmaker during Senate markups of the ACA. But he believes the Obama administration did not promote the option “because it was a low priority and there was no evidence it would make a positive difference addressing the myriad of issues they thought they were dealing with.”

Now that the ACA remains intact, however, Health and Human Services Secretary Tom Price could issue guidance on the provision and the administration could claim to have begun to fulfill a campaign promise without even passing a law in Congress.

We sought an explanation from Pence’s office and from the White House communications staff but did not get a response.

The Pinocchio Test

Car and life insurance currently is sold exactly the same way as health insurance — regulated by state insurance regulators, with policies tailored to the rules and laws set by the state. So it is false to suggest there is any difference.

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“We’re going to give the American people the freedom to buy health insurance across state lines — the way you buy life insurance, the way you buy car insurance.”
in a speech in Jacksonville, Fla.
Saturday, March 18, 2017