Memes have two sides

Hank, I think cross-state buying is an idea whose time has come. You make good points in your post today on this subject. Yes, the underlying problem is the cost of medical care; and yes, the idea of cross-state purchase of insurance does nothing about this underlying cost. But - - our health care system does contain government-imposed distortions to the insurance markets that cause medical insurance to be more expensive than it needs to be. I think the prohibition against cross-state purchase of insurance is one of those distortions and I think that allowing interstate sales would reduce insurance premiums.

Here's why I think so.

In the example of Georgia vs. Manhattan, the Georgia insurers would simply set premiums for New York buyers based on the cost of medical care in New York. Georgia BCBS for example can easily obtain the needed cost data for New York from New York BCBS - both are Wellpoint companies. And Georgia BCBS actuaries are perfectly capable of using that data to set prices for New York residents (Keep in mind that medical costs aren't the same in every part of New York, just as they aren't the same in every part of Georgia. Setting different premiums for areas where the medical costs differ is the same actuarial exercise whether within one state, or across state lines.) So there is no reason Georgia buyers would be affected. Note that this is not different from current pricing within the state of Georgia, where premiums vary based on where a person lives within the state e.g., Atlanta vs. Macon. Conclusion: Georgians wouldn't pay more for their insurance, just because New Yorkers were permitted to buy policies issued in Georgia.

However . . . real savings would occur for New Yorkers because they would no longer be forced to buy policies that include all the mandates required by the state of New York. They could choose instead to buy a policy issued in another state – in this case, Georgia, that includes only the Georgia mandates. The result is a lesser premium for New Yorkers - even if their premium is still greater than Georgia residents pay because medical cost might be higher in New York.

So escaping the New York mandates would result in a real premium savings for New York buyers with no impact on Georgia buyers.

There’s more. Issuing additional policies in Georgia would increase premiums written in Georgia. That increases Georgia’s premium tax revenue and reduces New York’s. The increased premium volume would also benefit Georgia companies and agents who, presented with a national market would have every incentive to figure out which states offer the most attractive opportunities, and design plans that would be most attractive to the residents of those states. Perhaps then -voila - we will also have state legislatures actually forced to compete with one another on insurance mandates. (I'm not terribly optimistic that competition among legislatures would actually happen. A similar situation is present with state taxes and yet high-tax states such as Ct and Ma and NY seem oblivious to the net population exodus to other states). Still, allowing cross-state purchase of insurance would not be a bad thing. In fact, it would be a very good thing for anyone who lives in a "high-mandate" state.