The Purchase of Insurance Across State Lines in the Individual Insurance Market

Proposals to allow the purchase of insurance across state lines (PASL) have gained some support in recent years. Health insurers have traditionally been allowed to sell a policy only within the state that approved and regulates that particular policy. PASL would allow insurers to sell a policy approved in one state to people residing in any state. 
 
Any federal legislation to enact PASL in an individual insurance market would have to address two main legal considerations:

  1. The McCarran-Ferguson Act, which allows the states to retain their regulatory authority over insurance, and 
  2. A constitutional prohibition against the commandeering of state officials by the federal government. 

This paper outlines these obstacles and potential solutions and concludes that as long as the legislation is thoughtfully drafted (as described in the paper), there is no significant legal or Constitutional barrier to enacting PASL. Additionally, the concepts discussed here may be relevant to any federal health reform legislation involving regulation of health insurance or the use of state officials.    

Keywords: Policy reform ideas, Access, Legal issues/reforms, Federalism, Regulation, Administrative cost/structure, Competition, Cost containment, Cost effectiveness, Plan competition, Premiums, Reinsurance, Risk adjustment, Subsidies, Play-or-pay, Financing