The Purchase of Insurance across State Lines in the Individual Market

See Health08.org, Kaiser Family Foundation, 2008 Presidential Candidate Health Care Proposals: Side-by-Side Summary, available at <http://pdf.kff.org/health08/compare_5.pdf> (last visited January 9, 2009).

Health Care Choice Act of 2005, H.R. 2355, 109th Cong. (2005); Health Care Choice Act of 2007, H.R. 4460, 110th Cong. (2007). Hereafter both bills are referred to as “the Choice Act.” The bills were also introduced in companion form by Senator DeMint (R-SC) as S. 1015, 109th Cong. (2005); and S. 2477, 110th Cong. (2007).

Other proposed regulatory ideas include the concept of Optional Federal Chartering (OFC), which would keep state regulation in place but allow an insurer to choose to be regulated under a single federal charter instead of on a state-by-state basis. An example is the National Insurance Act of 2007, S. 40, 110th Cong. (2007), introduced by Sens. Sununu (R-NH) and Johnson (D-SD). The bill was also introduced in companion form H.R.3200, 110th Cong. (2007) by Reps. Bean (D-IL) and Royce (R-CA). To date, the major OFC proposals have not included medical insurance.

See, e.g., Matthews M. , Opinion, “McCain Is Right On Interstate Health Insurance,” Wall Street Journal, October 1, 2008, available at <http://online.wsj.com/article/SB122282743245193057.html> (last visited June 29, 2009); Herbert B. , “McCain's Radical Agenda,” New York Times, September 16, 2008, at A29, available at <http://www.nytimes.com/2008/09/16/opinion/16herbert.html> (last visited June 29, 2009); see also, The Health Care Choice Act: Hearing on H.R. 2335 before the Subcommittee on Health of the House Committee on Energy and Commerce, 109th Cong. (2005) (witness testimony), available at <http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_house_hearings&docid=f:22986.pdf> (last visited June 29, 2009).

15 U.S.C. §§ 1011–1015 (2008).

See Survey, Health Insurance Coverage Status and Type of Coverage by Selected Characteristics: 2007, Annual Social and Economic Supplement, Current Population Survey, U.S. Census Bureau (2008), available at <http://pubdb3.census.gov/macro/032008/health/h01_001.htm> (last visited June 29, 2009).

See U.S. Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: 2007, August 2008, at 19, available at <http://www.census.gov/prod/2008pubs/p60-235.pdf> (last visited June 29, 2009).

Congressional Budget Office Cost Estimate, Health Care Choice Act of 2005, H.R. 2355, September 12, 2005, available at <http://www.cbo.gov/ftpdocs/66xx/doc6639/hr2355.pdf> (last visited June 29, 2009).

See Survey, “Individual Health Insurance 2006–2007: A Comprehensive Survey of Premiums, Availability, and Benefits,” America's Health Insurance Plans Center for Policy and Research, December 2007, at 8–9, available at <www.ahipresearch.org/pdfs/Individual_Market_Survey_December_2007.pdf> (last visited June 29, 2009).

It should be noted that average premiums in the individual market are normally lower than in the group market, probably as a result of higher cost-sharing provisions in individual policies. See, e.g., The Kaiser Family Foundation & Health Research and Educational Trust, Employer Health Benefits 2007 Annual Survey, 2007, at 1, available at <http://www.kff.org/insurance/7672/upload/76723.pdf> (reporting the average annual total premium cost for individual coverage in an employer-sponsored plan as $4,479) (last visited June 29, 2009).

See, e.g., Matthews , supra note 4.

See Miller T. , “Geographic Monopolies vs. Choice and Competition in Health Insurance Regulation: Starting a Market Driven Race to the Top,” presentation at American Enterprise Institute for Public Policy Research, July 31, 2008, available at <http://www.aei.org/docLib/20080731_MillerPresentation.pdf> (last visited June 29, 2009).

Health Care Choice Act of 2005: Hearing on H.R. 2355 before the Subcommittee on Health of the H. Comm. on Energy and Commerce, 109th Cong. (2005).

Kofman M. Pollitz K. , “Health Insurance Regulation by States and the Federal Government: A Review of Current Approaches and Proposals for Change,” Health Policy Institute, Georgetown University, April 2006, at 9, available at <http://www.pbs.org/now/politics/Healthinsurancereportfinalkofmanpollitz.pdf> (last visited January 29, 2009).

Id.

See e.g., the Health Care Choice Act, H.R. 2355, Hearing before Subcommittee on Health of the H. Comm. on Energy and Commerce, 109th Cong. (June 25, 2008) (statement of Merrill Matthews, Director, Council for Affordable Health Insurance, supra note 72, at 27, available at <http://archives.energycommerce.house.gov/reparchives/108/Hearings/06282005hearing1564/Matthews.pdf> (last visited June 29, 2009).

Id., at 17–18.

Id., at 26.

See Congressional Budget Office Cost Estimate, supra note 8, at 5.

15 U.S.C. §§ 1011–1015 (2008).

322 U.S. 533 (1944).

Property and casualty insurers (P/C insurers) have traditionally employed this antitrust exception to pool information through rating bureaus in order to forecast claims trend and market analysis, with the goal of reducing administrative costs and promoting a more competitive insurance market. These bureaus are sanctioned under state law to comply with state antitrust laws in all states in which they operate.

15 U.S.C. § 1012 (2008).

15 U.S.C. § 1011 (2008) (emphasis added); see, e.g., Ophthalmic Mut. Ins. Co. v. Musser, 143 F.3d 1062 (7th Cir. 1998).

29 U.S.C. §§ 1001 et seq (2008).

As a result, specific state laws, even if they have a connection with or reference to an ERISA welfare benefit plan have been held to avoid preemption, including state laws mandating minimum health benefits. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985). State laws requiring independent physician review of medical necessity disputes; see Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002). State “any willing provider” laws requiring health plans to admit “any willing provider” (physicians, hospitals, and/or pharmacists) willing to accept the health plan's terms and conditions; see Ky. Ass'n of Health Plans v. Miller, 538 U.S. 329 (2003).

See Pollitz K. , “Early Experience with ‘New Federalism’ in Health Insurance Regulation,” Health Affairs 19 (July/August 2000): 7–22, at 8, calling the passage of HIPAA “a new era of federal/state partnership” which “created certain minimum protections for consumers in federally and state-regulated health plans, including self-funded employer plans, while maintaining states' ability to enforce their laws that exceed federal protections.”

HIPAA requires guaranteed renewability of coverage in the individual market of the same policy with the same insurers, unless there is fraud, nonpayment of premiums, and other specific events. Thus, an insurer must renew an individual's policy regardless of health status unless the individual chooses to drop it. 42 U.S.C. § 300gg-42 (2008).

42 U.S.C. § 300gg-41 (2008).

United State General Accounting Office, Health, Education and Human Services Division, Letter to the Hon. Nancy L. Johnson, Chairman, Committee on Ways and Means, House and Representatives, Implementation of HIPAA: State-Designed Mechanisms for Group-to-Individual Portability, Alternative Mechanisms Under HIPPA, GAO/HEHS-98-161R (May 20, 1998), available at <http://archive.gao.gov/paprpdf2/160522.pdf> (last visited June 29, 2009).

See Small Employer and Individual Health Insurance Availability Model Act (National Association of Insurance Commissioners 2001).

The five states are Maine, Massachusetts, New Jersey, New York, and Vermont. See Me. Rev. Stat. Tit. 24A, § 2736-C; Mass. Gen Laws Ch. 176J, § 4; N.J. Stat. Ann. § 17B:27A- 4; N.Y. Ins. Law §§ 3231 and 4317; Vt. Stat. Ann. Tit. 8, § 4080b(d). All of these statutes need to include a year.

Federal mandates include the following: minimum post-delivery hospital stays; certain post-mastectomy treatment and care, including reconstruction, and mental health parity requirements. See Employee Retirement and Income Security Act, 29 U.S.C. §§ 1185, 1185a, 1185b (2008); Public Health Service Act, 42 U.S.C. §§ 300gg-4, 300gg-5, and 300gg-6 (2008).

Bunce V. C. Wieske J. P. , Council for Affordable Health Insurance, “Health Insurance Mandates in the States 2008,” available at <http://www.cahi.org/cahi_contents/resources/pdf/HealthInsuranceMandates2008.pdf> (last visited June 29, 2009).

America's Health Insurance Plans, Coverage Mandates, available at <http://www.ahip.org/content/default.aspx?bc=39|341|315> (last visited January 13, 2009).

Board of Directors, America's Health Insurance Plans, A Commitment to Improve Health Care Quality, Access, and Affordability, March 2004, available at <http://www.ahip.org/content/default.aspx?docid=428> (last visited June 29, 2009).

See Commonwealth of Massachusetts, Division of Health Care Finance and Policy, Comprehensive Review of Mandated Benefits in Massachusetts, Report to the Legislature, July 7, 2008, available at <http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/mandates/comp_rev_mand_benefits.pdf> (last visited June 29, 2009).

The Supreme Court in Rush Prudential v. Moran, 536 U.S. 355 (2002), held that state external review laws were “saved” from preemption and could apply to ERISA plans without supplementing or supplanting ERISA's exclusive civil enforcement scheme if they allowed the independent reviewer power to construe terms such as “medical necessity” only, rather than free-ranging power to construe contract terms, on an analogy to a medical second-opinion.

America's Health Insurance Plans Center for Policy and Research, An Update on State External Review Programs, 2006, July 2008, at 3, available at <http://www.ahipresearch.org/PDFs/StateExternalReviewReport.pdf> (last visited June 29, 2009).

States where external review laws apply to medical necessity determinations include the following: Illinois, Iowa, Louisiana, Maryland, Minnesota, Missouri, Montana, New Hampshire, North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, Utah, and the District of Columbia. Id.

These states include the following: Alaska, Arkansas, California, Connecticut, Florida, Kansas, Kentucky, Maine, Maryland, Massachusetts, Nevada, New York, North Carolina, Oregon, South Carolina, Tennessee, Vermont, Virginia, West Virginia, and Wisconsin. Id.

Id., at 5.

The Health Care Choice Act of 2005, H.R. 2355, 109th Cong. (2005); and The Health Care Choice Act of 2007, H.R. 4460, 110th Cong. (2007).

S.1015, 109th Congress (2005); and S. 2477, 110th Congress (2007).

The Choice Act was ultimately reported favorably out of Committee, but received no further action in the full House.

For a discussion of the McCain health care proposal, see Moffit R. E. Owcharenko N. , The Heritage Foundation, “The McCain Health Care Plan: More Power to Families,” Backgrounder, no. 2198 (October 15, 2008), available at <http://www.heritage.org/Research/Healthcare/upload/bg_2198.pdf> (last visited June 29, 2009).

State PASL legislation has been building momentum. See, e.g., H.B. 1327, 66th Gen. Assem., 2d Reg. Sess. (Colo. 2008) (allowing a carrier that is not subject to Colorado law to sell a policy to a Colorado resident if the policy is lawfully sold in another state; the out-of-state policy would be subject to Colorado's prompt pay law and the state's claim denial and internal appeals requirements); S.B. 1190, 190th Gen. Assem. (Pa. 2007) (providing that a state resident has the right to purchase health insurance from a foreign insurer, regardless of whether the foreign insurer is licensed or in compliance with state laws); H.B. 214, 2007–2008 Legis. Sess. (Vt. 2007) (allowing Vermont residents to purchase health insurance policies sold in other states, provided certain financial and consumer protection requirements of Vermont law are met, such as surplus and reserve requirements, disclosure and reporting requirements, and grievance procedures).

H.B. 7493, Gen. Assem., 2008 Legis. Sess. (R.I. 2008); and S.B. 2286, Gen. Assem., 2008 Legis. Sess. (R.I. 2008).

See, e.g., Interstate Insurance Product Compact website (currently limited in scope to life insurance, annuities, long-term care, and disability insurance), available at <http://www.insurancecompact.org> (last visited June 29, 2009).

15 U.S.C. § 1012(b) (2009).

517 U.S. 25 (1995).

“Express preemption” exists when the statute contains explicit congressional intent to preempt state law. See Boggs v. Boggs, 520 U.S. 833, 841 (1997) (Employee Retirement Income Security Act of 1974 § 514, 29 U.S.C. § 1144(a) (2006), as express preemption clause).

“Field preemption” exists when the statute contains a schema of federal regulation “so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.” Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947).

479 U.S. 806 (1986).

See Barnett Bank, supra note 51, at 38. (Is note 51 correct?)

322 U.S. 533, at 552 (1944); see also U.S. v. International Business Machines Corp., 517 U.S. 843, 877 (1996) (noting that the Court “abandoned long ago the notion that insurance is not commerce and so beyond the power of Congress to regulate.”)

See, e.g., Gonzales v. Raich, 545 U.S. 1 (2005) (holding that Commerce Clause authority includes the power to prohibit the local cultivation and use of marijuana in compliance with California law); Perez v. United States, 402 U.S. 146 (1971) (holding that Supreme Court “case law firmly establishes Congress' power to regulate purely local activities that are part of an economic ‘class of activities’ that have a substantial effect on interstate commerce.”)

See, id. (Raich), at 22 (“In assessing the scope of Congress' authority under the Commerce Clause, we stress that the task before us is a modest one. We need not determine whether respondents' activities, taken in the aggregate, substantially affect interstate commerce in fact, but only whether a ‘rational basis’ exists for so concluding.”)

See Health Care Choice Act of 2007, supra note 2, at § 3.

Quote from Senator McCain on “The Official Website of John McCain's 2008 Campaign for President”; site is currently inactive.

Kofman M. Pollitz K. , “Health Insurance Regulation by States and the Federal Government: A Review of Current Approaches and Proposals for Change,” Health Policy Institute, Georgetown University, April 2006, at 9, available at <http://www.pbs.org/now/politics/Healthinsurancereportfinalkofmanpollitz.pdf> (last visited June 29, 2009).

Printz v. United States, 521 U.S. 898, 935 (1997).

U.S. Constitution, amend. 10.

Westmoreland T. , The Law of Health Reform: Ten Legal Issues, O'Neill Institute for National and Global Health Law, May 30, 2008, available at <http://www.law.georgetown.edu/oneillinstitute/documents/reform_top10.pdf> (last visited June 29, 2009).

Id.

Id.

See supra note 62.

New York v. United States, 505 U.S. 144 (1992).

See Printz, supra note 62, at 935.

Id., at 936.

528 U.S. 141, 150 (2000).

See Minnesota ex rel. Hatch v. U.S., 102 F. Supp. 2d 1115, 1120–22 (D. Minn. 2000).

See, e.g., Printz, supra note 62, at 935 (O'Connor, J., concurring).

South Dakota v. Dole, 483 U.S. 203 (1987). See, e.g., Printz, supra note 62, at 935 (O'Connor, J., concurring); Kansas v. U.S., 214 F.3d 1196, 1202–03 (10th Cir. 2000) (distinguishing state requirements resulting from acceptance of federal welfare funds from the situation described in Printz).

National Association of State Comprehensive Health Insurance Plans, Comprehensive Health Insurance for High-Risk Individuals: A State-by-State Analysis, 22d ed. (2007/2008): At 11.

See, e.g., Miller T. , “A Regulatory Bypass Operation,” Cato Journal, 22 no. 1 (Spring/Summer 2002): 85–102; Hyman D. , “Health Insurance: Market Failure or Government Failure,” Illinois Law and Economics Research Papers Series, Research Paper No. LE08–003 (2008), available at <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1087830>; Parente S. Feldman R. Abraham J. , and Xu Y. , Consumer Response to a National Marketplace for Individual Insurance, Final Report, Carlson School of Management, University of Minnesota (June 28, 2008), available at <www.aei.org/docLib/20080730_National_Marketpla.pdf>.

See Congressional Budget Office Cost Estimate, supra note 8, at 5.