Interstate Health Insurance Bill Lets Insurers Pick Their Regulator, Exempting Them from State Mandates

This bill, titled the Health Coverage Across State Lines Act, creates a new system for how individual health insurance policies are regulated when they are sold across state lines. Essentially, it allows an insurer to choose one state—the “Primary State”—whose laws will govern the policy’s issuance, sales, rating, and renewal, even when that policy is sold in a “Secondary State.” The goal is to encourage competition and potentially lower costs by letting insurers standardize products nationwide.

The Regulatory Road Trip: Who’s Steering?

Think of this as an insurance company getting to pick the state with the easiest driving laws and then using those rules everywhere else. The core of the bill (Section 4) says that the Primary State’s “Covered Laws” apply everywhere. Crucially, this means that if you live in a Secondary State that mandates specific, expensive benefits—like extensive mental health coverage or specific maternity care—the insurer selling you an out-of-state policy can skip those mandates if the Primary State doesn't require them. For consumers in states with robust protections, this is the big trade-off: potentially lower premiums, but possibly fewer benefits.

Secondary States don't completely lose power, but their authority is severely limited. They can still collect taxes, enforce laws against fraud and abuse, and regulate unfair claims settlement practices (like dragging their feet on paying claims). However, they lose the power to regulate the actual design and pricing of the policy itself. This setup is modeled after the successful risk-retention group framework used for certain business insurance, but applying it to individual consumer health insurance is a much bigger shift.

The Good News for Renewals

One significant consumer protection is built into the renewal process. The bill explicitly prohibits an insurer from moving an insured person to a different class or increasing their premiums based on their health status, change in health status, or past claims experience (Section 4, Prohibited Reclassifications). If you develop a chronic condition, your insurer can’t single you out for a premium hike at renewal time. They can still raise rates for the entire class of policyholders based on overall claims experience, but this provision offers a solid guardrail against individual medical risk being penalized year after year.

The Fine Print Warning

If you buy one of these interstate policies, the insurer is required to give you a clear notice in 12-point bold type that is worth reading carefully. This notice must state that the policy is governed by the laws of the Primary State, and that because of this, it “may not include all benefits mandated by the secondary state” and may be less expensive as a result. This puts the burden squarely on the consumer to understand what they are losing in exchange for potential savings. For a small business owner offering this to employees, or a freelancer shopping on their own, deciphering which state’s laws govern which benefits becomes a new, complex homework assignment.

The Big Picture: A Regulatory Race to the Bottom?

The main concern here is regulatory arbitrage. Insurers are highly incentivized to designate a Primary State with the fewest mandates and the most relaxed regulations. If they can sell a bare-bones policy nationwide from a state with minimal consumer protection laws, why wouldn't they? While this could make coverage more affordable for healthy, younger people, it could also flood the market in every state with policies that lack the essential benefits or network adequacy rules that local regulators fought to implement. The Secondary State’s insurance commissioner is essentially sidelined, watching policies governed by another state's rules being sold to their residents.