A study evaluating different scenarios that would allow people to purchase health insurance across state lines found that 12 million previously uninsured people would be able to get insurance if there were competition between states.

The study was presented during an American Enterprise Institute panel discussion on interstate competition for individual insurance as a way to increase access to the uninsured.

In the study, Stephen Parente and Roger Feldman, both health economists with the University of Minnesota, researched whether competition existed only within the five largest states, in all 50 states or within four geographic regions. They used data from the 2005 Medical Expenditure Panel Survey to assign people to states based on race, gender, income and age. They then ran simulations to figure out which scenario would provide the most coverage for individuals.

Because Alabama has the least number of regulations, consumers would decide to switch their policies to companies in Alabama, they said. However, they also said that competition among the states in the four regions would allow more than 11 million people to be insured, and it might be easier for populations to swallow if they know the insurance company they are using is closer to home.

State-specific mandates for programs like community rating or guaranteed issue can cause insurance premiums to increase drastically, they said.

Karen L. Pollitz, project director for the Georgetown University Institute for Health Care Research and Policy, said the study’s numbers are misleading. Just because more people would be carrying insurance cards in their pockets wouldn’t mean that they have adequate insurance, she said.

“It’s like saying a roller skate is cheaper than a car,” Pollitz said. “Good health insurance that will take care of you when you’re sick is expensive because health care is expensive.”

She added, “The regulations require that the insurance be meaningful.”

While Aparna Mathur, a research fellow at AEI, commended the pair for starting a discussion in an area where there is little literature, she questioned some of their methodology. In particular, important variables like health status, tobacco use and occupation weren’t factored into the demographic distributions, Mathur said during the July 31 session at AEI.

She also questioned whether high-risk people would be able to purchase cheaper policies in states without community rating or guaranteed issue laws. And Mathur said the information used to determined estimates of how much state regulations impact premiums of the study was not comparable.

Jay Webber, a Republican in the New Jersey state legislature, said because his state has one of the highest numbers of insurance mandates in the country, it is also one of the most expensive states in which to obtain insurance.

“We’re seeing a real affordability crisis in New Jersey,” Webber said, adding that the uninsurance rate is skyrocketing.

He said the state is getting “crunched,” and more businesses every year stop providing their employees with insurance because of the high costs.

“I think New Jersey could be a real battle ground for the issue of health care choice,” Webber said.

• Study Summary