Open Wyoming’s Borders to Out-of-State Health Insurance

This fall, the Wyoming Liberty Group is supporting legislation for the 2012 Budget Session that will allow health insurers that have a business presence in Wyoming to sell individual and small group health insurance policies that they sell in other states.  The bill is quickly garnering bipartisan interest.

The primary purpose of this law is to allow Wyomingites to enter effective insurance pools.  WyLiberty economist Dr. Sven Larson has researched health insurance pools and concludes that a pool reaches critical mass somewhere between 2.5 and 4 million people.  Anecdotally, we have heard from various insurance agents that an individual health insurance policy that costs $150 a month in Wisconsin costs $400 a month in Wyoming, despite each policy containing nearly the same benefits.  It’s clear that even if every Wyomingite were together in one pool, the pool would fall far short of the proper size.  By allowing Wyoming insurers to sell policies from states with larger populations, prices should drop.  Affordability will increase access, and the more the risk is spread the more effectively health insurance can operate.

The second purpose of this law is to increase consumer choice.  Although Wyoming law does not require a large number of coverage mandates for health insurance policies, some of these mandates go beyond what consumers want or need.  By freeing Wyoming insurance companies to offer the latest innovative products from up to 49 other states, consumers will have more health insurance options.  With this choice comes individual responsibility, the same responsibility individuals must exercise when purchasing other types of insurance.

The third purpose of this law is to encourage the individual purchaseof health insurance.  Life insurance, auto insurance, and supplemental health insurance currently work across state lines, are affordable and effective, and are purchased and maintained by individuals.  Small group and self-insuring companies offer health insurance that runs with employment, creating at best uncertain coverage and at worst dependence on employers that discourages mobility and entrepreneurship.

Unlike Wyoming’s health insurance compacts law, which passed in 2010, this new law would place the onus on insurance companies to offer out-of-state products. In other words, instead of requiring the insurance commissioner to create a new interstate market with other states (which would have to be approved by the U.S. Congress), this law frees insurance companies to bring thousands of new customers into existing and future health insurance pools.  It is not guaranteed that insurance companies will take advantage of this, but it is very likely that Wyoming will become a very attractive market for health insurance.

This law is based on a law that passed in Georgia this year, codified as Ga. Code Ann., § 33-29A-30 et. seq. Though following Georgia’s innovation, this law would make Wyoming a leader in knocking down interstate barriers to cost-effective insurance pools, increasing consumer choice, and taking a step toward ending a decades-old quagmire of employer-provided health benefits.