Last week President Trump signed an Executive Order allowing the sale of health insurance across state lines. This is all well and good, I thought, but how would it work mechanically?
So I did some research and realized that this is change could be very exciting, especially for people who own small business or are otherwise self-employed.
In order to prevent adverse selection (only dying people signing up for life insurance, for example) the health insurance industry has relied on employment-based groups. A person hired by any given company is likely to be “average.” A new employee could just as readily be a healthy 25-year old as a 55-year old with high blood pressure and bad knees.
The Executive Order allows the sale of insurance nationally through associations. Most self-employed people belong to at least one association. I, for example, belong to the National Association or Realtors, the Appraisal Institute, the Counselors of Real Estate and USAA.
What if all of these groups could offer health insurance to their members, their families and employees with the same assurance against adverse selection as employer-based groups? What if there were great benefits to the associations like sponsorship fees, increased membership and higher member retention?
Then things could get interesting. What if groups like the National Rifle Association, Mary Kay Cosmetics, the Knights of Columbus or the Bread Bakers Guild of America got in the act?
Today someone looking for individual or small group coverage has very few, if any, choices. In the next few years there could be dozens of groups competing for your business.
Now that would be a welcome change.