A proposal by Minnesota Gov. Tim Pawlenty would make his state the first to allow consumers to purchase health insurance across state lines.

Tim Pawlenty

As part of a package of health care reform initiatives up for consideration before state legislators in 2010, Pawlenty is recommending changes in state law to expand health coverage competition in the state. His office said in a statement that the market is dominated by three health care plans with a combined market share of more than 80% of fully insured Minnesotans.

In order for a product to be sold in Minnesota, several conditions would have to be met, under Pawlenty’s plan. They include that the insurer have a certificate of authority in Minnesota and be subject to state fees and taxes.

An additional requirement is that the regulator from the state where the company is domiciled must be accredited by the National Association of Insurance Commissioners and must review and approve policy forms.

In addition, the Minnesota Commissioner of Commerce will determine the top 20 states that are “most effective,” according to the governor’s office, in terms of regulating health insurance policies and have the best health outcomes for their residents. Only those policies, under Pawlenty’s plan, would be offered to Minnesotans.

The state would also establish an Interstate Health Insurance Compact, allowing fellow states to join and share common regulatory standards to help the sale of health coverage across state lines. The Minnesota version would be modeled after the NAIC’s Interstate Insurance Product Regulation Compact that has aided the sale of life insurance.

“In recent years, we’ve made significant progress toward making our health care system even more market-driven, patient-centered and quality-focused,” Pawlenty, a Republican, said in a statement. “While Congress debates federal health care reform, there are important additional steps that we can take in Minnesota to provide greater choice and competition while holding down explosive health care costs.”

In addition to buying health coverage across state lines, Pawlenty is also proposing legislation to require pricing health care services based on quality and cost for the state-subsidized health care programs MinnesotaCare and Medical Assistance. He is also proposing a law for including consumer-driven incentives for Minnesota Care, the program that offers health insurance for state residents at or below 275% of the federal poverty guideline.