If you’ve ever shopped for your own coverage and wondered why you can’t just buy a cheaper plan from the next state over, the answer starts with a $50 fine. This is health insurance explained through one insurance agent, two Supreme Court cases, and a law Congress passed in 1945.

In 1866, an insurance agent in Virginia named Samuel Paul sold a fire insurance policy without a license. A court in Petersburg fined him $50.

That $50 fine is the start of why you can’t buy health insurance from another state today.

The Test CaseThe $50 Fine

Paul worked for insurance companies based in New York. Virginia had just passed a law that said an out-of-state insurer had to deposit between $30,000 and $50,000 in bonds with the state before it could sell a single policy.

The New York companies didn’t want to put up the money. So Paul applied for a license without the bond, got turned down, and sold a policy anyway.

That was on purpose. It was a test case. The insurance companies wanted a court to say that insurance crosses state lines, so the states had no business regulating it.

The First Ruling1869: The Court Says No

In 1869 the case reached the Supreme Court, and the insurance companies lost. The Court said issuing an insurance policy is not a transaction of commerce. Samuel Paul owed his $50, and insurance belonged to the states.

It stayed that way for 75 years. Every state built its own insurance department and wrote its own rules.

The Second Ruling1944: The Answer They Asked For

Then in 1944 the question came back, and this time the insurance companies were on the other side of it.

The federal government had indicted the South-Eastern Underwriters Association. That was nearly 200 fire insurance companies that controlled 90% of their market in six southern states, Virginia included. The charge was fixing prices.

Their defense was Samuel Paul’s case. Insurance isn’t commerce, so the federal law against price fixing doesn’t reach us.

On June 5, 1944, the Supreme Court disagreed. Insurance is interstate commerce. The answer the industry had asked for in 1869 now meant Washington could regulate all of it.

The HistoryThe Nine-Month Reversal

Nine months later, on March 9, 1945, Congress handed it back to the states. That law is the McCarran-Ferguson Act, and it’s why each state still decides which health plans can be sold to the people who live there.

Below is what that law actually does, and what would happen if it went away tomorrow.

The LawWhat the 1945 Law Actually Does

McCarran-Ferguson didn’t deregulate insurance. It left every state’s rules right where they were. Your state decides what benefits must be covered, how appeals work, and how fast claims must be paid.

The law also doesn’t say a company can’t sell in more than one state. It says each state gets to approve what’s sold to its own residents.

The MapThere Isn’t One Health Insurance Market

That means there isn’t one health insurance market. There are 51 of them: 50 states plus DC.

A company that wants to sell in all of them has to be approved 51 times, under 51 sets of rules.

The WorkaroundWashington’s Workaround: Section 1333

That’s how it stayed for the next 65 years. Then in 2010, Washington tried a workaround.

The Affordable Care Act included Section 1333, which allows what it calls health care choice compacts. A compact is an agreement between states to accept each other’s approved plans.

Sixteen years later, the federal rules for those compacts still haven’t been finalized, and not one state has set one up. A proposed rule went to the White House for review in July 2026, so that’s one to watch.

There is a compact that works this way today. 46 states, plus DC and Puerto Rico, belong to it. But it covers life insurance, annuities, disability income and long-term care. It doesn’t cover health insurance.

The EvidenceThree States Already Tried It

A few states didn’t wait for Washington.

In 2011, Georgia passed a law that let insurers sell Georgia residents any plan they already sold in another state. Supporters expected new companies and lower prices. The law took effect on July 1.

Five years later, not one insurer had used it.

Maine and Wyoming passed their own versions, and regulators in both states reported the same result. No out-of-state company came in, and no policies were sold. The door was open and nobody walked through it.

The ReasonWhy Nobody Came

The head of Georgia’s health insurance association explained it in one sentence. All health care is local, and all health care costs are local.

Before an insurance company can sell you anything, it has to sign contracts with your local doctors and hospitals. That list of contracts is called the network.

A company from another state shows up with no network and no customers, so it has very little to bargain with. Researchers at Georgetown interviewed insurers and regulators in all three states, and that’s the barrier they heard about again and again.

The PricingYour Premium Follows Where You Get Care

Your premium isn’t mainly set by the state line. It’s set by the cost of care where you live.

You get sick where you live, and you go to the hospital where you live. That hospital charges local prices for nurses, doctors and rent. An out-of-state approval stamp doesn’t change that local bill.

The American Academy of Actuaries said the same thing in a 2017 issue brief. Allowing sales across state lines has limited potential for premium savings, because premiums would continue to reflect local health care costs.

So say Congress announced tomorrow that you could buy from any state. Here are the three what-ifs to plan for.

What-If 1Out-of-State Policy, Local Prices

You’d buy your policy from a company in another state, but you’d still pay local prices.

That company still has to make those deals with your local hospitals. If it has no deal there, you pay more out of pocket.

What-If 2Your Doctor May Be Out of Network

Your doctor would likely be out-of-network, which means your doctor has no contract with the plan. In many cases, a distant plan doesn’t include your home doctor or hospital at all.

Then the question becomes who pays the difference. In many cases, that difference shows up as out-of-network costs that don’t count the way you expect.

What-If 3Whose Rules Protect You?

When a claim is denied, who protects you: your state’s rules or their state’s rules?

Appeals, timely payment and mandated benefits are all state rules. Buy elsewhere and you may lose the protections you counted on.

Important NoticeIt Depends on Where You Get Care

That brings us back to Samuel Paul. His companies wanted out from under the states in 1866. 160 years later, there are still 51 markets, and each one has its own list of benefits that a plan you buy on your own has to cover.

Here’s one example. Nevada’s list includes chiropractic care, up to 20 visits a year. Next door in Utah, chiropractic care isn’t on the list at all.

Now say a Utah plan gets sold to someone living in Nevada. Does it have to cover the chiropractor or not? Nobody can tell you for certain, because it’s never happened, and the federal rules that would settle it were never finalized.

No one company is the good guy or the bad guy here. It’s how the system is set up. So whether buying across state lines would help you depends on your situation and where you get your care.

This is my personal professional opinion, not legal advice, and every situation is different. Plans and benefits vary by state. I’m describing what public documents say.

Next StepsThree Things to Check Before You Pick a Plan

For now, your own state is the only place you can shop. Here are three things to check while you do.

First, check the network before you check the price. Is your doctor in? Is your hospital in?

Second, look past the monthly price. Check the deductible, which is what you pay before the plan starts paying. And check the out-of-pocket limit, which is the most you’d pay in a year for covered in-network care.

Third, get help before you guess.

So the reason you can’t buy health insurance from another state is a 1945 law that left each state in charge of what’s sold to its own residents. The evidence so far says that removing the state line wouldn’t change what care costs where you live. Plans, networks and protections vary by state and by individual situation, so compare them before you enroll.

Not connected with or endorsed by the United States government or the federal Medicare program.

We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Program to get information on all of your options.

Sources: Paul v. Virginia, 75 U.S. 168 (1869). United States v. South-Eastern Underwriters, 322 U.S. 533 (1944). Congressional Research Service, Insurance Regulation: History, Background, and Recent Congressional Oversight. Georgetown Center on Health Insurance Reforms, ACA Section 1333 compacts. Reginfo.gov, State Innovation Waivers and Health Care Choice Compacts (CMS-9877). Insurance Compact, member states. American Academy of Actuaries, Selling Insurance Across State Lines (2017). KFF Health News, interstate sales in Georgia (2017). Governing, cross-state health plans. CMS essential health benefit benchmark summaries for Nevada and Utah (2025 to 2027).