Even as national health reform moves through Congress, one governor has proposed an aggressive change in insurance policy in his own state. Minnesota's Tim Pawlenty (R) announced a plan Tuesday to reform the state's health system, headlined by a controversial proposal to let Minnesotans to purchase insurance across state lines. The interstate insurance idea has been discussed before as a way to increase free market competition. Detractors argue, however, that it will group young and healthy consumers into cheaper plans and drive up costs for the sick and elderly.

Even though Minnesota's health care has been recognized as among the best in the nation, a Kaiser Family Foundation study found that the average health insurance premiums for a Minnesota family were 9.8 percent higher than the national average. Brian McClung, Pawlenty's deputy chief of staff, said that simple fact pushed the governor to propose the interstate plan.

"Governor Pawlenty believes that opening up the health insurance marketplace to other states can help provide additional competition, provide more choices and reduce costs for Minnesotans," McClung said. "We've had discussions with the legislature in the past about changing the ways HMOs are regulated in the state, and that concept has not been well-received by the legislature, so we thought we would introduce this idea about buying insurance across state lines."

Critics immediately pounced on the plan, with state Sen. John Marty (D) warning that it would "import problems from other states." To ensure that healthy people don't go straight for cheap, low-quality plans and drive up costs for other consumers, Pawlenty's plan takes steps to ensure that residents can only purchase efficient plans. The state commissioner of commerce would determine the top 20 states for regulating health policies, and residents could only buy from those.

Additionally, any plan would have to be accredited nationally, be certified in Minnesota and would be subject to fees, taxes, laws and practices in Minnesota.

If the proposal is approved by the legislature, Minnesota would be the first and only state to allow interstate purchases, which doesn't create the kind of grand free market that most supporters are looking for. McClung acknowledged that the plan would work better if more states were involved; Pawlenty is looking to expand the proposal to create an interstate health insurance compact modeled off of the Interstate Insurance Compact, a group of 36 states that permits the interstate regulation and purchase of some insurance products, including life insurance and annuities.

McClung noted that while the interstate idea has been discussed in Congress, it was ultimately dropped from any final bills and never gained much traction. And while the timing is unusual -- changing one state's insurance policies while the entire nation reforms health care could just create more chaos -- the governor thinks Minnesota can propel more states to consider the plan.

"Minnesota has a long tradition of leading in health care reform," McClung said. "We've taken some significant steps in the last few years, and Governor Pawlenty sees this as another tool in the toolbox."