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The barrier exists for numerous reasons.

1. States have different laws as it pertains to insurance. In order for a company to operate (sell insurance) in a particular state, they need to meet the rules of that state. Customers and companies are generally prohobited from conducting business interstate in this manner when the company is not approved for those reasons.

2. Jurisdiction is a huge part of it. If someone in NY wants to buy a policy from some fly-by-night company in VT and that company has not been approved by NY, the customer likely has no recourse if the company defrauds the customer. By requiring the company to get approval to do business in NY, they are able to not only vet the company to some extent, they also now have some level of legal authority to shut the company down if they are fraudulent.

Other goods and services are freely bought and sold among the states.

Other goods and services are not substantially different and do not subject individuals to undue risk if the company that sells the product turns out fradulent.

If you want to buy a tv from your local best buy or from some retailer online in another state, if that TV breaks, you are not out a ton of money.

If you buy insurance from an un-approved company and they default on paying your $50,000 medical bill, you are likely up a creek without a paddle.

It does so to serve special interests including health insurers and those offering certain mandated services.

This is a problem with the state insurance commissions, not the insurance companies. Why would any insurance company want artificial barriers to how they do business???

This problem extends far beyond simply health insurance - this is seen in all forms of insurance including LTC, fixed and variable annuities, and life insurance. Some states are so restictive that companies don't even try to do business there. That is one reason why you see NY so much more expensive than other states.

The federal government is generally not involved. That is a problem largely created by individual states.

IIRC, ACA does something to address this but I don't have the time to do the research at the moment.
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