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NAIC Urges Caution in HIX Regulations

 |  By John Commins  
   August 16, 2011

The National Association of Insurance Commissioners is urging the federal government to avoid creating regulatory loopholes for health insurance exchanges that could give multistate plans significant advantages over their smaller, in-state competitors.

"Insurance Commissioners and the NAIC have serious concerns about the potential for market disruption and adverse selection, and the resulting negative impact on consumers and health insurance markets which would arise if Multi-State Plans are allowed to operate under different rules than their competitors," NAIC leaders said in a letter to Cheryl D. Allen, contracting officer for the U.S. Office of Personnel Management.

Starting in 2014, OPM will be responsible for contracting with at least two health plans that will be sold on every state's HIX as "multistate plans." NAIC said in its letter that language in the law could inadvertently create two sets of rules – one for larger multistate plans, one for everyone else."

The letter was signed by NAIC President and Iowa Insurance Commissioner Susan Voss, and co-signed by the NAIC President-elect, Vice President and Secretary-Treasurer. NAIC was responding to OPM's request for information as they draft guidelines for multi-state plans.

The commissioners warned that separate rules could threaten plan solvency and lead to market segmentation, consumer confusion and a loss of consumer protections. "We urge OPM to require Multi-State Plans to be subject to all fees and assessments levied by state Exchanges in order to finance their operating expenses," the letter said. "Allowing larger insurers a free-ride at the expense of smaller competitors would damage competition and could endanger the viability of Exchanges."

NAIC also raised concerns that a second provision, written to ensure a level playing field, could in fact upend state consumer protection laws if the multistate plans are exempted from state regulation. "Healthcare delivery system varies greatly from one state to another and within a state, and these variations give rise to different consumer protection issues," the letter said.

"Exempting Multi-State Plans from the additional consumer protections a state has put in place will confuse consumers, leave some consumers with less protection than others and result in an unlevel playing field that could give the largest insurers additional competitive advantages in the marketplace, thereby undermining the goal of the PPACA to create more competition in health insurance markets and strengthen consumer protection."

If OPM exempts a plan from applicable state regulation, by extension it also exempts all other plans – both in and out of an Exchange - from those same regulations, leaving a regulatory vacuum, NAIC said.

See Also:
HHS Unveils Proposed HIX Rules
Stakeholders React to Proposed HIX Rules
5 HIX Challenges for Health Insurers

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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