Health Reform Proposals Will Make Matters Worse, Say State Regulators

Insurance commissioners from three states today expressed concerns that health insurance reform proposals put forward by Democrats and Republicans would destabilize state markets and create more problems than they're designed to solve.

Specifically, three members of the National Association of Insurance Commissioners sharply criticized a Republican proposal to allow consumers and companies to purchase health insurance across state lines and a Democratic plan to strip health insurers of antitrust protections.

Rep. Marsha Blackburn, R-TN, said at the White House healthcare reform summit on Thursday that allowing consumers to purchase health insurance policies that are regulated in other states would spur competition and lower costs.

"State lines right now basically have stop signs up when it comes to across-state-line access," Blackburn said at the summit. Removing those barriers, she added, would lower costs and "insurance companies accountable."

NAIC President Jane Cline, insurance commissioner for West Virginia, told reporters Friday that insurance companies already operate in multiple states. However, they must comply with each state's regulations and coverage mandates.

Kansas Insurance Commissioner Sandy Praeger, who is also chair of the NAIC's Health Insurance and Managed Care Committee, says states have long opposed allowing the federal government to strip them of a critical oversight tool.

"We lose a lot in terms of consumer protections," she told reporters. "Companies will seek out the states that have the least amount of consumer protections in their state laws, file their products there, get them approved, and then come back into my state."

Praeger says a federal mandate to strip states of the right to regulate policies and mandate coverage would likely have fewer benefits, and would thus be cheaper.

"Who do those appeal to? Younger healthier folks, people who don't think they need much insurance, but want some protections," she said. "That means the people who want comprehensive coverage will buy from our state-regulated plans, which will ultimately cost more."

"We are there to protect the market and to keep everyone playing by the same rules. This destabilizes and allows for adverse selection and cherry picking," she said.

Oklahoma Insurance Commissioner and NAIC Secretary-Treasurer Kim Holland said the Republican idea would overrule the democratic process that state legislatures have used to respond to the requests of their constituents.

"There are regions of this country where legislatures have passed a lot of laws to require insurers to cover various services that their constituents are demanding. That contributes to cost," Holland said. "We have to ask ourselves 'are there ways we can insure the appropriate consumer protections we all want while still allowing some flexibility for those folks who are simply priced out of the market?'"

The commissioners also reiterated their opposition to a bill pushed by Democrats that would strip health insurance companies of antitrust protections under the McCarran-Ferguson Act of 1945. The bill overwhelmingly passed the House on Wednesday by a 406-19 vote. A related bill is in the Senate Judiciary Committee. Democratic sponsors say the bill would increase competition among health insurance companies, and thus lower costs. The commissioners say it will do neither.

Praeger says the antitrust exemptions allow smaller health insurance companies to tap into new markets using the aggregated claims experience data of larger competitors.

"That helps them determine their potential risk going forward and helps them price their products," Praeger says. "The jury is still out on whether or not they would be allowed to do this—but we think that would give the larger companies a big advantage and make it more difficult for smaller companies to appropriately price their products. That could potentially cause more market consolidation and limit the competitiveness of the market."

Holland said antitrust protections stabilize state health insurance markets.

"If you have not been here before, you have no history or background on what general losses might be, demographics, or a variety of different information that might assist you in appropriate pricing," she says. "What we don't want is companies coming in and under-pricing their products because it could lead to a solvency concern."

Holland said the antitrust protections promote competition.

"Companies are able to come in with some reasonable assurance of pricing products effectively and then compete on that basis without disrupting the market with inadequate pricing that could have the unintended consequence of a solvency problem," she said.

The commissioners also rejected Democrats' claims that stripping the antitrust protections would stop price fixing and collusion among health insurance companies.

"We currently have laws that we can enforce if we thought that was going on, through our attorney generals, through our insurance departments," Praeger said. "That is a consumer protection issue that we regulate now."

If there were evidence that health insurers were in collusion, Holland said state insurance commissioners would work together to investigate.

"Insurance commissioners across the nation share information. We collaborate on many concerns," Holland said. "We recognize that the large companies that are doing business in many states that would most benefit from some action of that nature would be operating in most of our states. If we were concerned about that in one state, we would share that information with each other and pursue it collectively. That issue has not risen."