Where Do Federal Charter Options Leave Health Insurers?
By Stephen Piontek
While a number of proposals for optional federal charters for insurers have been floated, all of them are either vague or silent on how health insurance companies would fare under such scenarios, said a speaker here.
Speaking at the annual meeting of the Health Insurance Association of America, Ted Scallet, principal with the Groom Law Group, in Washington, D.C., reviewed a number of major issues that health insurers should be aware of under an optional chartering scenario.
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Three major proposals have been released so far, said Scallet. The American Council of Life Insurers’ draft covers companies that write life insurance, annuities, disability income and long-term care insurance. Health insurance is not mentioned in the ACLI’s proposal, Scallet said, but added that ACLI may consider a “place holder” for the product when legislation is introduced, meaning it would be considered two or three years down the line.
The draft of the American Insurance Association, a property-casualty trade group, also says nothing about health insurance, he said, while the proposal of the American Bankers Insurance Association covers “insurance,” which means health insurance could get some kind of coverage under the proposal.
Under these proposals, an insurer’s license would be issued by a new insurance regulator located in the Treasury Department, said Scallet.
One of the major problems for health insurers, Scallet said, is “what do you do if you’re a multi-line company and if a charter is made available by reference to specific products?”
If health insurance is not covered, he said, “does there need to be a separate health company licensed in a state?”
Additionally, he said that if coverage under a charter is defined by reference to specific products, how does one define health insurance? “Does it include dental, supplemental, specified disease?”
Scallet said that insurance companies have felt at a disadvantage in Washington vis ? vis banks because they have no federal insurance regulator. “Insurance companies want a cheerleader in Washington,” he said.
But he urged health insurers to think this through because the idea has its pluses and minuses. On the one hand, he said, “an insurance czar may have more visibility and standing.” And it could prove advantageous in some ways for health insurers to deal with one regulator rather than 50.
But on the other hand, he said, health insurers face a “regulatory overlap” problem since they “already have a substantial amount of federal involvement and regulation in their business.”