Consumer advocates are warning state insurance commissioners that they risk sacrificing state-based consumer protections if they support a Senate bill in its current form.

The advocates were responding to a letter from state insurance regulators to the bill’s sponsor regarding the proposed health care legislation.

The bill that is raising concern is S.B. 1955, The Health Insurance Marketplace Modernization and Affordability Act of 2005. It was introduced in November 2005 by Sen. Michael Enzi, R-Wyo., who is chairman of the Senate’s Health, Education, Labor and Pension Committee.

The bill seeks short- and long-term solutions to health care availability, including a provision that would allow businesses and trade associations to band their members together and offer group health insurance coverage on a national or statewide basis.

During the consumer liaison session of the winter meeting of the National Association of Insurance Commissioners last month, funded consumer representatives raised concern over a letter sent to Enzi by the NAIC.

The letter, dated Nov. 7, 2005, thanks Enzi for “working with the NAIC to seek real solutions for employers who want to provide access to health care for their employees.”

It notes the NAIC’s opposition to association health plans, citing “…fragmentation of the market, cherry picking of risk, plan failures and increased fraud.” The letter also warns that the establishment of AHPs would lead to “higher premiums for most small businesses and a false sense of security for employees and their families, especially those with the greatest health care needs.”

But the letter also notes Enzi’s efforts to find an alternative to AHPs and cites “noteworthy improvements” in draft legislation that “do not allow associations to self-fund and those that preserve state oversight of the plans.”

The concept that state oversight would be preserved was one that was challenged by Mila Kofman, an NAIC funded consumer representative and an assistant research professor with Georgetown University.

Kofman contends that nothing in proposed legislation would preserve state regulation and that, in fact, “there is a huge loss of state-based protections.”

Additionally, she notes that in 19 states there would be preemption of regulation overseeing state group health insurance plans.

The bill is a major restructuring of the health insurance market. Kofman says that by focusing on the issue of AHPs, other important parts of the bill that affect state regulation are not being given enough attention.

If states are aggressive, says Kofman, insurers could challenge them according to language in the bill. States will not retain authority, she says, but rather there will be deregulation and loss of consumer protections.

The bill would allow insurance companies the right to go to federal court and sue a state if they believed that authority was exceeded, she says. If a state lost a case, it could, among other things, be responsible for paying the suit, including attorneys’ fees, she adds.

“Will the NAIC negotiate away consumer rights?” Kofman asked commissioners during the meeting. “You can choose to oppose the bill and protect consumers or negotiate away those protections.”

In response, commissioners said they are intent on preserving state authority but also need to be part of ongoing dialogue.

“We are right to try to engage in a debate to make the bill as good as possible,” Joel Ario, Oregon insurance administrator, said in response.

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