State regulators and state lawmakers are attacking a bill that could force state insurance departments to compete with a new federal agency for the opportunity to regulate insurance companies and insurance producers.

U.S. Sens. John Sununu, R-N.H., and Tim Johnson, D-S.D., unveiled the bill today in Washington.

Alessandro Iuppa, Maine superintendent and president of the National Association of Insurance Commissioners, Kansas City, Mo., says he believes passing the bill would reduce consumers ability to resolve complaints.

Dealing with a federal agency is “never easy, at best,” Iuppa says. “I’m not confident that the citizens of Maine would get the same response in Washington.”

Iuppa says regulators at the Maine Bureau of Insurance have had a tough time helping Maine residents with complaints involving the Employee Retirement Income Security Act, the new Medicare Part D prescription drug plan, and other laws and programs set up in such a way that the federal government has preempted state authority.

“The ability to help is limited by limited authority,” Iuppa says.

Implementation of the Part D drug plan has been particularly disastrous, Iuppa adds.

Creating a federal insurance regulator also could lead to many conflicts between the state and federal systems, Iuppa says.

Iuppa wonders what would happen to solvency supervision if federally chartered insurers participated in state guaranty systems.

Susan Nolan, executive director with the National Conference of Insurance Legislators, Troy, N.Y., and Craig Eiland, Galveston, Texas, NCOIL’s immediate past president, who is a state representative in Texas, say enacting the new OFC bill would jeopardize $13 billion in annual state premium tax revenue and hurt consumers.

The current version of the OFC bill would have no direct, immediate effect on premium taxes, but NCOIL officials ask whether insurers would really continue to pay taxes to state regulators if they were supervised by federal regulators.

And state officials say they believe the bill could have an immediate effect on consumers’ abilities to resolve disputes with insurers

The new OFC bill “isolates state legislators and commissioners from their constituencies,” Nolan says.

“We don’t think federal programs have worked so well in the past,” Nolan adds, citing problems with the new Medicare Part D program and shortcomings in the response of the Federal Emergency Management Agency to the recent hurricanes.

Eiland says NCOIL will work with all state groups, including the National Conference of State Legislatures, Denver, and the National Governors Association, Washington, to fight the Sununu-Johnson bill.

The bill “is not a consumer-driven bill but a bill drafted by the industry for the industry,” Eiland says. NCOIL “completely and fully oppose it.”

But Eiland says he doubts the bill will advance.

Few members of Congress will want to go home during an election year and say they are supporting a federal intrusion on states’ rights, Eiland says.