Following the introduction of optional federal charter legislation in the Senate last week, state regulators and legislators questioned how such a charter would help consumers and improve state insurance regulation.
The legislation was sponsored by Sens. John Sununu, R-N.H., and Tim Johnson, D-S.D.
“I’m not sure it can be effective,” says Alessandro Iuppa, Maine superintendent and president of the National Association of Insurance Commissioners, Kansas City, Mo.
Many products are state-specific and a lot of state law would have to be preempted in order to attempt to create a system analogous to the banking system, he adds.
He notes the creation of such a system is “hypothetical” but says that if it were to be developed, it would leave open questions such as how families would be covered by insurance where one spouse was covered by a federally chartered insurer and the other by a state chartered insurer.
It also leaves open the question of how well consumer questions and complaints would be handled, he says.
State insurance departments offer a quicker response time and are easier than interacting with a federal agency, which he described as “never easy at best.”
In Maine, the department handles a significant volume of calls, Iuppa says. “I’m not confident the citizens of Maine would get the same response in Washington.”
In fact, in programs where state authority has been preempted, including the Medicare Part D prescription drug plan and ERISA, Maine and other states have done what they could to help consumers with questions or problems, Iuppa says. However, he adds, “the ability to help is limited by limited authority.”
State insurance regulators can encourage entities to help the consumer, but “there is a fork in the road where there is just not the authority to act anymore.”