Recent deliberations of the National Association of Insurance Commissioners on health care reform have rekindled an old question: does the insurance industry have too much say in how the NAIC decides in its model recommendations and other standards?

There are hundreds of insurance industry lobbyists pressing their views with the NAIC on various issues. Most recently, they pushed to modify proposals for medical loss ratios (MLRs) and other provisions of the Patient Protection and Affordable Care Act (PPACA).

By and large, consumer reps agree the NAIC’s recommendations to the U.S. Department of Health and Human Services (HHS) provided some solid protections for consumers.

To support consumer representation in the discussions of its various committees, the association established a consumer participation program in 1992, where selected individuals representing the interest of consumers are appointed to a consumer liaison program. Those representatives attend open sessions of the NAIC at meetings the association holds each year.

These consumer representatives are classified as funded and unfunded. Funded representatives are reimbursed for travel costs to attend meetings, while unfunded reps are not. (This year, the NAIC began to reimburse unfunded reps for their meals.)

In 2010, 18 funded consumer representatives and 10 unfunded representatives were appointed by the NAIC’s Consumer Participation Board of Trustees, consisting of six state insurance regulators and six consumer representatives.

Interviews with some of these chosen representatives found a broad mix of views on whether they have an adequate voice.

The Struggle to Be Heard

Like many unfunded consumer reps, Melvin Hollowell, the insurance consumer advocate for the state of Michigan and an unfunded consumer rep, himself, the situation is a frustrating one. He notes that the NAIC’s official intent is to provide an equal voice for consumers as well as for the industry, but in practice, it does not play out that way.

Comparing manpower, industry lobbyists outnumber consumer advocates at NAIC meetings by an order of magnitude. “In terms of raw numbers, there’s no comparison,” Hollowell says. “The industry has an army of lobbyists, lawyers, actuaries, and boots on the ground ramped up to protect their turf.”

But he also adds that despite this lopsidedness, consumer reps give more bang for the buck. “There is a super-talented group of folks who are my colleagues as consumer reps–they are a pretty stellar group that is as effective as any group I’ve ever worked with. It’s so impressive.”

More importantly, Hollowell believes that the NAIC does pay attention to the public’s advocates. In its meeting in Seattle this summer, where implementation of PPACA was a prime issue, he saw an immediate responsiveness and high degree of respect between both sides. He also says the NAIC staff was helpful in getting information and explaining policy issues for consumer reps.

Timothy Jost, a law professor at Washington and Lee University, Lexington, Va., another funded consumer representative, says he thinks consumers are well represented before the commissioners. Jost was involved in the discussions of MLRs and tried to make sure those provisions of PPACA were implemented as Congress intended. Despite the large numbers of industry representatives, he says consumers got a fair hearing from the NAIC, which came to Jost as a pleasant surprise.

“My feeling is that the commissioners understand their job is to protect consumers,” Jost says. “I always felt they respected us and responded to our concerns.”

Still, consumers at NAIC meetings are clearly outnumbered, especially agents and brokers, he says. “Producers have the most the most powerful lobby as far as I can see.”

“We’re facing a huge industry, so I never feel we have enough representation,” says Bonnie Burns, training and policy specialist with California Health Advocates, Sacramento, Calif., a funded rep. “But this year, we’ve had considerable impact on the NAIC process. In some instances, we were helpful to regulators who have political problems taking similar positions to ours.”

The industry has “terrific power,” Burns says. “They have lobbying, they have money. And even if we can get [a proposal] through the NAIC, they can stall it at the federal level.”

Burns, who specializes in long term care (LTC) advocacy, said she had helped the NAIC adopt model rate stability provisions for LTC insurance in 2000, which make it hard for carriers to impose huge premium increases on customers.

“Somehow we failed in that because now we are seeing some large long term care companies raising rates,” she says, referring to recent rate hikes by insurers such as John Hancock, which recently increased its LTC rates by 40%, a move deeply unpopular among agents and policyholders.

LTC insurance, she notes, “is sold to people as a way to do right thing, to protect themselves if they would need care later.” Now it appears buyers of LTC policies didn’t buy the protection they thought, she laments.

“I think some of the regulators are equally distressed” about LTC rate increases, she says.

Burns said she also worked with the NAIC’s working group dealing with a summary of benefit forms health insurers will have to issue to help consumers understand differences among health care policies when reform provisions start going into effect next year.

Insurers have concerns because they will have to prepare these forms and make them available to health plan members. “We want to make sure they give people the ability to compare one policy with another,” Burns says.

PPACA requires insurers to provide consumers with a four-page document that describes all elements of a policy so people can compare deductibles as well as limitations, excluded benefits and other provisions.

The industry is resistant to brief summaries of plan reliance because its legal experts fear that insurers could be legally bound by the summaries’ terms. But the summary descriptions are not a contract, Burns argues.

She says she is content with the MLR recommendations the NAIC recently presented to HHS. She is worried, however, that the health insurers might continue to work against some reform provisions outside the NAIC.

“Anything we do at NAIC is at risk of being wiped out or modified at the Federal level because of the financial clout the industry has with elected officials,” Burns says. “So we are waiting to see how many of the things we did win are going to last.”

Outmanned and OutgunneD

Lynn Quincy, a senior policy analyst for Consumers Union in Washington, an unfunded rep, said at the recent NAIC meeting in Seattle, there were 17 consumer reps and about 1,200 industry lobbyists.

Did she feel overwhelmed?

“To be a lobbyist with the NAIC is very challenging, because the NAIC is doing a lot of work that affects consumers,” Quincy says. “The commissioners welcome hearing from consumer reps to help balance out what they hear from the industry, but the number of areas they are working on means it’s challenging for a small group of consumer reps to monitor all issues.”

Quincy says she is satisfied with the NAIC’s recommendation to HHS on MLRs. “The consumer reps who worked on that felt it was a sound recommendation. I’m optimistic that if consumer reps work their butts off, we are going to see some good regulations out of NAIC about health care reform implementation.”

Steve Alexander, an actuary with the Office of the Insurance Consumer Advocate for Florida’s Department of Financial Services, an unpaid consumer rep, has attended only two NAIC meetings to date. But he is not happy with what he sees.

“My impression so far is that the consumer reps at the NAIC are outmanned and outgunned by the industry,” he says. “Furthermore, I feel that the consumer reps provide mostly token representation and are not taken seriously by the commissioners.”

Alexander would like the NAIC to place consumer reps on its various committees, which are currently attended solely by state regulators, and that they should be actively solicited by the commissioners for input and advice.

“All consumer input should be fully documented, published and made available to the public,” he adds. “Instead, it appears that consumer reps must fight to be heard, are mostly ignored and only politely tolerated by the NAIC.”

Brendan Bridgeland, director, Center for Insurance Research, Cambridge, Mass., concedes that many representatives from the industry attending NAIC meetings “have important and valid points to make.” As a funded rep, he sees his job is “to balance that out,” says Bridgeland. “We help [the NAIC] keep consumer viewpoints in mind.”

Bridgeland is also a consumer rep with the Insurance Interstate Product Regulation Commission (IIPRC), Washington, an NAIC affiliate that holds its own meetings during NAIC conferences.

At first, he felt overwhelmed at NAIC meetings, he says, because he would see perhaps 100 people in a meeting room working for insurers. “Now I can see the insurance regulators listen to both sides. If one or two people have a valid point, it will be listened to.”

To help keep commissioners views balanced, Bridgeland says he would like to see limits on the ability of commissioners to go to work for the insurance carriers they are helping to regulate. It is not unusual for commissioners to move to the insurance industry after they have left office, he notes.

“I do think there has been a revolving door” between state office and the industry for some commissioners, Bridgeland says. “I don’t know if that colors some of their decisions or not, but I think it makes the regulatory structure look weaker.”

Bridgeland would like to see a “cooling off” period imposed, during which a former commissioner would be barred from taking a job in the industry for some time after leaving office.

Members of Congress cannot leave office and then immediately come back and lobby Congress, he observes, adding that it would be helpful if that applied to state insurance commissioners, too.

Unsurprisingly, the NAIC feels that its structure works just fine, and Susan Voss, NAIC President-elect and Iowa Insurance Commissioner, insists the NAIC is made up of individuals whose job it is to protect consumers.

The NAIC has continued to expand the role of consumer representatives through its Consumer Board of Trustees, which meets at every meeting of NAIC, she says.

“I haven’t heard complaints from consumer representatives,” she says. “We have worked hard to have the most open and transparent process ever. On health care, for example, there has not been a closed way of doing things.”

Voss also points to the NAIC’s multi-state market conduct hearings and its examinations of public insurance companies. “Commissioners are very cognizant of consumer protections,” Voss emphasizes. “That’s our mission.”

That may be so, but for now, the system in place features, if nothing else, a gross imbalance between consumer and industry representation. That imbalance raises questions as to the NAIC’s impartiality when it comes to setting standards.

One of the chief arguments the NAIC relies upon when making the case for its state-based model of regulation is that it is more responsive to consumers. To a large extent, there is truth to this. State regulators often contend that it is better for an individual policyholder to bring questions and complaints to a local insurance authority rather than to some distant federal office where they will be lost in the shuffle. But if that is the case, then the NAIC has no easy answer for how much face time representatives of the industry get compared to true consumer advocates, who must shout to be heard.