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NAIC Wades into State/Federal Role in Health Insurance Regulation, Enforcement

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The National Association of Insurance Commissioners (NAIC) was in a sticky situation regarding its regulatory oversight stance this week with regard to statements by a top official concerning implementation of the health insurance exchange provisions of the Patient Protection and Affordable Care Act (PPACA).

See also: Q&A: 10 Things You Need to Know About the PPACA Ruling

However, state regulators may need to look at the reform act from a broader perspective—enforcement of the Act from the federal government if the states don’t enact PPACA model laws, some say.

At issue is whether states that are not moving forward under PPACA to set up their own health care exchanges, and trying to meet a host of deadlines, would be giving up state regulatory control of health insurance regulation to the federal government.

Although health care experts are divided, an NAIC official made it seem that the federal government would be taking over health insurance regulation in many states, perhaps in total, and the NAIC doesn’t want people to think that.

Washington-based NAIC health policy team manager Brian Webb, made public statements as recorded in a piece published by Reuters on July 30th to the effect that states would be ceding regulatory control to the federal government against their wishes.

“If the states do not get ready for this, then they lose the ability to regulate. It’s the whole marketplace,” Webb told the forum hosted in Washington by Alliance for Health Reform, Reuters wrote. Webb’s presentation can be found here.

PPACA opponents continue to fight implementation of the law in Congress, in the courts and elsewhere. The law calls for states to set up exchanges, or Web-based health insurance marketplaces, for individuals and small groups by 2014.

“They may get their wish and not be able to do anything in their marketplaces,” Webb was quoted by Reuters as saying. “There’s not an insurance commissioner in the country who wants to say, ‘No, we’re not going to regulate that.’”

However, Republican governors in many states are not scurrying to get an exchange in place and have rejected grants and attempts to set up an exchange, and their  appointed commissioners are following suit in some cases.  

The NAIC President, Kevin McCarty, is from one of those states—Florida—and reacted on behalf of the NAIC, along with Kansas’ elected insurance commissioner, who heads the association’s health insurance committee, in a statement posted on its website and distributed to media.

“It is well established that the NAIC has no position on the Affordable Care Act (ACA), nor the type of health exchange implemented in the individual states,” stated McCarty and Kansas Insurance Commissioner Sandy Praeger, chair of the NAIC Health Insurance and Managed Care Committee.

Indeed, states will continue to regulate health insurance, noted Chris Petersen, a health insurance industry lawyer with Morris Manning & Martin in Washington who lobbies before the NAIC.

All products in the health insurance exchanges will still have to comply with state insurance laws and be filed with state insurance departments to be included on the exchanges.

And one federal health care lawyer noted that, “if you think about it, the states will be doing licensing and solvency and critical things like that.”  

Indeed, HHS is trying to say there are no federal exchanges, just state exchanges managed by the federal government to get around the premium subsidies issue granted only to state exchanges.

Although Webb may have been overstating the exchanges situation, there are legitimate concerns about the broader question of federal regulation of states if states don’t enact PPACA reforms, according to Petersen.

For guarantee issue, if a state insurance department won’t enforce guarantee issue—perhaps Florida, as it has postured, as Petersen noted, then the federal government can come in and become the enforcer.

“States need to look at the provisions of the ACA to determine whether they will have the ability to enforce those if they did not take additional state actions,” Petersen said.

The NAIC is working on model PPACA laws for the states to adopt mostly through the graces of the state legislatures. Although there is precedent for this, like when HIPAA was passed and then states passed their own HIPAA, there is a much larger question about whether every state will adopt a state-based PPACA given the political nature of the health care reform law, Petersen acknowledges.

McCarty serves under (but was not appointed by) Florida Republican Rick Scott and has fought almost every aspect of PPACA, from medical loss ratios to exchanges to Medicaid expansion, but has said in press reports he will comply with the law even as he is committed to repealing it, perhaps under a change of administration come November’s elections. Florida fought the PPACA all the way to the Supreme Court.

Although Praeger is elected and has expressed desire to move forward on exchanges, her Kansas governor has made no bones about his contempt for the PPACA.

According to a report in the Insurance Journal, Republican Kansas Gov. Sam Brownback said he wants to wait until after the presidential election to move forward on exchanges.

See also: Where States Stand on Implementing PPACA

Praeger, in press calls and appearances, has always championed moving forward exchanges, and indeed works at the nuts of bolts implementation in a variety of subcommittees and task forces as the key state insurance regulator in discussions with HHS.  Praeger, who is married to a doctor (which, she noted, gives her a perspective on wasteful utilization of health services, such as multiple X-Rays) said that health care costs are rising at an unsustainable level. She has said that PPACA is not so much about health insurance as it is a way to keep costs under control and get everybody the health care they need.

“Health insurance is the ticket in the door,” Praeger has said.

 “A recent media report about the implementation of health exchanges citing NAIC comments regarding state regulatory authority deserves clarification,” the McCarty/Praeger statement stated in reference to Webb’s remarks in the Reuters story. “States have full authority to establish their own exchanges, partner with the federal government, or defer to the federal government. Although the PPACA sets forth minimum standards, the states have the opportunity to regulate and enforce their own market rules, including rate and form approval. The NAIC continues to advocate for maximum state authority and flexibility for those states implementing ACA.”

The NAIC is a body that has many members, of all political persuasions at the state level, and nothing has made this more clear in recent years than PPACA, where commissioners, often under direction from their governors have tussled with issues from the medical loss ratios to the creation of state health insurance exchanges.

Some at the NAIC might want to switch “from a ‘we’re screwed’ mode to saying affirmatively that they will continue to handle the same functions they do now, like reviewing products, advising consumer, handling complaints, licensing agents and so forth,” said the federal health care official.

Webb was out of the office this week and could not personally be reached.


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