During the health care debate, one of the biggest question marks that I had was whether the insurance regulations, which would be handled by the states and not a federal regulator, would be enforceable. Countless examples of insurance companies getting off scot-free, or of state insurance commissioners lacking the will or the resources to stop them, raised my concern. Now, Robert Pear and Kevin Sack at the New York Times add to that concern by discovering that some state insurance commissioners don’t even have the authority to uphold the regulations in the Affordable Care Act.
Faced with the need to review insurance rates and enforce a panoply of new rights granted to consumers, states are scrambling to make sure they have the necessary legal authority to carry out the responsibilities being placed on them by President Obama’s health care law.
Insurance commissioners in about half the states say they do not have clear authority to enforce consumer protection standards that take effect next month.
Federal and state officials are searching for ways to plug the gap. Otherwise, they say, the ability of consumers to secure the benefits of the new law could vary widely, depending on where they live.
We already see this in the wild variations of the Medicaid law, which relies on state participation in the funding. After a review by the federal government, California, Florida, Hawaii, Michigan, Nebraska, Oklahoma, Virginia and Wyoming acknowledged they do not have full authority to enforce the succession of laws associated with the ACA.
In some states, legislatures have prepared for this by passing laws to explicitly give authority to their state insurance commissioners to enforce these consumer protections. Maryland, North Carolina and New Hampshire completed this in the past several months. But do you think Oklahoma will? Or Wyoming? In order to actually enforce the law, they’ll have to just, um, persuade insurance companies to do the right thing. Or, they’ll use more general laws banning deceptive trade practices, which insurers are sure to fight in court.
The original sin here was to outsource regulation of the ACA to the states, probably because of the money it would have taken to set up a federal agency. The Obama Administration has some money through the Health and Human Services Department that they will offer to states to help them with rate reviews and other enforcement capabilities (that could happen as early as today), but funding is less the issue than ability under the law to enforce. And this was completely predictable.
Meanwhile, read from Consumer Watchdog about the street activism happening at the National Association of Insurance Commissioners meeting, where they are putting in place many of the rules. Sadly, the lobbyist armies are out in bigger force:
Unbelievably, the NAIC may agree in a vote (probably Tuesday) to let insurance companies deduct their sales fees–i.e. payments to insurance brokers for selling you a policy– before calculating the medical care ratio. This is a multibillion-dollar amount nationwide, and brokers get paid every year that you keep a policy.
If that happens, it will amount to a sellout of major proportions. I’ll be delighted to eat every word of this if the rumor proves wrong, but we heard yesterday that some commissioners were already backing the industry on broker fees.
If the insurance lobby wins on all of these lobbying issues, the number they publish for the percentage they are spending on health care will be meaningless. Health reform will fail from the beginning to contain insurance costs.
What the NAIC sends to HHS will be a proposal, not a done deal. HHS has every right to send back the lobbyist language and demand regulations that actually do what the law asked–to make insurance companies operate more efficiently, with less overhead, maybe some smaller CEO salaries, and no dedicated right to ever-rising profits.
UPDATE: Jon Cohn managed to write a 1,600-word piece on implementation of the Affordable Care Act without mentioning this issue.