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Regulatory and Health Care Reform Must Tap State Expertise

Source: NAIC

Posted on 22 May 2009

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The state-based insurance regulatory system has remained a constant in an otherwise erratic economic climate. That was the key message conveyed this week when state insurance regulators visited members of Congress to highlight the part of the regulatory system that has consistently worked.

More than 35 state insurance commissioners joined National Association of Insurance Commissioners (NAIC) Chief Executive Officer Dr. Therese M. (Terri) Vaughan for meetings with members of Congress to discuss insurance regulatory reform. Commissioners also heard from Congressman Barney Frank (D-MA), chairman of the House Committee on Financial Services on his views for financial regulatory reform; from Health and Human Services Secretary Kathleen Sebelius on health insurance reform; and from Congressman Earl Pomeroy (D-ND) on his perspective as a former NAIC President and North Dakota Insurance Commissioner.

During the meetings, Dr. Vaughan and state regulators stressed that any reforms must provide consumers with the time-tested protections of the current national system of state insurance oversight.

“It is imperative that we preserve and build upon the successful model of our national state-based regulatory system,” said Dr. Vaughan. “The American people want more financial stability, not less. Reform proposals must ensure consumers have accountable and local regulators who can provide continued stability despite these challenging economic times. State insurance regulators work hard every day to make sure that insurers honor their promises to policyholders.”

“Any reform framework must integrate, but not displace our current state-based system of insurance regulation,” she continued. “It must serve to further safeguard the assets of the insurance companies these regulators oversee so the companies can meet their obligations to the individuals and businesses who, as policyholders, have put their trust in them. We have continually improved and strengthened the state insurance regulatory system for more than 150 years.”

NAIC President and New Hampshire Insurance Commissioner Roger Sevigny said the visits were designed to ensure careful consideration of reforms to the nation’s financial services regulatory structure.

“As Congress works to address the current financial turmoil, we want to make sure the comprehensive national system already in place – the existing state-based insurance regulatory system – is given full consideration and review,” Sevigny said.

Sevigny further noted that, as a whole, the business of insurance has not posed systemic risk to the nation’s economy, instead providing a source of relative calm in an otherwise turbulent time. State insurance solvency oversight has kept insurance companies stable and protected policyholders from the worst of the financial meltdown, and state regulators continue to provide a local response to consumer issues at no cost to federal taxpayers.

“While we agree that reforms are needed, we believe that federal and state regulators should work together in a way that continues to protect consumers and promote financial stability. There are areas in which we might need federal assistance, but that assistance should streamline the strong state-based regulatory framework — not supplant it with a new federal bureaucracy,” Sevigny said.

State insurance regulators also shared with members of Congress the NAIC principles for health insurance reform, which stress substantial experience and expertise of the states in the crafting of federal legislation.

“States already have many patient protections, solvency standards and fraud prevention programs in place that should not be preempted by the federal government,” said Kansas Insurance Commissioner Sandy Praeger, who also chairs the NAIC’s Health Insurance and Managed Care Committee.

We encourage the development of broad standards rather than prescriptive rules wherever possible to maximize state flexibility to implement reforms in a manner that is responsive to local and regional market conditions. States must be allowed to go beyond the minimum standards to protect consumers.”