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Senate plan is called too empowering to health insurers

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By David S. Hilzenrath
Washington Post Staff Writer
Thursday, December 17, 2009; 12:42 AM

The Senate health-care bill could enable insurers to avoid some of the strongest consumer protections and benefit requirements adopted by state governments, Democratic lawmakers from Maine and California say.

The bill would allow insurers to sell policies across state lines, subject to the laws and regulations in a state of the insurers' choosing, 31 Democratic House members said in a letter Tuesday to House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.).

"Practically speaking, insurers will domicile their plans in states with less stringent regulations and market to the population in more protective states like ours, just like nationally chartered banks have done," the House members led by Jackie Speier (D-Calif.) wrote on behalf of lawmakers from the two states.

The arrangement "will lead to a race to the bottom in insurance regulation and severely threaten the important and often lifesaving protections the residents of our states enjoy," the House members wrote.

The lawmakers were referring to a provision allowing states to enter so-called interstate compacts for the sale of insurance.

Advocates have said that interstate sales could increase competition and reduce premiums. Critics say any cost savings could come at a price. Consumers may not realize until it is too late that they have bought thinner coverage, members of advocacy group Consumer Watchdog said.

The Senate bill would put some hurdles in the way of any "race to the bottom."

First, states could join interstate compacts only by enacting a state law. Thus, if a state government jeopardized its own insurance regulations by entering a compact, it would be by choice. That could pave the way for future lobbying battles in state capitals.

Second, insurers would have to comply with federal requirements promulgated under the bill. Many of those have yet to be determined and would be established through regulation after the bill is enacted.

Third, insurers selling across state lines would remain subject to certain regulations of the state in which the purchaser of the coverage resides. Those would include regulations involving "market conduct, unfair trade practices, network adequacy, and consumer protection standards," the bill says.

Jerry Flanagan, health-care policy director at Consumer Watchdog, said that language includes wiggle room for future lobbying when regulations are written to implement the bill. The language does not appear to protect state requirements dictating what benefits health plans must provide, Flanagan said.

Speier and the other House Democrats also criticized the House bill, saying it would allow states that join a compact to decide among themselves which state's regulations will govern a plan. That "could make the regulations in the consumer-friendly state irrelevant," they wrote.

While the authors of the letter focused on the interstate compact provision, another provision of the Senate bill could achieve a similar result. It would allow insurers to offer nationwide plans, subject to the benefit requirements of only one state. The benefits would have to meet minimum federal standards established under the bill.

The bill explicitly recognizes the possibility that these nationwide plans could omit benefits required by some states. In such cases, it would require only that the insurer notify consumers "that the policy may not contain some benefits otherwise mandated."

The Senate bill would allow states to opt out of nationwide plans they find unsatisfactory.

Three key senators in the health-care debate -- Olympia J. Snowe (R-Maine), Mary Landrieu (D-La.) and Blanche Lincoln (D-Ark.) -- have proposed an amendment that would prevent states from opting out of nationwide plans.

By strengthening the national plans' provisions, "this amendment will guarantee American entrepreneurs have access to plans with a uniform benefit package that achieves both quality coverage and lower costs by injecting new competition into stagnant state insurance markets," Snowe said in a news release Wednesday describing the amendment.


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