NU Online News Service, Jan. 8, 4:04 p.m.EST

The National Association of Insurance Commissioners has sent aletter to congressional leaders opposing the creation of a federalhealth choices commissioner.

In the past the NAIC has voiced support for the federalgovernment's health care reform efforts, particularly leading up toand after Vice President Joe Biden's speech before the associationat its 2009 Fall National Meeting in National Harbor, Md.

The letter continues that support, but notes some concerns withthe current plans and offers recommendations to federallawmakers.

Addressed to House Speaker Nancy Pelosi, D-Calif., and SenatePresident Harry Reid D-Nev., it states, "We oppose the creation ofa new federal Health Choices Commissioner and Health ChoicesAdministration with authority to enforce provisions of this act instates whose laws meet federal minimum standards. This dualregulation is likely to create unnecessary cost and confusion andproduce no added value."

Instead, the NAIC said it recommends health insurance exchangesbe established and administered at the state level with theflexibility to meet the needs of local markets and consumers.

The letter asserts, "State insurance regulators have extensiveexperience and expertise in regulating health insurance. They arealso closer to consumers and have a better understanding of themarkets they regulate than a single national regulator inWashington, D.C. could have. For these reasons, consumers are bestserved by insurance regulation that is located firmly at the statelevel."

The letter offers conditional support for provisions in theHouse and Senate health care reform bills that would eliminatepreexisting condition exclusions and annual and lifetime limits andend the practice of rating policies based upon gender andhealth.

"The NAIC supports these measures, if they are paired with aneffective individual mandate to mitigate the risk of adverseselection," NAIC wrote.

The NAIC letter calls for more robust penalties than thoseproposed to ensure that young, healthy individuals do not drop outof the insurance market. "We are especially concerned with theminimal sanctions in the Senate version."

"Reforms such as guaranteed issue, community rating and theelimination of preexisting condition exclusions can encourageyoung, healthy individuals to wait until they get sick to purchasehealth insurance coverage, especially in the individual market.While both bills include provisions designed to mitigate this risk,we are concerned that overly broad exemptions and insufficientpenalties will prompt many to opt out of insurance coverage,endangering the viability of the entire reform package," said theletter.

The NAIC advised that especially in the early years ofimplementation, "an effective mandate will be essential."

Other recommendations in the letter include:

o Avoid any provision that could separate the regulation ofpremiums from the regulation of solvency.

o Allow the federal government to quickly shut down fraudulentmultiple employer welfare arrangements (MEWAs) that falsely claimto be exempt from state regulation.

o Ensure that the effective dates of provisions in the new laware coordinated with implementation of the individual mandate andsubsidies in order to mitigate the risk of adverse selection.

o Insist that nationally sold plans be subject to all statutesand regulations that apply to other plans being sold to the samepopulation and that they remain subject to the oversight of stateinsurance regulators.

The letter was signed by NAIC President and West VirginiaInsurance Commissioner Jane L. Cline; Susan Voss, NAICpresident-elect and Iowa insurance commissioner; Kevin McCarty,NAIC vice president and Florida insurance commissioner; KimHolland, NAIC secretary-treasurer and Oklahoma insurancecommissioner; Sandy Praeger, NAIC Health Insurance & ManagedCare Committee chairman and Kansas insurance commissioner; and JoelArio, NAIC Health Insurance & Managed Care Committee vice-chairand Pennsylvania insurance commissioner.