NU Online News Service, Feb. 26, 3:11 p.m.EST

WASHINGTON–President Obama's proposal for a federalagency to regulate health insurance rates will in practice applyonly in states where the regulators lack full rate reviewauthority, state insurance regulators said.

That reaction by the leadership of the National Association ofInsurance Commissioners, in the wake of the president's health caresummit on Thursday, came in a statement followed by a pressconference today.

NAIC members also said they would oppose any multistate compactsor exchanges, which would give insurers regulated in other statesthe authority to sell health insurance across state lines under therules of their state of domicile.

"This misguided proposal would increase premiums for those whoneed insurance the most and eliminate important consumerprotections," the regulators said in a statement during ateleconference given by Jane Cline, NAIC president and WestVirginia insurance commissioner; Kim Holland, Oklahoma insurancecommissioner; and Sandy Praeger, Kansas insurance commissioner.

Ms. Praeger, chairman of the NAIC's Health and Managed CareCommittee, said, "We are unified against selling across statelines."

Such activity, she said, would destabilize the market and allowinsurers to "cherry pick" a regulatory jurisdiction that offeredthe fewest restrictions

"It would also fragment the insurance market and exposeconsumers to increased fraud and abuse," said the organization'sstatement.

It added, "This concept must be rejected and the decisionwhether to allow, and under what conditions to allow, interstatesales of insurance should be left up to the individual states."

Regarding a U.S. rate regulation agency, NAIC took the positionthat the president's proposal will give regulators in those stateswithout full rate authority the power to ensure that proposed rateincreases are "truly justified and receive a thorough review beforethey become effective," the NAIC officials said.

During the press conference commissioners said they could workwith the Health and Human Services Administration on rates becausethey understand that final rate approval would not be taken awayfrom state regulators.

The comments clarifying the rate regulatory authority proposedin the president's outline Monday were provided by CommissionersCline and Praeger.

They issued the statement clarifying the intent of thepresident's proposal after meeting in Washington with KathleenSebelius, secretary of the Department of Health and Human Services;Sen. Dianne Feinstein, D-Cal.; and Rep. Janice Schakowsky,D-Ill.

In general, the regulators said, "state insurance regulators arevery pleased that the president's overall proposal emphasizesstate-based reforms."

Under the specifics provided by Ms. Sebelius and others, thepresident's proposal includes state-designed exchanges and willprovide "considerable flexibility for states to implement thefederal standards in a way that best meets the needs of theirpopulations," they said.

"We also applaud the insurance market reforms which guaranteethat individuals will be able to purchase insurance even withpreexisting conditions and ensure that individuals are not ratedbased on health status," they added.

However, the NAIC officials said, "we remain concerned about theinadequacy of the individual mandate which could lead to adysfunctional marketplace and higher rates for consumers."

During the press conference the commissioners declared theirsupport for the McCarran-Ferguson Act antitrust exemption forhealth insurers, which, in recently approved legislation by theHouse of Representatives, would be removed.

The states, they said, have plenty of laws on the books toprosecute any attempt at price-fixing, and eliminating data-sharingwould give larger insurers an advantage over smaller firms.