Private group would make rules under healthcare bill

Healthcare overhaul legislation moving through the Senate Finance Committee would put crucial rule-making authority in the hands of a private association of state insurance commissioners that consumer advocates fear is too closely tied to the industry.

The National Assn. of Insurance Commissioners currently writes model laws and regulations that individual states are free to accept or discard. Under the bill by Sen. Max Baucus (D-Mont.), it would craft a model rule governing “health insurance rating, issuance and marketing requirements” that would become “the new federal minimum standard without any further congressional action.” States would be permitted to deviate from the standards only by appealing to the Department of Health and Human Services.

In effect, the bill would allow the group to write many of the new rules on issuing and marketing insurance to millions of uninsured Americans who would be required to purchase policies.

“The NAIC is clearly an organization that is dominated by the insurance industry,” said California Lt. Gov. John Garamendi, a former state insurance commissioner.

“I think the NAIC has an important role to play. They have a lot of knowledge, but I would be concerned about giving them authority to set the rules.”


The group’s 56 members are public officials -- the elected or appointed chief insurance regulators of the states, the District of Columbia and five U.S. territories -- responsible for enforcing laws that vary widely in rigor depending on jurisdiction.

But the association itself is a private organization not subject to open meetings and public records law, noted J. Robert Hunter, insurance director of the Consumer Federation of America and a former Texas insurance commissioner.

“They have no transparency,” he said.

Sandy Praeger, insurance commissioner of Kansas and chairwoman of the National Assn. of Insurance Commissioners’ healthcare committee, defended the association’s proceedings as “deliberative and open” and brushed off concerns about its ties to insurers.

“I don’t view our position as too close to the industry,” she said. “It’s tapping existing expertise.”

In giving rule-writing authority to the association, Baucus would avoid creating a new federal bureaucracy, potentially heading off a source of opposition to the bill.

A Senate Finance Committee aide said in an e-mailed statement that “Sen. Baucus believes keeping all stakeholders at the table will result in passing the best bill possible, and he worked with the NAIC as well as a wide variety of other stakeholders.”

A rival, costlier bill advanced by Rep. Henry A. Waxman (D-Beverly Hills) would establish a “health choices” commissioner’s office.

Putting the rule-writing pen in the association’s hands would be “totally inappropriate,” said the Consumer Federation’s Hunter. “The NAIC is not accountable. [Federal lawmakers] don’t have any control over them.”

Much of the criticism, particularly from consumer groups, stems from the departure of top association officials for plum industry jobs.

In 2004, the president of the National Assn. of Insurance Commissioners quit midterm to head the Property & Casualty Insurers Assn. of America.

Last year, one official left to become chairman of Swiss Re America Holding Corp., a division of global reinsurance giant Swiss Re. Another left to lead the Insured Retirement Institute, a Washington-based trade group that promotes the use of insurance in retirement portfolios.

Praeger said she saw benefits in such mobility.

“I kind of look at it as seeding the industry with good regulators,” Praeger said.