The insurance commissioners

As part of the price for opting out of the laws controlling anti-trust behavior across state lines, the insurance industry agreed to accept regulation by each state. This pushed every state to create an Office or Department of Insurance, each one run by a Commissioner appointed by the state to manage the local insurance industry. This has led to a patchwork of different regulations and practices between the states and also helps explain why the premium rates can vary significantly between one state and the next. For example, in some Democrat states, there's a strong emphasis on consumer protection. This pushes up the administrative costs for the insurers and so produces higher premiums. In turn, this lack of consistency has prompted suggestions there should be more general standards agreed by the Commissioners. They have a National Association which includes all the Commissioners from the 50 US states, Washington DC and the five US territories. This is a useful talking shop and it has produced a number of policy guidelines and model laws which have gained some acceptance by the policymakers from the individual states. Unfortunately, without any power, the NAIC can do no more than suggest. States do not have to learn from each other. This is politics as usual.

When it comes to health, there's a slight difference in approach with the majority of Commissioners arguing they should have the power directly to regulate the premium rates of their local insurers. The reason for this is easy to state. In the majority of other countries around the world, the healthcare service is funded by the state. You may well think this is socialism or communism gone mad, but this is the way the rest of the world believes best. The result is that there's either a specific element of the tax burden identified as paying for "free" access to medical care or the care is provided out of the general tax revenue. In the US, all the people who are employed or who have income sufficient to pay the premiums, gain access to treatment. But when people turn up without valid insurance at an emergency room, the cost of treatment is added into the overheads of the hospital and covered by the bills sent out to the insurance companies. So, in effect, those of us who pay private insurance payments are actually paying the equivalent of a tax. If we voter don't like a political party for increasing taxes, we can vote them out of office. Insurance commissioners should always have the power to prevent unreasonable increases in health insurance rates.

Yet that is not always the case. For example Dave Jones, the Commissioner for California, has no right to prevent health rate increases. When Blue Shield recently announced it was going to increase rates by up to 59%, all he could do was mount a political campaign to persuade the company to delay the increase. Fortunately, the public outcries have been sufficient to persuade insurers not to make excessive increases, but there's no logic to the current position. Dave Jones can now refuse increases for auto and homeowners policies. It's not at all clear why health insurance should be treated differently.