All of this raises alarms with insurance regulators, especially in states with strong regulations. Will reform bring wave after wave of schlocky policies, and lots of angry policyholders with little recourse? Consumer groups, perhaps overly distracted by the public plan commotion, haven’t voiced much opposition—at least none that has shown up in the media. For that matter, press stories dissecting what could happen if insurers can pick and choose which rules to live under have been few and far between. No doubt it’s too in-the-weeds for TV, or perhaps its importance has escaped newspapers scrambling to stay on top of Harry Reid and his sixty votes.
Kaiser News Service did a Q and A primer on the subject that was far too wonky for ordinary consumers. It was a classic “he said-she said” story: Republicans argue this; advocates argue that. One point the story made: “Regulation is important, critics of the GOP proposal say.” Duh!
The Los Angeles Times version was a bit more informative, but way too “inside baseball” for average Times readers. One point it made: “In California, for instance, insurers must comply with prompt claims payment laws.” What the heck does that mean for readers in Pasadena?
What we need now is a deep look at the protections themselves in some of the states with strict regulation, and what consumers in those states have to lose if they buy policies from one of the insurance marauders. Those looking for a fresh angle might consider an drawing an analogy with the banks that embarked on a successful crusade to get out from under state banking laws. A court decision allowed banks to charge the rate set in the state where they were chartered to all of their customers nationwide. Major banks ran quickly to set up shop in states that allowed them to charge customers the highest possible rates. The competition this brought destroyed consumer protections that had been hard won in many states and left consumers defenseless against aggressive banking practices. What insurance crisis lurks down the road ?
The individual market is where consumers most need protection. Both the House and Senate recognize that. Both bills say that policies sold across state lines must disclose clearly and conspicuously that a policy may not be subject to the laws and regulations of the state where its buyers live. How many consumers know what that means? Buried somewhere in the fine print might be language that says the rules of Wyoming apply. What insurance buyer knows what those rules are?
A few years ago, the Florida state legislature required such language on association policies, a special type of out-of-state policy, being sold in Florida. One candid agent told me: “Agents tell people who ask about it: ‘don’t worry about that language. It doesn’t mean much.’ It really hasn’t caused consumers to run screaming from the room.” So much for disclosure—even with large type.