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.

Thanks again Trudy for another provocative piece.
#1 Posted by Hardrada, CJR on Tue 24 Nov 2009 at 01:30 PM
You're welcome.
#2 Posted by trudy lieberman, CJR on Tue 24 Nov 2009 at 05:34 PM
Reminds me of the "right to work" laws in southern states. Yeah, you can "choose" to work, but you won't work for much, and you damned sure can't ask for more.
#3 Posted by Benedict@Large, CJR on Wed 25 Nov 2009 at 05:34 PM
Thanks for this informative piece, Trudy.
Provisions like this is exactly why public option advocates are making such a "commotion." We are being painted as my-way-or-the-highway ideologues by the media and by Dems who can't wait to get this thing out of the way, but in reality we see that the only way to avoid disaster in this HCR exercise is to hold out for a real alternative to predatory insurance companies. We fear that this health care "reform" exercise is going to end up like the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 which was a gift to the credit card companies and an unmitigated disaster for consumers. In fact, three years down the road it turned out to be too, too much of a good thing for the mortgage and credit card industries, when consumers who experienced financial crisis such as unemployment or financial disaster from medical emergencies, but were prevented from declaring bankruptcy, opted to walk away from their mortgages in order to keep paying the credit card debt.
Keep up the good work. Please!
#4 Posted by James, CJR on Thu 26 Nov 2009 at 08:45 AM
"insurance marauders"? An utterly myopic, lop-sided article. Regulations are good, insurance companies bad. Consumers are too dumb to choose for themselves and so shouldn't be given a choice. Let the Nanny State do it for them.
Many regulations are crafted by lobbyists - surely you can see the potential risks in that? And many consumers can't afford to buy the bloated policies mandated by their state (see: Massachusetts). Let's see both sides of this story.
#5 Posted by JLD, CJR on Thu 26 Nov 2009 at 09:15 AM
Insurance marauder is an apt description of a company that bases itself in a state with weak regulations so it can sell cheap, and likely awful, policies to consumers in a tight market.
Regulations are part of consumer protection. You wouldn't want to drive a car nor eat a burger in an unregulated world.
And frankly, after all the loan business that went on from 2002 to 2008, consumers are too dumb to understand the nature of the products they have to buy.
It's in lawyerese and the bank and insurance guys hire really good lawyers.
I don't understand why some people object to the government giving them a hand in that sort of battle.
"How dare you infringe on my right to be violated!"
#6 Posted by Thimbles, CJR on Thu 26 Nov 2009 at 01:06 PM
Let's be honest-health insurers are the ONLY business in America that have routinely caused the deaths of Americans, directly and indirectly- and gotten away with it.The current HCR bill is premised on a virtuous cycle where our massive premiums go directly to political leaders largest campaign contributors and then cycle into ever increasing contributions as our premiums skyrocket. It will cement in place the graft and corruption which has brought American politics to the unconscionable point of being lower than a snakes belly.....
#7 Posted by Scott Carlo, CJR on Thu 26 Nov 2009 at 08:29 PM
Trudy, PLEASE write about WTO GATS Article XXI in this context.
#8 Posted by Michelle Orama, CJR on Mon 18 Jan 2010 at 10:27 PM