NU Online News Service, Jan. 8, 4:04 p.m. EST

The National Association of Insurance Commissioners has sent a letter to congressional leaders opposing the creation of a federal health choices commissioner.

In the past the NAIC has voiced support for the federal government's health care reform efforts, particularly leading up to and after Vice President Joe Biden's speech before the association at its 2009 Fall National Meeting in National Harbor, Md.

The letter continues that support, but notes some concerns with the current plans and offers recommendations to federal lawmakers.

Addressed to House Speaker Nancy Pelosi, D-Calif., and Senate President Harry Reid D-Nev., it states, "We oppose the creation of a new federal Health Choices Commissioner and Health Choices Administration with authority to enforce provisions of this act in states whose laws meet federal minimum standards. This dual regulation is likely to create unnecessary cost and confusion and produce no added value."

Instead, the NAIC said it recommends health insurance exchanges be established and administered at the state level with the flexibility to meet the needs of local markets and consumers.

The letter asserts, "State insurance regulators have extensive experience and expertise in regulating health insurance. They are also closer to consumers and have a better understanding of the markets they regulate than a single national regulator in Washington, D.C. could have. For these reasons, consumers are best served by insurance regulation that is located firmly at the state level."

The letter offers conditional support for provisions in the House and Senate health care reform bills that would eliminate preexisting condition exclusions and annual and lifetime limits and end the practice of rating policies based upon gender and health.

"The NAIC supports these measures, if they are paired with an effective individual mandate to mitigate the risk of adverse selection," NAIC wrote.

The NAIC letter calls for more robust penalties than those proposed to ensure that young, healthy individuals do not drop out of the insurance market. "We are especially concerned with the minimal sanctions in the Senate version."

"Reforms such as guaranteed issue, community rating and the elimination of preexisting condition exclusions can encourage young, healthy individuals to wait until they get sick to purchase health insurance coverage, especially in the individual market. While both bills include provisions designed to mitigate this risk, we are concerned that overly broad exemptions and insufficient penalties will prompt many to opt out of insurance coverage, endangering the viability of the entire reform package," said the letter.

The NAIC advised that especially in the early years of implementation, "an effective mandate will be essential."

Other recommendations in the letter include:

o Avoid any provision that could separate the regulation of premiums from the regulation of solvency.

o Allow the federal government to quickly shut down fraudulent multiple employer welfare arrangements (MEWAs) that falsely claim to be exempt from state regulation.

o Ensure that the effective dates of provisions in the new law are coordinated with implementation of the individual mandate and subsidies in order to mitigate the risk of adverse selection.

o Insist that nationally sold plans be subject to all statutes and regulations that apply to other plans being sold to the same population and that they remain subject to the oversight of state insurance regulators.

The letter was signed by NAIC President and West Virginia Insurance Commissioner Jane L. Cline; Susan Voss, NAIC president-elect and Iowa insurance commissioner; Kevin McCarty, NAIC vice president and Florida insurance commissioner; Kim Holland, NAIC secretary-treasurer and Oklahoma insurance commissioner; Sandy Praeger, NAIC Health Insurance & Managed Care Committee chairman and Kansas insurance commissioner; and Joel Ario, NAIC Health Insurance & Managed Care Committee vice-chair and Pennsylvania insurance commissioner.