As Six-Month Implementation Milestone Approaches, Where do States Stand on Insurance Reforms?

September 23, less than two weeks away, is federal health reform’s half birthday. It is also the date on which many new health insurance market requirements go into effect, dubbed by the administration as the “patient bill of rights”:

• the prohibition against preexisting condition exclusions for children
• the extension of dependent coverage
• the prohibition against lifetime health insurance coverage limits
• the restriction of annual coverage limits
• the limitation on rescissions
• uniform explanation of coverage documents and standardized definitions
• the provisions guaranteeing direct access to certain types of providers and access to out-of-network emergency care
• prohibition of discrimination based on salary
• required coverage of certain preventive health services
• provisions ensuring quality of care, including quality reporting and wellness programs
• provisions to bring down the cost of coverage, including revenue reporting requirements for plans
• internal and external appeals

A recent New York Times article highlighted that many states believe they do not have the ability to enforce these provisions. Secretary Sebelius issued a letter to states on July 12, 2010, asking governors to survey their state’s ability to enforce the regulations. HHS also sought the input of the National Association of Insurance Commissioners (NAIC). The NAIC surveyed states to determine their enforcement capabilities, and in a letter to Secretary Sebelius, indicated that states may actually ensure compliance through existing laws as well as other state mechanisms. According to the NAIC survey, almost half of the states have the ability to enforce the federal provisions through either existing state law or general powers granted to the insurance commissioner. In addition, almost all states have the ability to use their form approval process, investigative powers or market conduct examination authority to force insurers to comply with the federal law.
A handful of states, including Maryland, New Hampshire and North Carolina, recently passed legislation giving them explicit authority to implement these federal health reform provisions. Maryland’s law spells out that the insurance protections apply to all health plans. The North Carolina and New Hampshire laws specifically give the insurance commissioner the power to enforce the provisions of the law.
While the federal health reform law allows states to adopt laws to enforce these greater consumer protections, if states cannot or will not enforce the new requirements, their law will be preempted and the regulatory authority will fall to the federal government, as codified in 42 USC §300gg-22 . PPACA §1321(c)(2) amends this section of the code to include regulation of the individual market. Ultimately, the new insurance market regulations will likely be enforced through a combination of federal and state laws.