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April 25
09:13 2017

Public Policy Analysis & Opinion

Commissioners raise international concerns, oppose national health insurance sales

Late in the winter of 2017, the National Association of Insurance Commissioners (NAIC) released several statements that merit attention.

Market share

On March 1, the NAIC released two sector-level reports on “market share information indicating the degree of market concentration in lines of business and identifying leading insurance writers.” The NAIC will publish final reports this summer that will contain more detailed analysis.

The property/casualty report contains cumulative market share data for the following lines of business: personal auto, commercial auto, workers compensation, medical professional liability, homeowners, and other liability (excluding auto liability).

The life/fraternal market share report contains cumulative market share data for life; annuity considerations; and the aggregate total of life insurance, annuity considerations, deposit-type contract funds, other considerations, and accident/health insurance.

Both reports include countrywide direct written premium for the top 25 groups and companies, as reported on the state page of the annual statement for insurers that report to the NAIC.

International concerns

The NAIC expressed concern over international insurance dealings in Congressional testimony delivered on February 16. The NAIC petitioned Congress in opposition to a “negotiated covered agreement.” According to an NAIC public statement, these agreements concern “a specific type of international agreement, defined by the Dodd-Frank Act, negotiated jointly by the U.S. Treasury’s Federal Insurance Office (FIO) and the United States Trade Representative (USTR) with foreign authorities.”

“The NAIC is very concerned with the disparate treatment some EU jurisdictions are imposing on U.S. insurers, and is committed to working with Congress and the administration to address this important issue,” testified Wisconsin Insurance Commissioner Ted Nickel, who serves as NAIC president.

The NAIC’s latest intervention in international trade comes as powerful members of the House of Representatives continue to call for the Government Accountability Office (GAO) to investigate NAIC’s international activities.

Commissioner Nickel continued, “While a covered agreement is one way to resolve these issues, we oppose this one. We urge Congress and the administration, with the direct involvement of the states, to expeditiously reopen negotiations with the EU to reach an agreement which brings finality to these issues, and better protects U.S. consumers, insurers, and the state regulatory system.”

Leigh Ann Pusey, president and chief executive officer of the American Insurance Association (AIA), testified in support of the negotiated covered agreement framework. “AIA believes that the new international agreement on insurance and reinsurance prudential measures is a win for the industry and for the U.S. system of insurance regulation.”

According to Pusey, the covered agreements give “international recognition to the state-based insurance regulatory system and provide U.S. insurers and reinsurers the badly needed certainty that they will no longer face discriminatory regulatory measures in the EU.”

Pusey further testified that the covered agreements set “a valuable precedent that will protect the state regulatory system from future attempts to import inconsistent or conflicting international regulatory standards.”

There is no unified industry position on this issue. Take, for example, the viewpoint of Charles Chamness, president and chief executive officer of the National Association of Mutual Insurance Companies (NAMIC).

Chamness stated: “NAMIC has long had serious concerns about the use of an international trade negotiation process to alter or preempt the state-based system of insurance regulation. We have argued that the USTR and the FIO should exercise such authority only if they determine that extreme circumstances demand it, and then only after full and transparent due process, including consultation with state legislative and regulatory authorities and public exposure of the policy objectives of the negotiations.”

Commissioner Nickel seemed to seek a middle ground between industry factions when he left the door open to some construction of covered agreement. The commissioner said: “State regulators can support an agreement which achieves clear and permanent mutual recognition for our time-tested U.S. insurance regulatory system, includes meaningful state regulator input and transparency in its drafting and execution, and is unambiguous in its terms and finality.”


Because the debate over healthcare policy remains as fluid as a Louisiana bayou, this column demonstrated the disciplined restraint to hold off on commenting on the issue.

On January 24, the NAIC leadership wrote to Congressional leaders who hold committee jurisdiction over healthcare policy. The NAIC asked for a role in the reconsideration of the Affordable Care Act. The commissioners wrote: “Through its open, collaborative process, which allows all stakeholders the opportunity to provide input and debate important issues, the NAIC has developed model laws and regulations that have been the standard for state regulation of health insurance. Such models were used by Congress to develop the Health Insurance Portability and Accountability Act (HIPAA).”

The commissioners also could have cited the NAIC’s experience of writing Medicare supplement standards and rules in the 1980s and 1990s. In those instances, Congress charged the NAIC

with creating a work product before a date certain. During the NAIC’s drafting process, representatives of federal agencies and the GAO monitored those activities. The NAIC submitted its recommendations to the federal agency with jurisdiction over the topic, which could accept, reject, or amend the work product under Congressional oversight.

The NAIC letter reminded the Congressional leaders that the association has many work products that already possess the approval of various special interests. “The NAIC has adopted models on key issues such as grace periods, rating rules, grievance and external review procedures, consumer protections, and network adequacy. In addition, the NAIC has published White Papers on a variety of health insurance regulation issues and on options for modifying the Medical Loss Ratio (MLR) to promote use of agents and brokers.”

The commissioners did not want to see a federal law that might establish a federal policy. “One of the common factors in the NAIC models is state flexibility.”

In short, the NAIC explained that its models could be gutted, watered down, bent, spindled, folded, or mutilated in a multitude of ways to satisfy the whims of powerful parochial interests.

“While the models seek to establish solid standards that will improve consumer protections and promote competitive markets, it is acknowledged that there are many details that must be left up to the states.” (And who really pays any attention to what is done late at night in some state capital?) “State governors, legislators and regulators know best what will work in their unique markets, and what will not work.” (After all, under state-based regulation of insurance, the uninsured population grew to nearly 50 million people, and numerous products made people feel like they had insurance without any real transfer of risk!)

What could go wrong?

In direct opposition to a bedrock policy proposed by the Trump Administration, the NAIC letter warned against allowing the unlicensed sale of health insurance products across state lines.

Both as a candidate and since arriving in Washington, Trump has sung the praises of “erasing the state lines” as a means of increasing competition and expanding availability of health insurance. Never mind that the history of the business of insurance is punctuated by colorful stories of when “competition” from boiler rooms or shadowy entities undermined the insurance mechanism.

“We continue to see proposals that would preempt state licensing requirements and, thus, consumer protections by allowing sales across state lines by federal edict, without proper discretion for the states to form compacts between themselves,” explained the commissioners.

In a separate channel of Congressional communication delivered on February 1, Tennessee Insurance Commissioner Julie Mix McPeak reminded a Senate panel that insurance markets do not like uncertainty. The commissioner stated:  “First, I would like to share with you the most important message that I will have for you today: Insurance markets do not respond well to uncertainty. To the extent possible, as you consider ACA reforms, it will be very important to remain transparent, as today’s hearing suggests, to engage stakeholders, and to minimize surprises in our regulatory system.”

In the kind of thoughtful words that are rarely heard in the U.S. House of Representatives anymore, the Tennessee commissioner recounted her state’s experience with the ACA. The complete testimony is available for download at

Commissioner McPeak closed her testimony with two points: “First, states should be empowered to regulate our markets. Additional flexibility from Congress and the Administration will help the states tailor insurance regulation to our unique markets and medical and insurance communities.”

In addition, the commissioner urged the committee to continue to exhibit transparency in the policy process. “Markets need clarity, and opportunities like this hearing today can help provide that clarity so that we do not see carriers exiting markets in bulk when they do not have an idea of what to expect in terms of regulation over the next several years.”

The author

Kevin P. Hennosy is an insurance writer who specializes in the history and politics of insurance regulation. He began his insurance career in the regulatory compliance office of Nationwide Insurance Cos. and then served as public affairs manager for the National Association of Insurance Commissioners. Since leaving the NAIC staff, he has written extensively on insurance regulation and testified before the NAIC as a consumer advocate.

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