Many states lack authority on new insurance rules: report

Nearly half of state insurance departments lack the power to fully enforce new insurance regulations that take effect next year under healthcare reform, raising the possibility of federal oversight of the rules when a state fails to do so, according to a newly released report.

Twenty-two states surveyed by the Commonwealth Fund have limited or no authority to uphold the new regulations, including a popular provision that prohibits insurers from denying coverage to individuals with existing medical conditions. The report did not list the states and researchers declined to release a list, saying respondents were promised confidentiality.

The Patient Protection and Affordable Care Act requires federal officials to step in when states do not “substantially” enforce health insurance rules.

Katie Keith, an assistant research professor with the Center on Health Insurance Reforms at the Georgetown University Health Policy Institute and one of the study's authors, said states without authority to enforce some or all of the insurance regulations would lose the ability to issue interpretation and guidance on the rules.

In addition to the ban on refusing to insure those with a pre-existing condition, the new health reform rules also require insurers to accept any customer; limit a waiting period for new benefits to no more than 90 days; meet standards for essential benefits; and limit the amount households must pay for deductibles and other out-of-pocket costs.

The rules also require that at least 60% of patients' expenses for care covered under a health plan be paid for by insurance instead of by patients, a percentage known in the insurance industry as actuarial value. They also set new guidelines for how much insurance rates may vary based on certain factors, such as age, as well as setting limits on the types of factors that can be considered.

The new market rules include some of the health reform law's widely known and popular provisions. The rule that stops insurers from denying benefits to those with pre-existing conditions was viewed favorably by 60% of respondents in the Kaiser Health Tracking Poll last April. The poll was a nationally representative survey of adults.

Federal enforcement may also be more cumbersome in cases where federal officials must first prove that the state did not substantially enforce the law, said Timothy Jost, a health law professor with the Washington and Lee University School of Law. Federal officials may also step in when states say outright they will give up oversight.

Some states have adopted new laws or regulations that expand insurance officials' authority to uphold the new rules. In the past three years, 11 states have enacted new laws or created new regulations to give insurance regulators authority to enforce the new rules, the survey found. Keith said for those states that have not yet acted, legislative sessions in the coming year would be critical.

Eight states reported they had existing authority to fully enforce the rules. Ten states did not respond to the survey.