State control of health insurance may be the issue that derails health reform

June 5, 4:07 PMHealth Care ExaminerSheila Guilloton

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Health insurance costs and availability are now controlled by the State. 
Will the states be willing to cede this control to the federal govenment
to facilitate health reform?

Most consumers of health insurance do not understand the kind and quality of health insurance that they can purchase is mostly governed by the state in which they live.  All the talk about health reform has neglected to focus on the fact that each state has its own Insurance Department and each state has almost complete control over what health insurance is sold in the state, what it costs and how it is administered.

Will the states be willing to cede the authority they currently have to the Federal Government in order to facilitate health reform? Probably not.

What do the states control individually? Quite a bit, especially in the small group and individual market.

Generally the state regulates individually purchased health insurance. The rules in one state are not necessarily the same as those in any other state. Each state also regulates employer based plans that are fully funded, that is, the insurance carrier pays everything after any deductible or co-pay.

Many Americans seem to have focused their attention on health care reform and what is being proposed in Washington.  But a federal solution belies the fact that it is the state government that controls much of what happens to both the cost and availability of health insurance in any given state.

The truth is that state officials have much more to do with health insurance costs than almost anyone else. Each state has a critical role because the state is involved with both the supply and demand side of health insurance.

On the supply side, the State Insurance Department requires an insurance company that wants to sell its products in that state to meet the licensing criteria set by the state. The state licenses health care professionals and controls the supply of medical facilities through various  “certificate of need laws”  that determine the number of hospital beds that should be made available in a given geographic area. 

On the demand side, the state makes the determination of income eligibility for public programs and mandating health benefits including procedures and treatments. The more mandates a states adds to health insurance to more likely it will be that smaller insurance companies will simply cease to do business in that state. Mandates differ greatly from state to state.

Is it really logical to assume that each of our sovereign states will simply turn over to the federal government the control and regulation of health insurance within the state?   Unless the federal government plans to be the payor, it is not likely that the states will give up the control they currently exercise.

For more info: You can read the reports of the Heritage Foundation which deal extensively with the role of state govenment in health insurnace.