Regulators Argue Against New Federal Oversight System for Insurance

State insurance regulators and consumer advocates on Wednesday criticized a proposal by House Committee on Financial Services Chair Michael Oxley (R-Ohio) that would eliminate state regulation on insurance premiums and shift oversight of the industry to the federal government, the AP/Dallas Morning News reports (Werner, AP/Dallas Morning News, 3/31). Oxley's plan would create a council of federal and state officials headed by a presidential appointee to regulate the insurance industry at the national level. Under the legislation, which Oxley said he would introduce later this year, states would be required "to adopt uniform standards and permit the market to determine insurance prices rather than have them determined by regulators as is generally the case now." Oxley said that national regulation would end "the travesty of price controls" for the insurance industry, adding that insurers' profits would increase and consumers' choices would expand under national regulation (California Healthline, 3/18). At a hearing of the House Financial Services Subcommittee on Capital Markets on Wednesday, insurance industry officials applauded Oxley's proposal, saying that federal oversight is needed to set uniform standards in states where "varying approaches and price controls are causing some insurers to leave markets," according to the AP/News. Roger Singer, a Boston insurance executive, noted that there are 550 separate state regulations for filing rates and products. However, Ernst Csiszar, president of the National Association of Insurance Commissioners, said that states are working to reach uniform standards, adding that a federal regulatory approach is "not feasible" because certain rates are determined by local conditions, according to the AP/News (AP/Dallas Morning News, 3/31). Csiszar said that while states have not adequately monitored the insurance industry, shifting oversight to the federal government could "eviscerate the state system" (Treaster, New York Times, 4/1). California Insurance Commissioner John Garamendi (D) said in a letter to Oxley, "I do not believe that a radical reduction of oversight of insurance companies is in the best interest of American consumers. This proposal aggressively attacks insurance rate regulation ... such as that in California." About half of the states currently regulate insurance rates (Werner, AP/San Jose Mercury News, 4/1).