Boost Virginia’s Insurance Industry Oversight
The Virginia Bureau of Insurance, a soft regulatory regime, needs some muscle for the future.
For many Virginians, the federal health care law is not merely a subject for political debate or a promise of better benefits in the future. It’s a reality.
Children are being enrolled for insurance because of a provision that prohibits their exclusion due to pre-existing conditions. Young adults are allowed to remain on their parents’ policies until they turn 26.
The new rules exist in the commonwealth because insurance companies are voluntarily complying with the law. They are policing themselves because the state’s Bureau of Insurance doesn’t have the authority to enforce the federal law.
That’s partly a short-term issue related to the 2010 calendar. The federal law was adopted in March after the state legislature had adjourned. But it’s also a product of a longer-term philosophy in Virginia.
The insurance bureau, part of the State Corporation Commission, has historically been responsible for policy implementation, not policymaking. State leaders have given the agency only modest enforcement powers, and there has been little motivation inside or outside the bureau to put teeth into regulations on rates and other insurance practices.
But a cultural change has already started, and the insurance bureau will need more authority to meet new obligations outlined in federal law.
State insurance regulators are charged with exerting stronger authority over rate changes and must enforce new rules that require large insurers to spend between 80 percent and 85 percent of premium revenue on medical care and quality improvements. The remainder is reserved for administrative costs, advertising and profits. Virginia currently has few rules regarding so-called medical loss ratios, although it does require policies for individuals to spend no more than 40 percent of premiums on administrative functions.
The new regulations on medical loss ratios are scheduled to begin Jan. 1, but several states have already asked for more time to implement them. Nevertheless, it’s hard to argue against the overarching goal, to improve quality and lower costs while keeping premium money devoted to medical care.
Even if the deadline shifts, leaders need to act immediately to give the state bureau adequate powers to ensure that Virginians receive the benefits they need. The timing is serendipitous because Insurance Commissioner Alfred Gross is retiring. It makes sense to give the bureau new authority while simultaneously hiring new, more assertive leadership.
With Republicans in Congress vowing to overturn health care reforms – a promise they lack the numbers to keep – it’s possible that their Virginia counterparts will be reluctant to adopt any changes associated with the federal law.
However, a decision to punt on insurance-industry enforcement would be short-sighted. Unless lawmakers are prepared to renege on powers they already possess for regulating insurance, they need to take responsibility for making sure changes in health care occur as smoothly as possible.
In Virginia, lawmakers are already playing catch-up.
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