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Multi-State Provision Could Erode Consumer Protections, Upset Markets

WASHINGTON, D.C. (August 15, 2011) — The National Association of Insurance Commissioners (NAIC) this week urged the U.S. Office of Personnel Management (OPM) to avoid opening a loophole that could give some of the nation‘s largest insurance companies regulatory advantages over their smaller competitors. The NAIC further expressed concern about potential consumer implications of the new Multi-State Plans offered through the insurance Exchanges if they are held to different standards.

Beginning in 2014, OPM is charged with contracting with at least two health plans to be automatically sold on every state‘s Exchange as “Multi-State Plans.”  While the law clearly intended for these plans to operate on a level playing field, language within the law could allow for two sets of rules—one for large Multi-State Plans and one for everyone else. The NAIC is concerned this provision may unintentionally upset state insurance markets and erode consumer protections.

In a letter to OPM signed by NAIC President and Iowa Insurance Commissioner Susan Voss states “Insurance Commissioners and the NAIC have serious concerns about the potential for market disruption and adverse selection, and the resulting negative impact on consumers and health insurance markets which would arise if Multi-State Plans are allowed to operate under different rules than their competitors.” The letter was co-signed by the NAIC President-elect, Vice President and Secretary-Treasurer.

The concerns raised by the NAIC are in response to OPM‘s request for information as they develop the guidelines for Multi-State Plans.  The comments provided further detail of the potential market disruption should Multi-State Plans be exempt from the rules that govern other plans offered through an Exchange or in the insurance market as a whole. They noted that separate rules could threaten plan solvency and lead to market segmentation, consumer confusion and a loss of consumer protections.  The NAIC urged OPM to require Multi-State Plans to meet all state laws and regulatory requirements. 

The comments submitted also explained that a second provision, intended to ensure a level playing field, could paradoxically upend state consumer protection laws if the Multi-State Plans are exempted from state regulation. While Congress intended for Multi-State Plans to adhere to applicable state regulations, as the law is written, if OPM exempts a plan from applicable state regulation, by extension it also exempts all other plans – both in and out of an Exchange - from those same regulations, leaving a regulatory vacuum.

Click HERE to view full text of the letter and the comments submitted.

About the NAIC

The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S. For more information, visit

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