Reflections on the National Ass'n of Insurance Commissioners and the implementation of the Patient Protection and Affordable Care Act.

• Author: Jost, Timothy Stoltzfus

INTRODUCTION I. THE NAIC IN THE PATIENT PROTECTION AND AFFORDABLE CARE ACT II. WHY THE NAIC? III. THE NAIC PROCESS IV. How DID THE NAIC CARRY OUT ITS PPACA RESPONSIBILITIES? CONCLUSION INTRODUCTION

One of the most common criticisms of the Patient Protection and Affordable Care Act (PPACA) (1) is that it constitutes a government takeover of America's health care system. By this, of course, is meant a federal government takeover. PPACA will certainly increase the federal government's presence in health care. It imposes new federal regulations on insurers, creates a new federal program for funding health insurance for uninsured middle-income Americans, dramatically expands the Medicaid program, and in all likelihood will increase the influence of the Medicare program on the organization of the overall health care delivery system.

Yet PPACA also expands the responsibility and authority of the states. The states, for example, are primarily responsible for enforcing PPACA's insurance regulatory reforms. (2) They are also responsible for establishing the exchanges--the entities through which Americans will purchase insurance and apply for subsidies (3)--and for managing reinsurance and risk adjustment programs. (4) According to the Act, states will be responsible for reviewing health insurance premiums and for assisting consumers with complaints against their insurers. (5)

However, PPACA not only increases the authority of the federal and state governments, it also empowers and assigns significant responsibility to a private agency: the National Association of Insurance Commissioners (NAIC). The NAIC is a private, nonprofit organization that has coordinated the activities of the nation's state and territorial insurance commissioners since 1871. (6) Its members are the insurance commissioners of the states and territories. (7) Traditionally, the NAIC has drafted model statutes and regulations for the states, served as a clearinghouse for insurance data, and provided a forum for insurance commissioners to discuss and address regulatory issues. (8)

This Article discusses the role of the NAIC in health care reform. It first describes the role of the NAIC in the reforms initiated by PPACA, then considers why Congress gave the NAIC significant responsibility for health reform, and finally examines how the NAIC has carried out these responsibilities. It contends that Congress found in the NAIC not only a very effective partner for involving the states in health care reform, but also a vehicle for gaining access to the technical expertise and public engagement that is necessary for effective health care reform implementation.

1. THE NAIC IN THE PATIENT PROTECTION AND AFFORDABLE CARE ACT

   Ten provisions of PPACA refer to the NAIC. (9) Several of these sections require the Department of Health and Human Services (HHS)--which is primarily responsible for establishing the regulations that will implement PPACA--to consult with the NAIC. One provision, for example, requires HHS to consult with the NAIC in developing a summary of benefits and a coverage disclosure document; (10) another requires HHS to define permissible age bands by conferring with the NAIC; (11) yet another requires HHS to work with the NAIC to establish regulations to govern compacts for the interstate sale of insurance. (12) Section 1341 instructs HHS to develop standards in consultation with the NAIC in order to establish an interim reinsurance program and mandates that assessments from insurers for funding the reinsurance fund be based on NAIC estimates. (13) Section 1321--the central provision of PPACA that authorizes HHS to implement the Act's insurance market reform provisions--directs HHS to consult with the NAIC in establishing regulations to implement the exchanges, qualified health plan requirements, risk-adjustment and reinsurance provisions, and the regulations that will create the insurances exchanges and other insurance reforms of the Act. (14)

   Other sections of PPACA give the NAIC a more direct role in PPACA's implementation. The exchanges, for example, must adopt a uniform enrollment form that takes into account criteria submitted by the NAIC to HHS. (15) Another provision requests the NAIC to develop model standards and forms for private insurers to use in reporting fraud and abuse to state insurance commissioners or other state agencies. (16) Yet another section requests the NAIC to develop standard methodologies and definitions for determining medical-loss ratios. (17)

   Finally, PPACA incorporates--or requests the NAIC to amend--existing NAIC model laws. PPACA, for example, provides that procedures for external review of health plans must include the consumer protections in the NAIC Uniform External Review Model Act. (18) It also instructs HHS to request the NAIC to revise its Medicare Supplement insurance standards so as to require at least nominal cost sharing under C and F policies, (19) which currently have almost no cost sharing. (20)

   As implementation of PPACA has proceeded, moreover, the NAIC has been given responsibilities even beyond those assigned by the statute itself. HHS has not only consulted with the NAIC to develop the summary of benefits and disclosure document, as PPACA requires, but has also delegated to the NAIC the responsibility for convening the panel of consumers, industry representatives, and regulators responsible under PPACA for drafting that document. (21) The NAIC also developed at the request of HHS a form for insurers to use in fulfilling the obligation PPACA imposes on them to justify unreasonable premium increases. (22) Finally, the NAIC has continued in its traditional role of creating model statutes for the states. This task is quite important, since PPACA requests that the states implement its regulatory requirements even though many states currently lack the explicit authority to enforce federal law otherwise. (23) The NAIC has, for example, drafted model statutes to implement provisions of the reform law that took effect for plans beginning six months "after the effective data of PPACA. (24)

2. WHY THE NAIC?

   There are several apparent reasons that the NAIC was given these responsibilities under the reform law. First, the NAIC asked for a role in implementing the law. The NAIC represented to Congress that its open and transparent model-law development process was the most consumer-friendly approach for implementing PPACA--indeed, that the NAIC's process was superior to the HHS rulemaking process. (25) Congress responded by giving the NAIC a role.

   Second, the NAIC is a natural partner for implementation given the role of the states in the reform legislation. The Senate's version of PPACA, which was ultimately adopted by Congress, creates a partnership between federal and state governments for implementing the legislation. (26) As noted above, PPACA asks the states to enact and enforce PPACA's insurance reforms and to create the exchanges and risk-transfer programs. (27) But PPACA assigns to the federal government--more specifically, to HHS--responsibility for adopting regulations to implement the law. (28) Cooperating and consulting with each of the states independently while drafting these regulations would be unwieldy. Furthermore, given the existence of the NAIC, establishing a new institutional framework to coordinate state insurance departments in addressing the technical problems raised by implementation of PPACA's insurance regulations would be redundant and unrealistic.

   Of course, a number of associations represent the states: the National Council of State Legislatures (NCSL), the National Governors Association (NGA), and more immediately relevant, the National Council of Insurance Legislators (NCOIL). The NCSL and NGA, however, do not have an established process for drafting model legislation or regulations. NCOIL does draft model legislation, but has less experience with health insurance regulation and less history of working with Congress on regulatory issues. (29) Although all states are considered members of NCOIL, only twenty-eight states are full contributing members. (30) The NAIC, by contrast, has an established program for drafting model laws and regulations and a structure that enables it to draw on state technical staff to work on regulatory is sues. (31) All states and territories participate fully in its activities. (32) It was therefore the obvious agent to collectively represent the states in collaborating with the federal government to address technical issues PPACA raised.

   The technical expertise available to the NAIC is a third advantage that it offered for advising HHS on implementation issues. Prior to the adoption of PPACA, HHS had only a handful of staff directly dedicated to the regulation of private insurance. (33) The NAIC, on the other

   hand, had access through its committee and working group structure to the regulatory staff members of all of the states and territories, including skilled actuaries, accountants, and lawyers. (34) The regulatory staff of HHS has grown dramatically since PPACA's enactment with the creation of the Office of Consumer Information and Insurance Oversight (OCIIO). (35) The OCIIO has recently been moved to the Centers on Medicare and Medicaid Services (CMS) and renamed the Center for Consumer Information and Insurance Oversight (CCIIO). (36) CCIIO's expertise is supplemented by resources and knowledge already existing in CMS, which oversees Medicare Advantage and Part D prescription drug plans; (37) the Departments of Treasury and Labor, which are responsible for regulating employee benefit plans; (38) and the Office of Personnel Management, which runs the Federal Employee Health Benefits Program. (39) Nevertheless, the responsibility for regulation of private insurance has traditionally resided with the states, which continue to have the most expertise and experience with such regulation. (40) This was the expertise that the NAIC...