They Are Called “Nationwide Plans,” And They Do Gut State Regulations

Ezra Klein has done the discussion on health reform a big disservice by making false claims about what could, in fact, start a race to the bottom in the insurance market. He writes:

What it doesn't allow is for insurers to simply sell their wares in any state. Aetna could not, for instance, decide that Indiana's lax insurance regulation made it an appealing state to headquarter in, and then sell insurance that conformed to Indiana’s standards in New York. Thus, there's no race to the bottom unless states want to have a race to the bottom. But it's not clear why they'd want that.

That is completely wrong. The Senate bill would allow for things called “nationwide plans.” These plans would be based in one state, and could sell in any other state (unless the states pass a law opting-out of the program, but Snowe is working to get rid of the opt-out), while ignoring those other state's regulations. To quote the bill section 1333:

(b) Authority for Nationwide Plans-
(1) IN GENERAL- Except as provided in paragraph (2), if an issuer (including a group of health insurance issuers affiliated either by common ownership and control or by the common use of a nationally licensed service mark) of a qualified health plan in the individual or small group market meets the requirements of this subsection (in this subsection a `nationwide qualified health plan')--
(A) the issuer of the plan may offer the nationwide qualified health plan in the individual or small group market in more than 1 State; and
(B) with respect to State laws mandating benefit coverage by a health plan, only the State laws of the State in which such plan is written or issued shall apply to the nationwide qualified health plan.

It clearly says right there in the bill that Aetna could set up shop in Indiana and sell insurance in New York that only meets Indiana's lower standards. This could produce a race to the bottom. The worst part is that it is an “opt-out” and not an “opt-in” program (unless Snowe succesfully removes the opt-out). States would not be able to act in time to prevent their regulations from effectively being gutted by “nationwide plans.” Nationwide plans nullify state laws regulating what kinds of health insurance must be sold in their state.