Trump Executive Order will create a health insurance race to the bottom
SACRAMENTO, Calif. – Insurance Commissioner Dave Jones issued the following statement in response to Trump’s executive order to allow the sale of health insurance across state lines and change rules relating to short-term insurance:
“Today’s Executive Order is President Trump’s latest attempt to sabotage the Affordable Care Act and undermine state consumer protection laws. The ACA brought health insurance coverage to over five million additional Californians and makes comprehensive health care coverage available even for those with pre-existing conditions. This Executive Order is President Trump’s latest way of trying to take away Affordable Care Act protections.
President Trump’s Executive Order threatens the continued existence of comprehensive health insurance coverage. Once Trump’s Executive Order is implemented by federal agencies, those who are sick may no longer be provided coverage that meets their health care needs.
Health insurers may sell across state lines today, but Trump’s Executive Order is intended to allow the sale of products across state lines without requiring compliance with the consumer protection laws of the state in which the product is sold. This change in the long-standing state-based regulatory approach is very harmful to consumers. We will do everything within our power to prevent it from going into effect.
This does not promote competition, but instead forces a race to the bottom. The Executive Order’s implementation will provide an opening to sell products that are exempt from state consumer protection laws and that won’t be subject to the same state protections to make sure that they pay claims when you seek health care.
Trump’s Executive Order calls on federal agencies to adopt rules that infringe upon states’ rights, undermines state regulatory authority, and prevents the enforcement of state consumer protections. We can expect this to result in the sale of products that don’t cover our health care needs, cost most consumers more money, and further destabilization of health insurance markets.
The non-partisan National Association of Insurance Commissioners (NAIC) expressed strong objections to proposals to allow the sale of insurance across state lines without complying with state consumer protection laws in the state in which insurance is sold. The NAIC has appropriately noted that one of the major causes of the recent financial crisis was the ability of banks to choose their regulator, and that ‘interstate sales of insurance will allow insurers to choose their regulator, the very dynamic that led to the financial collapse.’
Each state has important consumer protections in place, which have been enacted by the state’s legislature and Governor to protect the consumers in that state. If cross-border sales are permitted without complying with state laws, it would promote a race to the bottom, where insurers choose to incorporate in the state with the weakest laws and requirements providing the fewest benefits and skimpiest consumer protections, and then selling those products to consumers in other states regardless of those state’s laws.
Increased sale of short-term policies that don’t cover essential health care needs or comply with most rules that apply to health insurance will harm consumers and create health insurance market instability.
California has had a bad history with some Multiple Employer Welfare Arrangements (MEWA) which the Executive Order may expand, including cases of MEWA fiscal insolvency, the inability to pay consumer claims, and allegations of fraud.”