Proposals before Congress to allow insurance companies to market and sell healthcare policies nationwide are coming under attack from proponents of the current system of state-by-state oversight.
A key but lesser-known facet of the healthcare bills in the House and Senate would allow insurers to register in one state but sell policies in many other states as well.
That could allow insurers to ignore insurance laws in all but their home state and make it impossible for regulators in states with tough consumer protection laws to enforce them, a group of Democratic lawmakers says in a letter obtained by The Times.
Thirty-one House Democrats -- including 29 Californians -- are urging congressional leaders in the letter to abandon the provisions they say would gut hard-fought laws that protect consumers against insurer misdeeds in 17 states.
Proponents of the change argue that interstate sales could provide consumers with a wider range of policies to buy, engender more competition among insurers and drive down the cost of premiums.
Such an approach, supporters say, could enable insurers to customize policies to individual customers' needs, cutting services that policyholders don't want or need. They say it would also allow insurers a way to avoid state mandates they view as overly burdensome.
The bills also seek to provide consumer protections by establishing a federal benefits "floor." It would mandate an essential set of medical services that all policies would have to cover and other protections.
Opponents contend that consumers in many states could lose protections that go beyond what the bills would establish.
Consumers in California and some other states, for instance, could lose the ability to appeal treatment denials by insurers to panels of outside expert physicians, critics said. They also warned that policyholders could risk losing the protection of state laws that require insurance companies to pay for a wide range of treatments, including HIV testing and reconstructive surgery for breast cancer patients.
The provisions "will lead to a race to the bottom in insurance regulation and severely threaten the important and often lifesaving protections the residents of our states enjoy," the lawmakers from California and Maine said in the letter sent Tuesday to House Speaker Nancy Pelosi (D-San Francisco) and Senate Majority Leader Harry Reid (D-Nev.).
"Practically speaking, insurers will domicile their plans in states with less stringent regulations and market to the population in more protective states like ours, just like nationally chartered banks have done."
The letter was written by Rep. Jackie Speier (D-Hillsborough), who when she was chairwoman of the state Senate's insurance committee penned many of the laws she is now seeks to protect, along with Reps. Susan A. Davis (D-San Diego) and Chellie Pingree (D-Maine).
Speier said she would not vote to move the healthcare overhaul bill to President Obama's desk unless the provision allowing insurers to sell across state lines was removed or improved.
"This is a problem," she said. "There's a reason all the credit card companies are domiciled in South Dakota. Their laws are weak on behalf of consumers. The laws are friendly to that particular industry. With this language we're going to allow for that same anti-consumer conduct to be replicated in the health insurance realm."
Political observers said the number of House Democrats concerned about the provisions may prompt leaders to give it another look as the bills continue to move through Congress.
The provisions were included in the House and Senate legislation to win votes from conservative Democrats and moderate Republicans, according to legislative insiders.
Since the Senate legislation is garnering no Republican support, some opponents questioned why the provision remains in the bill.
"It's bizarre," said Karen Pollitz, a professor at Georgetown University's Health Policy Institute. "They aren't voting for it, so why is their junk in here?"
Reid's office said he had no comment. Pelosi's office did not respond to a request for comment.
In their letter, the Democratic lawmakers said that the provisions would hurt consumers across the country.
"Seventeen states, encompassing more than half of the U.S. population," the letter said, "have health benefit mandates and consumer protection regulations that could be adversely [affected] if these provisions are signed into law."