Insurance Dept. Funding Defeat Threatens More Than Health Care Reform

Political wrangling over health care reform could throw a monkey wrench in legislators’ plans to go home on Friday or it could shut down a state agency aimed at protecting insurance consumers.

On Tuesday, the Arkansas House voted down HB 1226, the appropriation bill for the Arkansas Insurance Department, by a 53-41 margin after Republican lawmakers said that the measure contained funding for "Obamacare."  The bill needed a supermajority of 75 votes to pass.

The state’s receipt of $2 million in federal grant funding to implement health care insurance exchanges and medical ratio reviews has come under attack during this session by GOP legislators who campaigned against the issue last fall. They cite continued lack of public support for federal health care reform.

But state regulators and many Democrats, including Gov. Mike Beebe, have stressed that Arkansas is bound to implement federal reforms until Congress or the U.S. Supreme Court reverse the law.

State Insurance Commissioner Jay Bradford barely passed a state regulatory bill dealing with health care implementation out of a House committee on Monday after multiple tries and numerous amendments. The bill, HB 2138 by Rep. Fred Allen (D-Little Rock), lays out some details of how Arkansas would plan for the insurance exchanges using federal grant money. An amendment to the bill would cease state planning functions of health care reform if the federal bill is ruled unconstitutional.

Opponents of health care reform have argued that the state can wait until the courts rule or Congress finishes its business before meeting a January 2013 progress deadline. Supporters say the state can’t wait until a later time without risking federal regulators taking over the process.

Today’s Insurance Department appropriation defeat could threaten that effort, but it also could jeopardize other agency functions, including licensing of agents, criminal investigations and consumer complaint protections. Additionally, tens of millions of dollars of insurance claims related to workers comp and public school insurance claims that flow through the agency would not have authority to be paid.

Insurance Department officials had no comment on today’s vote. However, later in the day department officials distributed a "fact sheet" with data about the agency’s operations. Officials contend that if the Insurance Department is not funded:

• $154.3 million in premium taxes from insurance agencies would go uncollected
• General revenue would suffer a loss of $98.4 million
• Police and Firemen’s Pension funds would lose approximately $55.9 million
• 72,159 producers and title agents would not be licensed
• 6,183 agencies would not be licensed
• 1,544 insurance companies would not be licensed

The department said that Arkansas Farm Bureau, Arkansas Blue Cross and Blue Shield, QualChoice and 68 other domestic insurance companies would have to cease operations in state, noting that "thousands of Arkansans are employed by these companies."

House leaders on both sides of the aisle and Beebe administration officials tell Talk Business that they are not sure how they will resolve the impasse at this juncture. One high-ranking budget leader complained that the vote against the department funding bill "violated the spirit" of the tax cut-budget agreement hammered out by the House, Senate and Gov. Mike Beebe. Lawmakers have a self-imposed deadline of Friday, April 1 to complete their legislative business.