Mayhall/Noonan (Foundations of US Ins Regs)

Question 1

Briefly explain why insurance regulation was born at the state government level in the US

Answer 1

In the mid 1850’s, there was very little resources at the fed gov level. State gov were more developed to handle a new concern like insurance industry

Question 2

Briefly explain why in the US the federal government attempted to take over insurance regulation. Also explain why the federal take over did not work

Answer 2

Cies with multi-state business had difficulties with all the different rules between states. Those cies joined a movement for fed insurance reg, but the movement was more about avoiding reg that about promoting fed superiority

Question 3

Discuss the ruling in Paul vs Virginia (1869)

Answer 3

• NY agent’s business in VA did NOT constitute interstate commerce
• Insurance was exempted from the Commerce Clause of the US Constitution
• States remain the primary regulators
• Creation of NAIC to protect state authority by sharing resource and bringing some uniformity in state reg

Question 4

Discuss the case: United States vs South-Eastern UW Association (1944). What was the response?

Answer 4

• Antitrust case brought by the gov against an asso of insurers that allegedly conspired to fix prices
• Court held that insurance consisted of larger transaction than the policy itself, and therefore WAS commr and can be federally regulated
• SEUA case focused primarily on the application of fed antitrust legislation

Question 5

Discuss the McCarran-Ferguson Act (1945) and why it was enacted

Answer 5

• Act provides that the reg of insurance by the state is in public interest
• Act states that no fed law should be construed to invalidate, impair or supersede any law enacted by any state gov for the purpose of regulating the business of insurance, unless the fed law specifically relates to the business of insurance

Question 6

Identifies 3 federal laws that are applicable to insurance:

Answer 6

• Sherman Act: Antitrust
• Clayton Act: Anticompetitive practices
• Federal Trade Commission Act: Consumer protection

Are intended to prevent and restrict anticompetitive practices and unfair competition

Question 7

Discuss the Gramm-Leach-Bliley Financial Modernization Act (1999)

Answer 7

• Removed many restrictions of affiliations among banks, securities firms, and insurance companies
• States should regulate the insurance industry
• Set out a min standards that state insurance laws and regs were required to meet or else face preemption by fed law

Question 8

Discuss Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) (2010)

Answer 8

Establishes the Federal Insurance Office (FIO)
• Studies and collects industry and state regulatory info
• Drafts proposed fed reg framework

Establishes Financial Stability Oversight Council (FSOC)
• Identify risk to financial stability in US
• Apply higher financial standards to cies
• Can declare that an insurance company pose a systematic risk and is subject to fed supervision

Question 9

Provide Argument against federal regulation of insurance

Answer 9

• Would eliminate competence at the state level
• Would create uncertainties for business
• Would reduce opportunities for consumer pressure

Question 10

How did the NAIC respond to the McCarran-Fergusson Act?

Answer 10

• Established a state-level statutory framework
• Provided for rate-filing provisions
• Prohibited excessive, inadequate or unfairly discriminatory rates

Question 11

What are Central themes of US insurance regulation?

Answer 11

• Regular financial reporting
• Safeguarding insurers’ solvency
• Ensuring fairness to consumers

Question 12

Identify 4 enchroachments by the federal government into state insurance regulation

Answer 12

• Federal HMO Act: Promote the creation of health maintenance organizations
• Employee Retirement Act: Establishment of standards for employee-benefit plans
• In 1979, Congress instituted min LR for individual and group Medicare supplement policies
• Health Insurance Portability and Accountability Act: Made health cov portable for workers at small employers

Question 13

What was the State Modernization and Regulatory Transparency Act (SMART 2004) proposed?

Answer 13

• Would require states to achieve uniformity in key areas or have their noncompliant laws preempted by fed ones
• Would end most reg of PC insurance rates

• No longer merely an internal matter of the US; the fragmented nature of the state regulatory system now is perceived in international trade discussions as a barrier to foreign cies seeking to enter US insurance market

Question 14

Discuss Patient Protection and Affordable Care Act (PPACA) (2010)

Answer 14

• Comprehensive reform of the health insurance market
• Creates specific requirements for health benefit plans to be marketed through federally-mandated state-created insurance exchanges