By Evan Falchuk

In America, insurance is regulated by the states, not the federal government.

Each of the 50 states decides who can sell insurance, mandates coverages, and sometimes even premiums. For some products, like auto insurance, states have made it mandatory for everyone to buy coverage. Massachusetts has taken this a step further and applied this kind of a mandate to health insurance.

The nearly complete authority of state governments over these issues is clear.

Which makes the press release issued earlier today by Pennsylvania Insurance Commissioner Joel Ario rather curious, and revealing.

Titled “Federal Health Care Reform Necessary to Fix a Broken System,” Ario lists three “common sense” solutions that he says should be implemented to reform health care. First, end pre-existing condition exclusions. Second, require everyone to buy health insurance. And third, “provide reasonable subsidies so health insurance is affordable for everyone.”

There’s nothing unreasonable about Ario taking these positions. But why is he is suggesting federal action is needed to implement them? Pennsylvania could pass a law doing all of these things today, without federal action.

I suspect the answer is in the opening paragraph of his press release, where it says there are 300,000 people on Pennsylvania’s waiting list for subsidized insurance coverage. It sounds like it’s about money. Pennsylvania wants federal reform so it can get federal money to support its state program.

But Ario wants something else, too. He wants to make sure that Pennsylvania and the other states keep their authority to regulate insurance:

Once these principles are in place, states should be given flexibility to implement the reforms. . . . Our nation is too vast and too varied for one regulatory regime to fit all needs.

Commissioner Ario’s statement reveals one of the less talked about issues in health care reform: the tension between today’s system of state regulation of insurance and the emerging scheme of federal regulation that may replace it.

For example, the House bill creates a federal health insurance regulator, whose responsibilities are just like – and in fact overlap – those currently enjoyed by state insurance commissioners.

The legislation (at Section 143) says that this federal commissioner shall, “as appropriate” consult with state agencies, “work in coordination” with them “to the maximum extent feasible” and do so “in a manner that prevents conflicts of interest in duties and ensures effective enforcement.” It’s a fancy way of saying there’s a new sheriff in town, and his address is in Washington, DC.

So far, we haven’t heard so much from regulators like Commissioner Ario about this kind of change. As the reform debate heats up, expect to hear more.