By Evan Falchuk

In the rush to reform health care, something very important has been overlooked.  Central to the major reform proposals is perhaps the most significant change in insurance regulation since World War II.  Congressional leaders and the President have made clear in their actions (if not their sales pitch) that they want the federal government to dominate the regulation of the U.S. insurance market.

Last week in Forbes, Grace-Marie Turner argued against this direction.  She uses the example of Utah’s “Health Insurance Exchange” to make her point (readers of the See First blog will have heard about the Utah Exchange when I blogged about it in March).

Says Turner:

Because it’s working so well, one might argue that the Utah Exchange should be replicated at the national level. But the Exchange has been successful because Utah lawmakers, led by House Speaker David Clark, were able to create a market-based program tailored to the unique needs of their residents.

It’s not clear what “unique needs” Utahns face that people in other states do not.  But at least she is making the argument you would expect to hear from more state insurance regulators.  Namely, that they know their states and their markets better than anyone and think it is bad public policy to sweep away the regulatory structures they have built over many decades.  It’s a fair point, and it’s a discussion we ought to be having openly as part of the reform debate.

Still, embedded in her critique of a bigger federal role is actually an argument against state insurance regulation.  She opposes the idea of Congress being in charge of rules on acceptable insurance coverage.  She worries they will come up with “limited options of costly, impersonal, one-size-fits-all programs dominated by benefit mandates and pushed by lobbyists and special interest groups, not consumers.”

But she seems to be missing something:  health insurers already face nearly 2,000 coverage mandates, created by state legislatures.  So is she against the whole notion of benefit mandates?  Or is it that she prefers her lobbyist-designed one-size fits all programs to be mandated at the state, not federal level?

There aren’t easy answers to these questions.  Ms. Turner is a noted health care expert, so I suspect she has strongly held views on the subject.  Still, very few people seem interested in engaging in this debate.

So, what do you think?  Should insurance regulation happen at the state, or federal level?  Should states and the federal government mandate coverages, or leave it to the market to sort out?

UPDATE: Some faint grumblings of dissent on federal insurance regulation here.