By Evan Falchuk

The battle between the states and federal government begins.

Yesterday, Illinois Insurance Director Michael McRaith told an audience that state insurance regulation is “under attack,” but that the states will prevail because they “do it better.”

Following a line of reasoning I highlighted last week, McRaith suggested adding federal regulation onto the existing state system would be duplicative, burdensome and fraught with the potential for conflict.  McRaith said that insurance was such a uniquely local business that the states were best suited to regulate it.

According to McRaith, even FDR, who did more to expand the federal government’s role in the economy than perhaps any President, “never touched insurance.”  McRaith even suggested that federal involvement in the insurance business might even have implications for the economic recovery.

It’s early yet, but for what may be the first time, a new front has opened in the battle over federal health care reform.  The silence of the state regulators may be breaking.

Expect to hear more as the battle begins to brew.