Franklin Roosevelt signed the McCarran-Ferguson Act in 1945. This groundbreaking law has led to the regulation of insurance — including insurance fraud — to the states rather through federal oversight.
The federal government does play a role, such as overseeing federal health-insurance programs like Medicare. Nonetheless, the states remain more in charge of insurance regulation than almost any other sector of American business.
The result is 50 separate states with differing laws, codes and regulations governing selling, underwriting, claims within their borders — and also insurance fraud. Mostly the states have risen to the occasion, with 48 of 50 states enacting anti-fraud laws.
Yet the actions of Congress do impact the battle against this crime. From major national disasters (FEMA) through healthcare legislation (the ACA and what lies beyond) by virtue of federal oversight and funding, many laws impact the world of insurance. While many organizations are involved with insurance and fraud-specific matters, no national organization “bridges” state insurance oversight and federal legislation or administrative actions.
To the positive, Congress does appear to appreciate the importance of knowing about, and fighting against, insurance fraud. The Coalition testified before a key U.S. Senate subcommittee this week. We shared insights into how insurance fraud hurts all Americans, and urged needed steps for turning the corner on this crime. Especially important, we urged more public and private sharing of medical data to better ferret out hidden crimes affecting both sectors.
In the process, the “age-old” debate of federal vs. state regulation of insurance resurfaced during the hearing.
While there is little doubt state regulation will remain in place, the question must be addressed: What role can and should the federal government play in fighting insurance fraud?
Going forward, Congress and the White House should keep in mind three mantras. First, stay keenly aware of the high cost insurance fraud imposes on consumers and the American economy. Second, make sure any federal legislation meets the “do no harm” test of not unduly burdening or hindering state anti-fraud efforts. And third, be vigilant in identifying where federal involvement will help combat fraud at all levels.
About the author: Matthew Smith is associate director of government affairs for the Coalition Against Insurance Fraud.