States balk at growing trend of federal preemption

The federal versus state insurance regulation debate just beginning to heat up in Washington is part of a larger debate that has been taking place across the country. “Federal preemption of state authority is a growing concern,” said Georgia Senator Don Balfour, chair of the National Conference of State Legislatures’ Standing Commit-tees. “These unwarranted power grabs by the federal government subvert the federal system, choke off innovation and ignore diversity among states.”

State legislators are concerned with the rise of federal preemptions through the regulatory process.

“Federal regulatory preemption is nothing more than a backdoor, underhanded means by which unelected bureaucrats impose their will on the states,” said New York Sen. Michael Balboni, a member of NCSL’s Executive Committee. “No single, unelected individual should be able to wield such power with the stroke of a pen.”

Insurance regulatory proposals are among those within the states lawmakers’ radar. U.S. Senators John Sununu (R-N.H.) and Tim Johnson (D-S.D.), both members of the banking committee, this month unveiled legislation that would allow life and property casualty insurers to choose federal rather than state regulation under an “optional federal charter” system. The legislation is titled the “National Insurance Act of 2006.”

State insurance lawmakers and commissioners, along with major interests within the insurance industry, oppose the Sununu-Johnson approach.

Beyond insurance
Beyond insurance, there are other proposals that concern states. NCSL released an updated Pre-emption Monitor report highlighting 72 bills or amendments that would step on the toes of state policy makers.

State legislators point to a rule proposed by the National Highway Transportation Safety Administra-tion to improve automotive roof-crush standards. The rule would preempt all state common and product liability laws that now hold automobile manufacturers to a stricter standard.

States say that the preemptions would cost them $60 million per year in higher costs to care for those who become permanently disabled.