Selling insurance products across state lines, seen by many as an efficient way to improve health care across the nation, hit a roadblock in Virginia this legislative session as four bills approving such a measure failed to gain approval.

Three bills in the House of Delegates (HB 31, HB 536 and HB 720) would have permitted “foreign” health insurers approved by any other state to sell a group benefits plan to offer the same product in Virginia in one form or another. The bills were tabled and may see action again in 2011.

A fourth bill, (HB 339) would have required the Virginia State Corporation Commission to issue a license allowing foreign insurers to transact business in the state if they are in good standing in their home state.

Gerald Milsky

That bill did not move past the Virginia House Commerce and Labor Committee.

All four pieces of legislation were “well intentioned,” said Gerald Milsky, a lobbyist for the Virginia chapter of the National Association of Insurance and Financial Advisors and former deputy insurance commissioner in the state.

“After much discussion, there were some unforeseen consequences not considered that the Virginia Bureau of Insurance pointed out,” Milsky told IFAwebnews.com. “What was not considered was the impact these bills would have on licensed insurers, producers and, particularly and most importantly, Virginia consumers with no one to turn to if there is a problem with a contract from a foreign insurer.”

He added that the proposed legislation would not even address “a real problem” in the state as “there is plenty of business in the Virginia market right now.

“The only thing these bills would allow in are products not up to standards,” Milsky, an insurance consultant with Richmond-based Macaulay & Burtch, said. “If they were, there would be no reason that they would not be licensed in Virginia.”

Bob Bradshaw Jr., president and CEO of the Independent Insurance Agents of Virginia, said the idea of interstate insurance product sales is talked about on a national scale as a quick fix to reform health insurance.

“It is always ‘here’s how to fix it,’ but without the knowledge of what the implications are,” he said. “But legislators look like deer in the headlights when [they discover the implications.]”

Virginia Gov. Bob McDonnell (R) promoted the theory in reaction to President Barack Obama’s State of the Union Address earlier this year, calling it one of several “common sense reforms” supported by Republicans.

Bradshaw said the IIAV is “100% in support of state-based insurance regulation,” a sentiment recently echoed by the group that represents state regulators: the National Association of Insurance Commissioners.

In a recent conference call on national health care reform, Sandy Praeger, who heads the organization’s health insurance and managed care committee, said state regulators “are pretty unified in opposition” to selling across state lines, “as we lose an awful lot in terms of consumer protection.

“They would destabilize the market,” said  Praeger, who serves as Kansas’ insurance commissioner.

This story originally appeared in the April 2010 print edition of Insurance & Financial Advisor.