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ORLANDO, Fla.-If it looks like a duck, quacks like a duck and swims like a duck, it should be regulated like a duck.

That metaphor succinctly summarizes state insurance regulators' view that states, not the federal government, should regulate any risk-bearing entity covering the cost of health care.

State insurance regulators are especially concerned about provider-owned managed care companies that assume risk but are seeking to avoid state regulation-at least temporarily.

The National Assn. of Insurance Commissioners discussed the issue in a broad white paper presented to its Accident and Health Insurance Committee during the NAIC's meeting earlier this month in Orlando.

State insurance regulators now are writing an executive summary of the 42-page paper as well as a position paper that reflects the NAIC's opposition to proposals for federal oversight of any type of risk-bearing entities.

The NAIC earlier this month voiced its specific opposition to federal lawmakers on two bills in Congress-H.R. 475 and S. 146-that would allow direct federal regulation of "provider-sponsored organizations" that service Medicare beneficiaries until Jan. 1, 2002.

After that deadline, states that have solvency requirements identical to those under the federal law, among other standards, would be allowed to regulate PSOs within their boundaries.

State insurance regulators believe "consumer protection is paramount" when it comes to regulating health insurance, NAIC Vp Glenn Pomeroy told the U.S. Senate Finance Committee earlier this month in written testimony.

"Based on the states' extensive experience in regulating thebusiness of insurance, we strongly believe that the most appropriate approach to the regulation of health insuring organizations is by function and not by acronym," added Mr. Pomeroy, North Dakota's insurance commissioner, alluding to PSOs' claims that they are different from traditional health insurers.

"Anyone who is engaged in the business of insurance is-and should remain-subject to regulation by the states," he said.

"The protections we offer extend beyond financial solvency and other licensing standards to market-conduct standards and financial examination activities," he said. "To provide these same protections, the federal government would need to replicate the states' insurance regulatory framework, resulting in significant unnecessary costs to the federal government."

Supporting the NAIC's position are representatives of the National Governors Assn., National Conference of State Legislatures and the American Assn. of Health Plans.

Opposing state regulation of PSOs are representatives of the American Medical Assn. and the American Hospital Assn.

State regulation generally creates "high" barriers for PSOs to enter a market, said Ed Hirshfeld, vp-health law for the AMA in Chicago. Other problems include the lack of uniformity in regulation among the states as well as delays in getting regulatory approval, he said.

State regulators dispute that unnecessary delays occur.

"The average application processing time for complete applications by most states is within 90 days," Mr. Pomeroy told the Senate's Finance Committee.