Obamacare For Homeowners Insurance: Fixing America's Broken Insurance Markets In A Time Of Climate Change

Abstract

Over the last decade, homeowners insurance markets nationwide have experienced unprecedented instability due to climate change. These disruptions, which are likely to accelerate in the coming years, risk destabilizing real estate markets, triggering financial instability, and undermining the nation’s resilience to climate change. Despite these massive stakes, federal and state reforms to date have largely failed to result in more accessible and affordable homeowners insurance coverage that promotes climate change resilience. This Article offers a new way forward, arguing that today’s troubled homeowners insurance markets resemble the broken state health insurance markets that pre-dated the 2010 passage of the Affordable Care Act (ACA), also known as Obamacare. For that reason, Obamacare offers a compelling initial template for reforming homeowners insurance markets in a time of climate change. This template begins with the principle that the federal government should play a major role in regulating homeowners insurance markets due to their national importance. However, rather than completely displacing existing state insurance regulation, federal reform should embrace a cooperative federalism model patterned on the ACA. This model would rely on federal law to establish key rules for selling, underwriting, pricing, and subsidizing homeowners insurance, while allowing states to implement and customize these rules to their local markets. Substantively, it would require homeowners insurers to offer coverage that meets comprehensive federal minimum standards and to avoid discrimination that does not plausibly promote social goals like climate change resilience. At the same time, Obamacare-based reform to homeowners insurance markets would dispense with heavy-handed state regulation of insurers’ rates, instead relying on managed competition among private insurers via state-run insurance exchanges. It would also rely on progressive subsidies to ensure that coverage remained affordable for low-income purchasers. While these reforms would of course need to be adapted to the homeowner insurance setting, Obamacare ultimately offers a powerful and underappreciated model for ensuring that homeowners insurance markets equitably promote climate change resilience in the decades to come.