2. Government-sponsored insurance brokerages: Much of healthcare reform debate has centered on the “public option” idea that people would be offered the choice of a government-run health plan that competes with the private sector. But a twist on that was included in the bill passed by the House: government-backed insurance brokerages that compete with private sector agencies and brokerages.

A provision in the House bill requires the Small Business Administration (SBA) to perform the functions of an insurance agency for groups of under 100.

We oppose this provision because professional agents and brokers already perform all of the services for consumers that the bill would require the SBA to provide.

Anti-antitrust

One of the byproducts of the healthcare reform debate was the introduction of a repeal of the industry's limited antitrust exemption under the McCarran-Ferguson Act for health and medical malpractice insurance. Shortly before this provision passed as part of the House bill, a Congressional Budget Office (CBO) analysis determined that modifying the federal antitrust exemption for health and medical malpractice insurers “will have no significant effect” on premiums charged for private health insurance.

“The antitrust provisions included in H.R. 3962 would have no benefit on health insurance premiums, as the CBO reports, but would spur frivolous litigation,” said Mike Becker, PIA national director of federal affairs.

Who needs the FTC?

Another provision in H.R. 3962 would permit the Federal Trade Commission (FTC) to prepare studies and reports on the entire insurance industry, including property and casualty. The FTC has been barred by federal law since the early 1990s from exercising any authority over insurance, which is the purview of state insurance regulators. Such a broad grant of authority has no place in a bill addressing health insurance, or in any federal bill.

OII to FIO: The stealth strategy continues

At the outset, the Office of Insurance Information (OII) was said by its supporters to be simply an information office to inform federal officials about insurance matters, and to coordinate international insurance agreements.

Last year, PIA opposed a bill to create an OII because it vested broad powers in the Treasury Department to preempt state insurance laws and regulations. The bill was removed from the consent calendar of the House shortly before adjournment for the year.

The version of OII introduced early this year placed more restrictions on preemptions, but was replaced with the current version, with the restrictions on preemptions narrowed and the scope of an OII broadened into an FIO with a greatly expanded mandate, and with what we believe is insufficient oversight of its activities.

A committee mark-up of the Federal Insurance Office Act of 2009 (H.R. 2609), scheduled to begin Oct. 27, was postponed. Financial Services Committee Chairman Barney Frank said the delay was to work out a jurisdictional issue with the Ways and Means Committee. He apologized “for not having presided appropriately” and added that he and Rep. Paul Kanjorski (D-Pa.), chairman of the Subcommittee on Capital Markets, would continue to consult with the Ways and Means Committee and the National Association of Insurance Commissioners (emphasis added), and expected to mark up the bill “in a short period.”

The delay came at the end of a 24-hour period which saw a lot of activity. On Oct. 26, PIA issued a press release pointing out that the lack of limits on preemptions in the bill was in marked contrast to a bill passed by the committee the previous week, which imposed strict limits on preemptions of state insurance laws by federal agencies.

The next morning, the National Conference of Insurance Legislators (NCOIL) issued a press release and letter opposing the bill. At mid-day, AA&B sister publication National Underwriter posted online a story on the NCOIL letter and another one by the NAIC with suggested changes to the bill to narrow the scope of the office and put limits on preemptions. Shortly after that, Rep. Frank announced the delay.

This legislation keeps getting rewritten to make it friendlier to federal insurance regulation. At minimum, the latest changes suggested by the NAIC should be incorporated into the bill. Failing that, the best outcome would be for Congress to take no action on this bill.

Consistency in Congress?

In October, the House Financial Services Committee was poised to take opposite positions on the same issue in the space of one week.

On Oct. 21, the Financial Services Committee approved a key amendment to a financial regulatory reform bill offered by Reps. Mel Watt (D-N.C.) and Dennis Moore (D-Kan.). Under the amendment, the Office of the Comptroller of the Currency (OCC) could find a state law preempted only on the basis of “substantial evidence” that a provision “prevents or significantly interferes with” a national bank's exercise of a power “explicitly” granted by Congress. The amendment restricts the OCC's practice of declaring state insurance laws null and void, based on its own interpretation of federal law, and makes clear that federal regulators may not routinely interfere with the states.

An Oct. 27 mark-up was scheduled of the Federal Insurance Office Act of 2009 (H.R. 2609). As drafted, the bill permits the office, to be created within the Treasury Department and led by an unconfirmed appointee of the Treasury Secretary, to override existing law without any meaningful dialogue with the states.

On Oct. 21 the committee voted to restrict federal preemptions of state insurance laws, then prepared to allow broad federal preemption of state insurance laws one week later. The contradiction could not have been more stark. PIA pointed this out in a press release, the day before Chairman Frank postponed the mark-up.

NFIP renewal, but too short

Congress approved a Dec. 18 extension of the National Flood Insurance Program on Oct. 30 as part of a continuing resolution to maintain current spending. President Obama signed it into law.

These short-term extensions are due to the fact that a comprehensive reform measure is still awaiting action, but has been crowded out of the Congressional calendar. Reform efforts have been stymied over two issues: proposals to add coverage for wind damage to the program, and forgiving the program's nearly $20 billion debt arising from catastrophic storms in 2004 and 2005. PIA opposes inclusion of wind coverage and supports debt forgiveness.

Many mortgage lenders require flood insurance before real estate closings can occur. When Congress creates an air of uncertainty, it triggers additional legal obligations concerning notice to consumers and current NFIP policyholders about the pending lapse. A 6-month extension to allow thoughtful deliberation on a comprehensive reform bill would make sense.