Bush Victory Could Mean Uphill Battles For Industry
With President George W. Bush winning a clear victory for a second term and greater Republican control of Congress, the life insurance industry probably will be facing some uphill battles.
Frank Keating, president of the American Council of Life Insurers, Washington, said in an interview the day after the election that the industry will have to work hard to persuade the new administration and Congress to support the life industrys agenda.
Republicans increased their number of seats while retaining control of the House, and it looks as if they will hold 55 seats in the Senate, up from 51 currently.
Many business groups are celebrating. But the Republican emphasis on tax cuts could hurt sales of life insurance products that offer tax advantages, and many Republicans, including 5 new freshman Republicans from the South, also may be slow and/ or unwilling to support legislation that would create an optional federal charter, Keating said.
Keating also said that the Republican agenda of tax cuts, which clearly are supported by the electorate, will return, including the issue of Lifetime Savings Accounts, which are anathema to the life insurance industry.
“I would assume that significant tax return will return, i.e., proposals for a flat tax, service sales taxes, cuts in income taxes, both corporate and individual,” Keating said. “These issues will be hotly debated in this new Congress,” he said.
“We welcome this debate, but we want to ensure that Congress understands that what ails America is too little savings, too little long-term savings and too little retirement security. We would just hope to be at the table to discuss those items.”
He said that lifetime savings accounts “are death to long-term savings and are terrible to Americas only long-term savings industry, and we will fight LSAs block by block and street by street.”
The American Benefits Council, Washington, also voiced some concerns, with President James Klein noting, “The election results are a mandate on national security, not health or retirement security.”
Pension and health care issues “were actually less of a focus for the candidates than anyone might have expectedespecially since the passage of major Medicare reform a year ago led us all to believe that health care would play an even more prominent role in the campaign,” Klein said.
His concern is that Mr. Bush will continue to pursue his agenda without Democratic support, even though he believes better policies are created when “the president and Republicans and Democrats in Congress find common ground.”
The Council of Insurance Agents and Brokers, Washington, says in a memo to members that there will be a wide range of employee benefit specifically, group healthissues that the new Congress and administration will attempt to deal with.
In the memo, the CIAB says President Bush “put a big focus this year on the enactment of association health plans to allow small businesses to pool their resources to expand purchasing power.”
The CIAB says many people in the benefits business believe that “AHPs would exacerbate existing problems of companies exiting the health insurance marketplace, increasing cherry-picking.
“Thanks to leaders such as [freshly reelected] Sen. Judd Gregg of New Hampshire [who chairs the primary committee of jurisdiction], AHPs have gone nowhere in the Senate despite several positive House votes in recent years,” the memo says. “It is too early to tell whether the election results will give legs to these proposals.”
The CIAB also says that the pressure for new health insurance mandates, or a trial-lawyer-friendly Patient Bill of Rights, “have decreased substantially.”
Keating lauded the presidents reelection, saying that, “Strong leadership will be required in the coming years and we believe President Bush will continue to provide it.”
But, he added, legislation either providing an optional federal charter or something along the lines of the State Modernization and Regulatory Transparency Act, which was drafted by the staff of the House Financial Services Committee this fall but never formally introduced because of opposition from state regulators and legislators as well as representatives of consumer groups, could advance.
“State regulatory reform and modernization are the No. 1 issues to the life insurance companies the ACLI represents,” Keating said. “A large percentage of our board supports modernization.
“We will ride either horse if it will give us a level playing field with the securities firms and the banks,” he said. “I think we are going to have to do a competent job of persuasion. I think over the last 16 months, knowledgeable people in both houses understand the need for reform. The contradiction, the confusion, of state regulation, indeed the cost, make the life insurance industry less competitive than it should be.
“Congress has to address the issues of cost and regulatory overkill at the state level,” he argued.
In his statement, Klein said that while the candidates lack of specificity on health and retirement issues means that there is no mandate for pursuing specific policies, he believes “it also creates an opportunity and freedom to do many things needed to better ensure Americans sense of personal financial security.”
Klein said he expects President Bush will urge the Congress to enact sweeping reforms to Social Security. He also predicted that on both the health and retirement fronts, he will also advocate policies intended to empower individuals to play a more active role in their benefit security.
While compiling the results of interviews it conducted of the attitudes of voters at the polls last Tuesday, officials of Americas Health Insurance Plans say they believe voters told members of Congress at the polls that they want restrictions on medical malpractice lawsuits and affordable health care for the uninsured.
In an interview, Karen Ignagni, president and CEO of the AHIP, also said the voters appear to be saying to their representatives that there is renewed interest in health savings accounts and “new products to support consumer choice.” Ignagni also said “Congress is going to be monitoring HSAs to see what else it needs to do to encourage use of these kinds of products.”
On the regulatory front, Ignagni said the voters seem to be asking the Treasury Department for greater flexibility in using flexible savings accounts, for example, in rolling them over from one year to the next, and in incentives to promote use of long term care products.
“There is a revolution going on in health care,” Ignagni said. “Increasingly, middle class people are not only wanting to make sure that they are protected for their acute care needs, but thinking ahead to long term care products.”
She said there are two stumbling blocks, noting that Congress allows companies to deduct contributions to health benefits for their employees, but there are no similar deductions for LTC. Secondly, she said, in the area of flexible benefits, individuals cannot use flexible benefit dollars to purchase LTC. “I think over the next period of time there will be an examination of these issues,” Ignagni said.
It is not only the health care industry that is supporting these provisions, she said. “A number of disease groups are partnering with us to get Congress to make this a priority.”
Regarding the priority issues, Ignagni said that members of Congress are hearing very strong messages that they need to move on medical malpractice. AHIP, she said, is finding that doctors are practicing defensive medicine because of the high cost of medical malpractice insurance and the number of claims.
“We are hoping that this election will provide a new opportunity for Congress to deal with this issue,” she said. “Ultimately, Congress is going to have to make a choice between physicians and lawyers, and they havent wanted to make that choice.”
Ignagni said she is aware that many members of Congress regard this as a state issue, and several states passed tort reform initiatives on Election Day dealing with this. She said her group is working at the state level on this issue, but “federal legislation would provide uniformity in dealing with it.”
Regarding the uninsured, Ignagni said her group is “seeing significant signs that members of Congress are coming back with a mandate to deal with this issue.” Voters are concerned about losing their health insurance, she said, and “that was widely discussed in House and Senate races. Congress has to address the issue of the uninsured,” she said. “President Bush has expressed concern about this issue and has put money in all of his budgets to deal with this issue.
“I think there is a growing consensus between Democrats and Republicans that a lack of insurance, particularly for those who are in the work force, is hurting our economy,” Ignagni said. “Thats because we have 15 million people who are offered health insurance but cant afford to pay for it. Absentee rates are higher because they go without care, and problems grow more acute because workers are not treating their chronic conditions.” As a result, “productivity suffers at the workplace,” she said. If the agenda of Congress is to help the economy, then resources should be allocated to tax credits, for example, to help people who cannot afford to purchase coverage right now.”
Ignagni added that it “would not only be an investment in the issue of the uninsured, but it would be an economic investment.”
Reproduced from National Underwriter Edition, November 4, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.