The life insurance industry could face an uphill battle in the new Congress.[@@]
Frank Keating, president, said in an interview Wednesday that the industry will have to work hard to persuade the new Congress and the new administration to support the life industry’s agenda.
President Bush seems to have won a clear victory. Republicans have retained control of the House, and it looks as if they will hold 55 seats in the Senate, up from 51 today.
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, may be slow to support legislation that would create an optional federal charter, Keating said.
The American Benefits Council, Washington, voiced equal skepticism, with president James Klein noting that, “The election results are a mandate on national security, not health or retirement security.” Klein explained that, “Pension and health care issues were actually less of a focus for the candidates than anyone might have expected ? especially 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’s concern is that 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-health, issues 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 president’s 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.
Keating also admits 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 reform 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 life savings accounts “are death to long-term savings and are terrible to America’s only long-term savings industry, and we will fight LSAs block by block and street by street.”
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.