It’s weeks like this–when there’s a veritable explosion of lawsuits, investigations, regulatory demands and accusations–that you begin to wonder how industry leaders and just plain old practitioners deal with the fact that the insurance business is a multi-billion dollar punching bag.
Or perhaps a pi?ata is a more apt description since, after being smashed in the courts or at the hands of state and/or federal regulators, a pile of money usually comes gushing out.
All you have to do is go to pages 6, 7 and 10 of this week’s issue to see that regulators of every stripe are on the industry’s case. Some of these are long-continuing sagas, such as unsuitable sales of investment products like annuities to senior citizens.
Similarly, there have been widespread reports of agents misrepresenting private Medicare Advantage plans to seniors because the commissions on those plans are fatter. Congress is taking note and you can bet that tighter supervision of sales is in the forecast, since both the House and Senate have held hearings on the issue.
This is not to mention the lambasting that companies that market Medicare Advantage plans have come in for, especially from Rep. Pete Stark of California. This is because, according to the Congressional Budget Office, the MA program costs about 12% more on average than the cost to Medicare of traditional fee-for-service providers.
I’d also guess that the investigation New York State Attorney General Andrew Cuomo launched with a great deal of fanfare is not going to blow over quickly. First of all it’s going to have a lot of resonance with the public, which feels at the mercy of health insurance companies and, therefore, hates them. Mr. Cuomo, being the politician he is, knows a good thing when he sees it, so he’s not going to back off. Just look where media-splashing investigations got the man who was the former New York AG and is now governor of the state, Eliot Spitzer.