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Life Health > Life Insurance

Measuring the Drapes

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The consensus of pundits, pollsters, industry lobbyists and even Republicans is that Democrats will play a much larger role in Congress in 2007 than they do currently.

Analyst and pollster Charlie Cook of the National Journal said Oct. 25 that under the most likely scenario, Republicans will probably see a net loss of 20 to 35 House seats, and with it, their majority.

In the Senate, the GOP could lose at least 4, but a 5- or 6-seat loss is more likely, Cook said. A 6-seat change tips the chamber into Democratic hands, Cook said, although President Bush cautioned Democrats at a press conference Oct. 25 that they “shouldn’t measure the drapes yet.”

But, privately, industry lobbyists don’t believe a change in control will have much of an impact on the life insurance industry.

In the words of one, a Democratic takeover “has its pluses and minuses.”

The lobbyist said that “with a Democratic majority in the House and with a more remote possibility of one in the Senate, President Bush can be expected to discover the veto pen that he has used once thus far–on stem-cell research.”

Under the most likely scenario, Rep. Barney Frank, D-Mass., will become chairman of the House Financial Services Committee, and Rep. Frank Kanjorski, D-Pa.., will become chairman of the key Capital Markets Subcommittee.

However, the Democratic majority is likely to be slight, ruling out major initiatives by Democrats on that committee, even though the opportunity for greater bipartisan legislative initiatives will improve.

There are 2 key insurance issues facing this Committee. If Democrats are in control of the House, the chances for an extension of the Terrorism Risk Insurance Act increase. The bill currently is scheduled to sunset Dec. 31, 2007. And the chances of group life insurance, which is currently not part of the program, being added also rises.

Since the life insurance industry–far more than the property-casualty insurance industry–has paid more attention to Democrats, there would be increased momentum for an optional federal charter for life insurance companies only.

That’s because opposition to an OFC is much spottier in the life industry than in the p-c industry, and the American Council of Life Insurers, Washington, has made a point of dividing up its contributions equally.

As for taxes, it is anticipated that the key tax post will be held by Rep. Charles Rangel, D-N.Y., as chairman of the House Ways and Means Committee. He is opposed to an expensive repeal of the estate tax, and more amenable to the approach supported by the insurance industry, an exemption of perhaps $2.5 million per person and a top rate of 30% or so.

In order to escape the looming return to the 55% rate, Republicans, both in Congress and the White House, might find themselves forced to accept this approach.

Under Rangel, the key healthcare subcommittee top post will go to Rep. Pete Stark, D-Calif., a liberal who is no fan of Health Savings Accounts and other Republican ideological proposals. Stark is also likely to support government controls on the prices of prescription drugs, which may have the effect of reducing the health insurance industry’s strong commitment to private programs under Part D of the Medicare program.

Rangel and Stark, as well as other Democrats, at the same time may be amenable to greater funding of Medicare and Medicaid programs.

Another key anticipated committee change will be at Energy and Commerce, where Rep. John Dingell, D-Mich., will again reign supreme. Under him, Rep. Henry Waxman, D-Calif., is likely to become head of the Health Subcommittee on that panel.

Waxman is also likely to head the Government Reform Committee and is likely to come down hard on the Bush administration’s healthcare policies.

As stated by one veteran industry lobbyist, “The point is that coming into January 2007 most of the p-c insurance industry will be on the outside of the decision-making process.” He says the life industry “is better situated, as their PACs have tried to be more even-handed in contributions reflecting the actual majorities in both houses–slightly tilted toward Republicans.”

The lobbyist said that from the life industry’s perspective, “they have done better under Democrats than Republicans.”

“Republicans, since the Contract With America, have tried to eliminate the estate tax–the raison-d’etre for purchasing whole life insurance.” It was Rep. Bill Thomas, R-Calif., retiring head of the Ways and Means panel, “who tried to repeal the estate tax and fund it by limiting the tax-deferred inside buildup on cash value life insurance policies.”

“With the Democrats in control, the life industry can rest easily that repeal of the estate tax will not happen, but there could very well be attacks on the need to fund the Democratic social agenda with huge national budget deficits,” the lobbyist said.

“Democrats such as John Dingell have argued for Federal insurance regulation, as did Fritz Hollings, retired Democrat of South Carolina,” he said. The lobbyist believes Kanjorski will eventually support Rep. Ed Royce, R-Calif., who recently introduced a bill calling for an OFC, on an across-the-board basis.

“The American Insurance Association has been supportive of Democrats as being far more amenable to federal regulation of insurance and the repeal of the McCarran-Ferguson Act,” the lobbyist said. “With more federal oversight will come scrutiny over the anti-rebating laws, as took place under Rep. John LaFalce, D-N.Y., who held hearings in the 1980s on the rebate of insurance commissions.

“I also believe that Ds will insist on more disclosure of agent commissions to consumers at point of sale–to be consistent with other financial products. This is not such a big jump, as so many of life insurance products today are hybrids and are regulated at the federal level as securities, such as variable policies.”

In the Senate, regardless of whether they take control, Democrats will be less sympathetic to outright repeal of the estate tax or expensive reform. And Sen. Chris Dodd, D-Conn., will likely succeed Sen. Paul Sarbanes, D-Md., who is retiring, as the top Democrat on the Senate Banking Committee.

Another key addition to that committee is likely to be Rep. Ben Cardin, D-Md., who is leading in the race to succeed Sarbanes. Cardin was the Democratic sponsor of bipartisan legislation introduced in the House in 2001 that added tax incentives to those seeking to build retirement savings. A number of these provisions were in the pension bill finally passed by the Congress in August.

And both Dodd and Cardin, as well as other urban Democrats on the Committee, are likely to be strong supporters of the extension of the Terrorism Risk Insurance Act, and also the addition of group life to the program.


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