Democratic control of the next Congress could mean that the life insurance industry agenda will fare better than it has under the last 6 years of the Bush administration, industry officials said last week.
In the meantime, Congress will reconvene on Nov. 13 for a lame-duck session to deal with issues left undecided before it left in late September to campaign.
The Association for Advanced Life Underwriting said in a note to its members after the election that this Congress is likely to accomplish “nothing substantial,” given that Congress will look vastly different next year.
“This is particularly true on politically polarizing issues such as the estate tax,” said Dermot Healey, president of the AALU, in the note.
But Healey left open the possibility that both Democrats and Republicans in Congress “may look to compromise to clear the decks of some important issues that may get bogged down with the new, tightened majorities in both Houses of Congress next year.”
If both sides “gave a little,” Healey said, “the estate tax could be an issue ripe for compromise in the Senate during the lame duck session.”
At the same time, he said, “the reality of a new Democratic House majority in the 110th will have an impact on this debate. How much, of course, remains to be seen.”
It was clear as Election Day ended that the Democrats would control the House, and it appeared that they would pick about 33 seats, giving them a working margin of 16 seats in the Congress.
Then, on the day after the election, news organizations declared Democrat James Webb the winner over incumbent Republican Sen. George Allen, in the cliff-hanging Virginia race, sealing Democratic control of the Senate.
The Democratic victory in the House installed Rep. Barney Frank, D-Mass., as presumptive chairman of the Financial Services Committee and Rep. Charles Rangel, D-N.Y., as presumptive chairman of the House Ways and Means Committee. Rep. Pete Stark, D-Calif., is presumptive chairman of the key Health Subcommittee of the Ways and Means panel.
The Democratic victory in the House gives Rep. Paul Kanjorski, D-Pa., the chairmanship of the key Capital Markets, Insurance and Government-Sponsored Enterprises Subcommittee of the FSC.
Democratic victory in the Senate means that Sen. Chris Dodd, D-Conn., who is proud of his support for the insurance industry, will become chairman of the Senate Banking Committee.
Dodd was primary author of the original Terrorism Risk Insurance Act, enacted in late 2002, and is also an author of legislation reining in class action litigation involving alleging securities fraud that was enacted in the Clinton administration.
His negotiations with the White House in November 2002 resulted in language being included in the TRIA bill that would allow the Treasury Department to extend TRIA to the group life insurance industry. Treasury, however, has consistently declined to do so, maintaining there is adequate capacity to handle all group life insurance demand.
In a statement issued before Webb was declared the winner in Virginia, Dodd confirmed he would keep the top Democratic post on the Senate Banking Committee, ending speculation he would seek the chairmanship of another committee.
He added that whether he served as ranking member or chairman, he intends “to consult with Senator [Richard] Shelby, R-Ala., [current committee chairman], and other members of the committee in an attempt to forge common ground.”
He added, “I intend to do all I can to work with all members of the committee to create a more secure and prosperous America.”
Dodd said he believed the committee should have 2 “primary priorities: First, to make America more secure by preventing the outsourcing of militarily sensitive jobs and technologies, by protecting our transit systems, by protecting our ports, and by ensuring that terrorists are thwarted in their efforts to use our financial system.”
The second priority, Dodd said, is “to make America more prosperous by creating the most transparent and vibrant capital markets in the world, by using our laws to better promote the export of American goods and services, by ensuring that working families can find affordable housing and better jobs, by protecting consumers so they can fully and fairly participate in our capitalist system, and by creating public transportation that serves the needs of working Americans in every corner of our country.”
And, in comments published by The Wall Street Journal on Nov. 4, Rep. Frank said he would be amenable to making it easier for public companies to live with the Sarbanes-Oxley Act, either through legislation or Securities & Exchange Commission rule-making.
A Democratic Senate will have Sen. Max Baucus, D-Mont., who is amenable to estate tax reform rather than repeal, as chairman. But, he would be working closely with Sen. Charles Grassley, R-Iowa, the current chairman.
The Democratic sweep brought losses of some familiar faces in the House. Rep. Nancy Johnson, R-Conn., who was serving her 11th term in Congress and was a strong supporter of the industry, was defeated handily. Rep. Jim Leach, R-Iowa, the first Republican chairman of the committee after the GOP takeover in 1995 but who stepped down because of term limits in 2001, was also defeated.
Leach worked for 4 years, from 1995 to 1999, to ensure that states remained in charge of insurance regulation, and to develop legislation stating that specifically. He is one of the named authors of the bill, the Gramm-Leach-Bliley bill. He was in his 14th term in Congress.
Rep. Sue Kelly, R-N.Y., was also defeated in the Democratic wave. She was chairman of the Oversight panel of the House Financial Services Committee and a strong voice for the industry on the committee, especially on terrorism risk insurance issues.
Regarding issues, AALU’s Healey said in a note to members that “key House Democratic leaders have told AALU that they plan on reinstituting pay-go rules for tax cut legislation.”
This would mean that any new tax cut or extension of an existing tax cut would have to be offset with a correlating decrease in spending, Healey said, which has “positive implications” for finding a responsible and sustainable resolution to the estate tax issue, even though it would require Democrats to find other sources of revenue to fund other initiatives.
Healey added in his note, written before final results were known, that if the Democrats won control of the Senate “there would be 10 new senators who would grapple with the estate tax issue.”
The new composition of the Senate would mean that 5 additional “pro-reform” senators would have the opportunity to weigh in on the [estate tax] debate,” he said.
Included with those senators whose positions changed during the last session of Congress, there would be between 49 and 52 senators who have expressed their opposition to repeal either through their recent votes or their stated positions, he said.
“This would be a decidedly different picture than that entering the 109th Congress–when 60 senators entered with past positions in support of estate tax repeal,” Healey said. “Many of these same senators have expressed a strong desire to focus first on tax cuts for the middle class.”
In a conference call with reporters, American Council of Life Insurers President and CEO Frank Keating said the No. 1 priority for the life insurance industry in the new Congress would be enactment of legislation creating an optional federal charter.
Regarding other issues, Keating said:
–He “doesn’t see” the Democrats taxing annuities or the inside buildup in life insurance policies.
“I have not heard that the Democrats seek to tax insurance products,” he said. “It would further weaken the ability to deal the crisis confronting retirement security, and weaken the incentive for people to save for their future. It would be counterproductive.”
–He believes Republican initiatives for Lifetime Savings Accounts, regarded as anathema by the insurance industry, “are dead.”
“They treat short-term savings the same as long-term savings,” Keating said. “Because most people would opt to save short-term, LSAs and RSAs [retirement savings accounts] are terrible ideas, and I think they have been laid to rest.”
–Proposals by the Commission on Tax Reform that would have limited or eliminated the tax incentives of most insurance products are also unlikely to surface in the new Congress.
“The Commission had some interesting ideas, but some were political non-starters,” Keating said. “The types of policies proposed under the Commission would not sit well with the populist Congress coming to power.”
–Legislation enacted in 2001 putting curbs on class action lawsuits won’t be amended.
“Class action lawsuit legislation passed because it’s time had come,” Keating said. “I see no rollback.”
On healthcare issues important to insurers, Washington Analysis issued a note to investors saying that a Democratic-led Congress would likely consider legislation that would narrow or eliminate the statutory “donut hole” where beneficiaries pay 100% of drug costs from the time out-of-pocket spending reaches $2,250 until it hits $5,100. The analyst said this would be “slightly positive” to purveyors of Medicare drug benefit plans because it may encourage more people to sign up. The analyst said popular support for this proposal is “strong,” and odds of House hearings and bill passage are above 50%.
But it is unclear if the Senate will go along “because of the sizable cost of such action and the fact that many plans already offer donut hole coverage,” the analyst said.
At the same time, the analysts said that additional incentives for Health Savings Accounts are unlikely to be enacted by a Democratic-controlled Congress, but efforts to roll them back despite Stark’s dislike of them won’t succeed. “Even though Stark opposes these savings vehicles, we doubt House Democrats would repeal HSAs,” the analysts said.