Despite an entire year of debate, it remained unclear as 2009 ended what the shape and substance of a future healthcare delivery system would be and how deeply the federal government will intervene in the regulation of the insurance industry.

While legislation reforming the healthcare delivery system is by far the most controversial, a healthcare analyst said such legislation will be passed, although opposition, especially from Republicans in Congress, remains strong.

Ira Loss, an analyst at Washington Analysis, said, “Even though each day seems to bring another bit of bad news from various polls; concerns and threats from various senators; and industry opposition, the Democrats have not given up on passage of healthcare reform. They are just too close.”

In short, he said, “it is no longer about policy; it is about winning.”

Loss said he believes that the Senate, with the urging of the Obama Administration, “will cut the necessary deals to neutralize the opposition and secure the necessary votes for passage of healthcare reform.”

He added that “although there are still several fights to be had and time is short for the Senate to pass the legislation before year-end, we remain optimistic that the Senate will meet this goal.”

That would set the stage for a final bill to be negotiated in the first quarter of 2010.

The same fluid situation appears to be true about financial services reform.

The House on December 11 passed legislation that included 9 bills that would reform regulation of the financial services system.

The bill creates a National Insurance Office whose powers have been watered down; provisions that harmonize the standard that investment advisors must use in selling securities products, which has upset insurance agents of all stripes; and leaves state solvency and consumer protection rules intact.

But, despite vows to the contrary, by mid-month it was unclear when the Senate Banking Committee would unveil its version of such legislation and how comparable with the House version the Senate’s legislation would be.

One difference between the two chambers is that members of the Senate Banking Committee are working on bipartisan legislation, while the House version is primarily the work of Democrats, with Republicans in uniform opposition except for the insurance provisions.

Two provisions that are crucial to insurance agents are in the House version of the financial reform legislation, H.R. 4173, the Wall Street Reform and Consumer Protection Act.

During the markup of the bill in the House Financial Services Committee, an amendment was added that would give the Financial Institution Regulatory Authority the ability to inspect and regulate any investment advisor associated with a broker-dealer.

This provision was removed during the House floor debate through an amendment offered by Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.

But a provision creating a one-size-fits-all standard suitability standard for sale of investment products is a huge issue.

Thomas Currey, president of the National Association of Insurance and Financial Advisors, said, “The bill creates a harmonized fiduciary standard of care for broker-dealers and investment advisors when they provide personalized investment advice about securities.

“NAIFA believes that if there is going to be a harmonized standard, then there should be equal enforcement of the standard,” Currey added.

Additionally, life insurers joined with all other major life and property and casualty trade groups in writing a letter to voice concern about a provision of the bill that would require large financial institutions to pre-fund a systemic risk resolution fund. The letter was sent to Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, and Rep. Barney Frank. The American Council of Life Insurers was among the signers.

The fund, to be created through the assessments of financial institutions with assets of more than $50 billion, would be used to pay for the failure of systemically significant financial firms.

“A new pre-funded systemic fund would threaten the economic recovery by diverting capital from job creation when previous efforts to augment capital are beginning to have an impact,” the letter said. “Further, there is no evidence that the existence of such a fund would deter the creation of new asset bubbles or other market distortions,” the letter added.

One change in the bill would allow the director of the Federal Insurance Office that would be created under the bill to have an advisory role on the Financial Services Oversight Council that would deal with large financial institutions that might create a systemic risk.

Another provision would require states to adopt annuity suitability standards at least as strict as those in the annuity suitability model adopted by the National Association of Insurance Commissioners, if they desire to receive funds from a grant system designed to upgrade and make uniform consumer protection provisions designed to protect seniors.

Under the provision, the SEC would manage a program that would provide grants to state insurance regulators to investigate and prosecute “misleading and fraudulent marketing practices” in connection with sale of securities and insurance products to seniors.

The funds could also be used to develop educational materials that would facilitate training aimed at reducing misleading and fraudulent marketing of financial products to seniors.”

The provision appropriates $8 million annually for five years to the SEC for the purpose starting in fiscal year 2011. Under the program, a state could get a maximum of $100,000 a year for three years; after that, it would have to reapply.

And a manager’s amendment to the bill includes a provision requiring the Oversight Council to use state law when resolving failing state-regulated insurers.

Another important amendment tucked into the bill is designed to streamline regulation of the surplus lines and reinsurance industry.

It would clarify that the home state tax policies, licensing and other regulatory requirements of the home state of the policyholder govern surplus lines and reinsurance transactions.

The language in the amendment is similar to the Nonadmitted and Reinsurance Reform Act of 2009, which was passed earlier this year by the House, but increases the odds the bill will ultimately be enacted, according to industry officials.

In a letter to the House asking that the surplus lines reform package be included in the overall financial services reform package, Steve Bartlett, president and CEO of the Financial Services Roundtable said that, “Through the application of home state regulation, this amendment creates a national standard for allocations of premiums, filing regulations, and payment of taxes for multi-state surplus lines policies.”

Additionally, he said, “the amendment improves the efficiency of solvency regulation and the application of state laws on reinsurance.

“Both of the changes achieved by this amendment would ultimately benefit the insurance buying public,” he added.

As for healthcare, Senate Democrats worked to complete action on its bill before adjourning for the year.

They appeared to be coalescing around a compromise to a so-called “public plan” in healthcare reform legislation whose provisions are dividing the insurance agents’ industry.

The compromise health plan negotiated by 10 moderate and liberal Democrats would call for creation of a national health plan in lieu of a public option but with a trigger and a high medical loss ratio.

The trigger would be pulled under the proposal if insurance companies don’t step up to the plate to offer such plans.

It would also include a Medicare “buy-in:”; an extension of the State Children’s Health Insurance Plan (SCHIP), but no Medicaid expansion beyond 133% of the federal poverty level; and, as written in the current Senate bill, state exchanges of private plans and insurance market reforms.

Joel Kopperud, a director of government relations for the Council of Insurance Agents and Brokers, reacted to the national health plan idea by saying, “Of course we need to see the details of how this national plan would be administered through state exchanges, but on the surface, we think that this may be something that competes fairly and are very encouraged.”

In other words, he said, in regards to this “new competitor,” this latest plan “sounds like it threads the needle.”

But Kelly Loussedes, vice president of public relations at the National Association of Health Underwriters, said members and staff of her trade group have deep concerns about the newest compromise proposal.

“Expanding the already overburdened Medicare and Medicaid programs would result in a vicious circle of escalating health care costs and reduced access to quality health care,” she said.

“One of the primary objectives of health insurance reform in America is to provide access to high quality coverage for all Americans that is affordable,’ she explained.

“Many policymakers believe that insurance is not available to a majority of the uninsured due to barriers to access health care,” she said, but in fact, “the main barrier is the cost of health insurance.”

Rather than exploring affordability solutions, however, “many reformers propose schemes that change the foundation of our current health care system which will actually make it more expensive and, therefore, less accessible for millions of Americans.”