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.”
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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.