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Life Health > Health Insurance > Health Insurance

Senate Financial Bill Action Heats Up

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WASHINGTON BUREAU — State lawmakers are still trying to push a national insurance office provision out of S. 3217, and Sen. Dianne Feinstein is trying to insert a health insurance rate regulation measure.

Members of the Senate already are talking on the floor about the idea of debating S. 3217, the Restoring American Financial Stability Act of 2010, but Democrats have not yet secured the votes they need to avert a filibuster, or endless round of debate, and have the bill come up for a vote.

Senate Majority Leader Harry Reid, D-Nev., has scheduled the first vote on a cloture motion, or motion to prevent a filibuster, for 5 p.m. today.

Observers expect Republicans to defeat that motion, but for Democrats to eventually change the underlying bill enough to persuade at least one Republican to vote for a cloture motion.

Sen. Richard Shelby, R-Ala., the highest-ranking Republican on the Senate Banking, Housing and Urban Affairs Committee, has told a banking group today that the situation means that Republicans still have an influence over the bill.

“If we hang together on the floor, we can create critical mass,” Shelby said.

The delay is giving insurance groups enough time to press for last-minute changes in bill language.

Leaders of the National Conference of Insurance Legislators, Troy, Mich., have sent a letter asking Senate Banking Committee members to delete Title V, Subtitle A, the section of the bill that would create an Office of National Insurance in the U.S. Treasury Department.

The current ONI provision would give the ONI the authority to collect and analyze insurance data, to prepare an insurance system modernization report, to recommend which insurers should be supervised by the Federal Reserve System, and to preempt state laws that it found to be inconsistent with international insurance agreements on “prudential matters.”

The ONI provision would insert “a federal presence into the regulation of insurance–seeks a solution to a problem that does not exist,” NCOIL officials write in the letter.

State lawmakers fear the ONI “would preempt state law and eventually threaten successful state insurance oversight,” NCOIL officials write. “As has been evidenced and attested to over and over again, and despite the wishes of those who would seek to avoid the protections of state regulation, insurance regulation did not contribute to the crisis and does not need federal intervention.”

In other S. 3217 developments:

- HEALTH INSURANCE RATES: Feinstein, D-Calif., wants to add a health insurance rate review provision that was left out of the new Patient Protection and Affordable Care Act and the new Health Care and Education Reconciliation Act.

PPACA contains a rate review section that would take effect starting in 2014. In that year, state and federal officials would start to “monitor premium increases of health insurance coverage offered through an exchange and outside of an exchange,” and the results of monitoring would affect the decision whether to offer large-group coverage through the new exchange system.

Feinstein’s proposal would give the secretary of Health and Human Services explicit authority to see that rates are reasonable.

Officials at the National Association of Health Underwriters, Arlington, Va., have expressed concerns about the provision.

NAHU does not believe Feinstein’s Health Insurance Rate Authority Act of 2010 is necessary, NAHU spokesman Kelly Loussedes says.

“Policymakers need to recognize that premium increases are the result of numerous factors, including increases in the price per medical service and greater utilization of services, adverse selection, new medical technology, cost shifting, state insurance taxes and fees, regulatory compliance, the aging of the population, and unhealthy lifestyles,” Loussedes says.

The new health reform law already contains numerous provisions that make insurance rates subject to significant oversight and review, Loussedes says.

“NAHU has always supported state-based oversight of health insurance and states currently have the ability to review and deny premium increases that are considered unjust or excessive,” Loussedes says.

- SYSTEMIC RISK: Democrats and Republicans continue to debate how to finance a $50 billion fund that would help regulators shut down large, troubled financial institutions that were believed to be “too big to fail.”

A version of S. 3217 approved by the Senate Banking Committee in March would limit the reach of the bailout fund tax to institutions with more than $50 billion in assets.

Lawmakers are now considering imposing a 0.15% or 0.16% annual fee on institutions with more than $50 billion in assets, in part because of a Congressional Budget Office forecast suggesting that, without the fee, S. 3217 would increase the federal budget deficit by $17 billion.

- DERIVATIVES: The Senate seems to be on track to requiring life insurers to use exchange-traded contracts to hedge portfolio risk.

Insurers are still trying to get an exemption that would permit them to use custom-made, over-the-counter arrangements.

Farmers, airlines and other parties that use custom-made OTC derivatives to limit risk already have won access to use of an exemption, and insurers say their situation is the same when they are trying to use OTC derivatives to limit risk, rather than to speculate on shifts in interest rates and borrower creditworthiness.

But, so far, life insurers have made no progress in winning access to an OTC exemption, life industry sources report.

- ACTIVITIES LIMITS: An S. 3217 provision would limit financial companies, including deposit-taking banks, from engaging in certain investment activities.

So far, life insurers have not been able to carve themselves out of that provision, a source says.

If the provision becomes law as written, it could keep life insurers and mutual funds that own banks from investing in or sponsoring private investment funds.


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