Filed Under:Agent Broker, Coverage Issues

Mr. Brown Goes To Washington

What a difference one election can make. Before the upset win on January 19 by Republican Scott Brown in the race for a U.S. Senate seat in Massachusetts, it looked like the nation was a few weeks away from seeing a healthcare reform bill crafted by Democrats signed into law.

The addition of Brown to the Senate means a subtraction for the Democrats. In the sharply divided chamber, Democrats will no longer control the 60 votes needed to shut down Republican filibusters. Shortly before Christmas, the Senate passed a healthcare reform bill with just the requisite 60 votes. Now, they're one vote short.

The election of Brown, a six-term state legislator from Wrentham, Mass., upended the political landscape in the heavily Democratic Bay State. Brown did what many thought was impossible: he captured the Senate seat that was held for 47 years by the late liberal icon Ted Kennedy.

Describing himself as a conservative and telling voters the state "needs an independent thinker," Brown said he does not support President Obama's healthcare reform plan in its current form as approved by the Democratic-led House and Senate.

As a state legislator, Brown supported the 2006 Massachusetts healthcare reform backed by then-Gov. Mitt Romney that requires all residents to purchase health insurance.

"I'm going to be the only person down there who is going to be the independent voter and thinker," Brown said during the campaign. "I've always been the underdog in one shape or form."

Potential impact on healthcare

The new political calculus prompted discussions among the Democrats of what strategy they should adopt going forward. At first, some Democrats suggested that they slow down and work on other items before attempting to pass healthcare reform.

Retiring Senator Christopher Dodd (D-Conn.) was among those calling on leaders to tackle other pressing issues until a new approach on health care could be forged. "It's not like we've got nothing to do around here," he said.

During his State of the Union address, President Obama called on Congress to "finish the job" and pass healthcare reform, but he did not say it was his top priority. With Democrats clamoring for Obama to focus on job creation and the economy, the president said lawmakers should let "temperatures cool" and then take a fresh look at his healthcare plan.

What was left unsaid was how long a cooling-off period he had in mind, or what reforms advocates will now peruse as part of a new strategy in the face of steadfast Republican opposition.

What hasn't changed

While the election of Scott Brown in Massachusetts is a watershed event that reshuffles the deck in Washington, D.C., it does not necessarily represent a complete change, especially for insurance issues.

Even though Brown received massive support from the Republican Party nationally, his win was sealed by attracting support from independents while also peeling off some Democrats. During the campaign, Brown reminded voters regularly that he is an independent thinker who will not necessarily toe his party's line. His record as a state legislator reads like that of a Main Street Republican with conservative views, but not an ideologue. In addition, he did not specialize in insurance issues in Massachusetts. Also of note is that Brown benefited from an inept campaign by his Democratic opponent Coakley, who apparently believed there was no way she could lose until it was too late.

Meanwhile on Capitol Hill, insurance issues in addition to healthcare remain in focus.

The push to repeal the limited McCarran-Ferguson antitrust exemption for healthcare and medical malpractice insurers continues. One version of a repeal bill even removes language protecting joint industry activities such as compilation of historic loss data. PIA, along with many in the industry, opposes repeal of McCarran-Ferguson.

Another important issue, the reform and reauthorization of the National Flood Insurance Program (NFIP), continues to get kicked down the road through a series of short-term extensions. The latest NFIP extension is through February 28, 2010. It looks like Congress will kick it down the road again, because it is highly unlikely that there's enough time to pass a comprehensive bill. NFIP reform efforts have been stymied over two issues: proposals to add coverage for wind damage to the program, and forgiving the program's nearly $20 billion debt arising from catastrophic storms in 2004 and 2005. PIA opposes inclusion of wind coverage and supports debt forgiveness.

One interesting proposal that would have a major impact on the insurance industry is a bill introduced by Sens. John McCain (R-Ariz.) and Maria Cantwell (D-Wash.). The Banking Integrity Act of 2009 (S. 2886) would reinstate the 1930s-era Glass-Steagall law that barred large banks from affiliating with securities firms and was expanded in 1956 to include a prohibition on engaging in the insurance business. Those limits were removed in 1999 with the repeal of the Glass-Steagall Act and the passage of the Gramm-Leach-Bliley Act (GLBA), which specifically allowed banks to enter the insurance business.

Analysts say passage of the McCain-Cantwell bill would force firms at the center of last year's financial crisis--such as Goldman Sachs, Morgan Stanley, Citigroup, JPMorgan Chase and Wells Fargo--to spin off investment and insurance operations.

At first, some pundits dismissed this bill, saying it has no chance of passage. But in short order, the Wall Street Journal editorialized in favor of it and it garnered six Senate co-sponsors. While PIA has not yet taken a position on S. 2886, we support the idea of getting big banks out of the insurance business.

Too soon to tell

As the 2010 episode of "Mr. Brown Goes to Washington" unfolds, it should also be noted that he is a Massachusetts Republican, which sounds like a contradiction in terms. The state hasn't sent a Republican to the Senate since 1972. When he runs for re-election, as all Senators begin to do the moment they take their oaths, he must again appeal to an electorate that remains overwhelmingly liberal, especially in comparison to most other states, with the possible exception of Vermont. This points toward Brown having to be truly independent, and perhaps not signing on completely to the current GOP leadership's strategy of "just say no" to bipartisanship.

So how will the altered political landscape in Washington, D.C. affect insurance issues? It's too soon to tell. But one thing's certain: even before being sworn in, Scott Brown was already having an effect on legislation just by his presence.

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