Filed Under:Agent Broker, Personal Insurance Business

More Gridlock Ahead?

This year's election could generate progress--or more of the same

The election of 2012 was so contentious that chances are each side was completely convinced that it was going to win. Those on the losing team were probably emotionally devastated, although they are not likely to admit it.

Committed partisans of any stripe often believe that the fate of the entire world will rise or fall depending on the results of their preferred election campaigns. Those who do not suspend healthy skepticism in service to their deeply held beliefs are better able to put politics in perspective. In other words, it is never the end of the world.

It should come as no surprise that President Obama’s re-election means there is no chance whatsoever that the Affordable Care Act (ACA) will be repealed, either wholly or in part. ACA implementation will continue. There also is a good chance that tax policy will change. The question is how.

Related: Read "High and Dry" by Jimi Grande.

The ability of professional insurance agents to continue selling health insurance and to be fairly compensated for doing so remains up in the air. ACA creates strict medical loss ratio (MLR) formulas that have led to health insurance sales placing limits on agent compensation. While legislation to curb this is still at play in Congress, we are skeptical that it could be enacted in the new political environment.

Participation and fair compensation from health sales through a health exchange are also at play. While Mitt Romney campaigned on offering state exemptions from the ACA, states must now decide, if they haven’t already done so, whether to offer a state-based health exchange or allow the federal government to manage and regulate one in their state. As a result, the focal point for ACA implementation will shift to the states. This is a positive development, as many states have been supportive of including agents as part of their exchanges.

Tax Policy: Even before Inauguration Day in January, taxes will be in the spotlight as legislators attempt to avert the automatic budget cuts mandated under sequestration. At the same time, the Bush-era tax cuts are set to expire, as is President Barack Obama’s payroll tax cut. If nothing is done, all of this happens.

Independent insurance agencies could face higher taxes, depending on the specifics of various tax reform proposals that may be considered in the effort to avoid plunging off this fiscal cliff. Although both Democrats and Republicans have said that small businesses should not face unfair tax burdens, many agencies file as pass-through entities and pay at the individual tax rates--something that will be in play this December. PIA will be fully engaged in the legislative process to protect the business interests of our members and ensure that they do not get caught in the fiscal buzz saw in Washington, D.C.

Other legislative initiatives are likely to be on the Congressional agenda in a second Obama term, many of which could impact professional insurance agencies. Among them:

  • Re-authorization of TRIA: The Terrorism Risk Insurance Act is coming up for renewal. Our industry still needs assurance that terrorism insurance will continue to be available to our customers.
  • Extension of the Farm Bill: While the authorization for the federal crop insurance program hasn't lapsed, the Farm Bill extension and related crop insurance reforms remain a top issue.
  • Natural disaster: The extensive damage across many states caused by Tropical Cyclone Sandy could lead to renewed support for a federal natural disaster backstop program.

Changes in Congress

The election increased liberals in the Senate and the House of Representatives largely remained the same, controlled by conservative Republicans. With the House, the question is just how conservative that body will remain. Several outspoken Tea Party members lost their seats and while this will not have a profound effect, the overall tenor of the election and how the GOP does or does not change its political strategy as a result, will.

Some pro-business House members won re-election. Rep. Spencer Bachus (R-AL), chairman of the House Financial Services Committee, won in Alabama, although it is not certain that he will retain his chairmanship. Rep. Mike Rogers (R-MI) also won.Rogersis the sponsor of legislation that would exempt insurance agent compensation from the new MLR restrictions under the Affordable Care Act and has been a strong advocate for agents. Rep. Steve Stivers (R-OH) was another key win. PIA named Stivers its 2012 Legislator of the Year and he is a strong advocate for state insurance regulation.

Not every pro-insurance legislator won. A strong ally, Rep. Judy Biggert (R-IL) lost her re-election bid. The congresswoman was the Chairwoman of the Insurance Subcommittee in the House and an excellent legislator.

Read another Ted Besesparis story, "Unconventional Wisdom."

The Democrats fared better than expected in the Senate and will retain control of the upper chamber. Despite picking up a few seats, the status quo will probably remain. Democrats likely will control 55 votes (includes two Independents who will likely join their caucus), and the Republicans at 45.

A total of 60 votes is needed to break a filibuster, which means the GOP is positioned to block Democratic bills in the Senate. But here is a caveat that makes politics more interesting: Democrats in the Senate have one chance to alter the filibuster at the start of the session, potentially lowering the number of votes needed to sustain a filibuster. Will the Democrats lower the vote needed to sustain a filibuster to 55 or 50 votes?

My bet is that they don’t. If the Democrats also won control of the House, they might have; the temptation to pass and enact supported legislation could have been too great. But because the House is controlled by the Republicans, the GOP has a veto there, rendering a change in the Senate filibuster rule moot except for appointments. The Democrats may not want to tempt fate by changing this rule. If the GOP subsequently gains a majority, the Democrats would rue the day they changed the filibuster. But they still might do it.

The core question at this juncture is: Will there be more gridlock in Washington, D.C.?

“With the election over, it is time to put the interests of the entire country first,” said PIA National President Andrew C. Harris in a post-election statement. “I think the most important thing President Obama can do is hold a summit of all divergent interests to move the economy forward.

“A grand bargain where both sides give to get our deficit under control is something I believe most conservatives as well as liberals could agree with,” Harris said. “All the talk in the world about social issues isn’t going to start the engine of business back in gear. Right now, the engine of business is in neutral, and we need to stick it into Drive and step on the gas.”

Still, Harris said he thinks there will be more of the same—unless President Barack Obama reaches across the aisle and adopts more conservative principles, a prospect he views as unlikely.

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