In the fall of 2009, there are more issues being debated or considered in Congress with potential impact on professional independent insurance agents than at any other time in recent years.

As lawmakers reconvene from what has been a raucous August recess, healthcare reform is the first issue to deal with. But there also is a raft of proposals with the potential to help or hurt the businesses of independent agents and the consumers who are their customers.

PIA just completed its fourth annual August advocacy event, “Capitol Hill in Your Backyard,” during which members are encouraged to contact their members of Congress to discuss pending legislation of particular interest to agents. When PIA launched this in-district lobbying event four years ago, there weren't many similar campaigns. The debate over healthcare reform changed all that.

As the healthcare debate became more contentious, the insurance industry was singled out for criticism for opposing certain reform proposals, with some advocates going so far as to call our industry “evil.” This is a symptom of the craziness that replaced reasoned debate and rational discussion in some quarters during August.

At the outset of the debate, PIA issued 8 principles for healthcare reform which we advanced as guidelines for the legislative process. They are as applicable now as they were before the August shouting:

1 Build on and support the private healthcare system, not dismantle it

2 Improve existing government programs

3 Do not create a government-owned insurance agency or brokerage

4 Preserve the role of independent agents and brokers

5 Build upon successful state-based innovations

6 Do not tax employer-provided health care benefits

7 Encourage cost controls and wellness programs

8 Congress needs to forge the broadest possible consensus before enacting any reform legislation.

What's going to happen in Congress? The final chapter is still being written, but here's an educated guess: Something will pass, and it will be called healthcare reform. President Obama, by declaring this as his top priority, has wagered his credibility and that of his still-young administration on being able to say he accomplished his goals. The health insurance carriers, medical providers and pharmaceutical firms that have expressed support for reform (even though some of them used proxies to stoke opposition in August) will, in the end, strike some kind of deal because it will be in their interest.

Regulatory reform, nat cat, workers' comp

While all of this is occurring, other insurance-related issues have continued to dominate the Congressional agenda. PIA continues to oppose certain proposals, especially the “OFC-on-steroids” bill, the National Insurance Consumer Protection Act (H.R. 1880), introduced earlier this year by Reps. Ed Royce (R-Calif.) and Melissa Bean (D-Ill.). It is by far the most aggressive attempt to turn over insurance supervision to the federal government and undermine the states.

Last year, we opposed Rep. Paul Kanjorski (D-Pa.)'s bill to create an Office of Insurance Information, because it vested broad powers in the Treasury Department to preempt state insurance laws and regulations. Our effort was successful when the bill was removed from the consent calendar of the House shortly before adjournment for the year. The version introduced this year, the Insurance Information Act of 2009 (H.R. 2609), looked better because it placed more restrictions on preemptions.

Unfortunately, separate legislation creating an Office of National Insurance (ONI) within the Treasury Department has no provision allowing the Secretary of the Treasury to stay preemptions. Also, it does not provide Congress with the power to nullify a preemption determination. In addition, a provision allowing the federal government to negotiate foreign treaties without congressional approval is causing concern. In short, much of the good work that had been done to improve Rep. Kanjorski's proposal has been undone in the ONI bill.

While we would prefer that neither an OII nor an ONI be enacted, any such legislation should contain strong restrictions on the preemption of state laws. And while we would like to believe the proposed ONI will not be used to advance federal insurance regulation, we have serious reservations about creating a federal bureaucracy for insurance which could then be used to begin to build a structure for full federal regulation of insurance.

We also oppose the National Commission on State Workers' Compensation Laws Act of 2009 (H.R. 635). It would create a commission to study state workers' compensation laws to determine their adequacy and whether additional “remedies” should be made available. Translation: It would create and fund a federal commission to fix what is not broken. There is no need for this bill. It is a waste of lawmakers' time and the taxpayers' money.

Our engagement on natural catastrophe issues continues. We have endorsed three pieces of legislation that will go a long way toward making hazard mitigation a key national priority: H.R. 3026, the Hazard Mitigation for All Act; H.R. 3027, the Pre-disaster Hazard Mitigation Enhancement Program Act, and H.R. 3028, the First Responder Innovation and Support Act of 2009. All three bills were introduced by Rep. Bennie G. Thompson (D-Miss.), chairman of the Committee on Homeland Security. “Congressman Thompson's three-pronged effort to facilitate disaster mitigation is a winning strategy in the fight to protect America from natural disasters,” said Brian T. Marino, co-chair of the PIA natural catastrophe working group.

Passage by the House of a 6-month extension of the National Flood Insurance Program (NFIP) was necessary and should provide enough time to complete common-sense reforms and a multi-year renewal; however, the Multiple Peril Insurance Act of 2009 (H.R. 1264) unwisely seeks to make wind insurance policies, currently covered under homeowners' insurance policies and statewide wind pools, available to the public through the NFIP.

PIA supports the Indexed Annuities and Insurance Products Classification Act of 2009 (H.R. 2733), a bipartisan bill to reverse a December U.S. Securities and Exchange Commission (SEC) decision to regulate equity-indexed annuities as securities. And PIA has joined a long list of insurance industry associations asking Congress to spare the industry entirely from regulation under the newly proposed Consumer Financial Protection Agency.

Victory for state regulation

The good news is the Obama administration's long-awaited regulatory reform proposals did not include a call for federal regulation, leaving insurance regulation to the states. This surprised many in the industry and no doubt came as a blow to those who have been intensely lobbying for a federal takeover.

There is an interesting backstory to this. For many years, it was assumed that many Republicans generally supported state regulation of insurance, while most Democrats were inclined to support federal regulation. But not everyone lined up that way, and there had been some shifting of positions over time.

When the Obama administration took office, it said nothing on the issue. Then on May 20, the White House released a memo from President Obama to all federal departments and agencies that placed broad restrictions on federal actions to preempt state law.

This marked a significant and far-reaching reversal of what had been going on for a decade. Since 1999, various federal agencies had adopted regulations that declared certain state laws to be null and void, trumped by the agencies' interpretation of federal law. This was often done without any specific action by Congress, or any clear authorization in existing federal law. The Office of the Comptroller of the Currency was notorious for routinely declaring state insurance laws preempted by federal banking laws. Now, the President of the United States was taking steps to restrain such regulatory overreach. This memo turned out to be a harbringer for what was to come.

On June 4, at the invitation of the White House, PIA executive vice president and CEO Leonard C. Brevik participated in a meeting with insurance industry and Treasury and Commerce Dept. officials. It focused primarily on the insurance aspects of financial services reform legislation that would be proposed by the Treasury.

Brevik stated that administration officials would benefit from studying the state system of insurance regulation, to learn why it succeeded during the financial crisis while federal regulation of the other sectors in financial services failed.

Days later, the Treasury released its proposed legislation for regulatory reform. Absent was any call for federal regulation of insurance, or any mention of an optional federal charter. Apart from systemic regulation of mega-insurance firms in the event of a crisis that could tank the entire financial system, insurance regulation would be left to the states.

The Wall Street Journal, in a report on the June 4 meeting, noted that the Administration had been caught off guard by the industry's division on the issue of federal regulation of insurance.

In a commentary, PIA national president Kenneth R. Auerbach, Esq., noted that “sometimes there is a tendency by some groups to soften their views or develop a case of organizational laryngitis at pivotal meetings such as these, in order to ensure that they get invited back. I am proud that PIA stood its ground in this setting and gratified that our forthright presentation of our views may have contributed to federal insurance regulation being excluded from the Treasury's recommendations. Well done!”

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