Forbes Says Insurers Should Have Choice Of Regulator

NU Online News Service, May 20, 3:40 p.m. EDT

BOCA RATON, FLA.–Magazine publisher and former Republican presidential candidate Steve Forbes told an industry conference here that insurers should choose who will regulate them.

And Mr. Forbes said consumers should be free to purchase certain lines of insurance based on market principles without regard to domicile.

In answer to a question during his address to attendees of the 83^rd annual meeting of the American Association of Managing General Agents here yesterday, Mr. Forbes said, "I think in terms of regulation, conceptually, I think the devil is in the details, but you [insurers] should have a choice of where you want to go."

He said based on the size of the carrier, federal regulation may be necessary to keep regulation consistent.

No matter who does the regulating, when it comes to health care, consumers should be allowed to purchase insurance anywhere they deem it most affordable, he said.

"In health insurance, even if states are doing the regulation, you should still be allowed, if you live say in Florida, to purchase a policy in Illinois if it is kosher in Illinois," he commented.

Mr. Forbes, who is chairman and chief executive officer of Forbes Inc. and editor-in-chief of Forbes Magazine, said market forces should be employed to help drive down the cost of health care and the role of government will only increase the costs, as Medicare and Medicaid have already done.

Health care proposals currently being considered by the House Democratic majority would include a public group plan provided by Medicare/Medicaid to compete with private offerings as well as government subsidies for private insurance plans covering those without health coverage.

Mr. Forbes said consumers should set up health care savings accounts with money paid to them by their employer, as Forbes does for its employees. If the consumer remains healthy and does not have to use money from the fund, they keep the money in the plan and watch it grow for future health care needs. Consumers would purchase catastrophe health care plans, and those who cannot afford to do so would receive subsidies similar to the federal food stamp program, he explained.

Because consumers are paying for services, he continued, they would search for the best price for care, much as they shop for food today. Market forces have allowed food to grow in abundance cutting the price of the product and, he reasoned, the same would happen with health care.

He said current plans being proposed in Washington to set up a federal health insurance plan to rival private companies would be the first step toward the United States nationalizing health care. With nationalization would come inadequate reimbursement and shortages of care.

"We don't have a real free market in health care," he said. "Where there is greater demand you prosper."

Most of his address was aimed at criticism of the Federal Reserve and Bush-era decisions on monetary and market regulation.

He said decisions by the Federal Reserve to put too much money into the economy, Security and Exchange Commission decisions to drop certain regulations on banking and trading dating back to 1938, and the Bush administration's adherence to a weak dollar policy led to the current financial crisis.

"This crisis was totally unnecessary," he said, adding that if monetary policy was tightened during that period and certain regulations not changed, the current recession would not be as severe as it is today.

He said the change in accounting standards to mark-to-market accounting, where owners of assets have to calculate the loss of assets even though no loss had taken place, was "one of the dumbest things ever done." The practice, he said, should be totally abandoned.

"It took a serious crisis and turned it into a tsunami," he said.

His major criticism of the current administration concerned the SEC still allowing the sale of naked short selling, which he termed something akin to someone selling their neighbor's house and hoping they can get it back after making a profit before the neighbor gets home. He said the current administration is taking too long to stop such selling and he is surprised it has not moved quicker.

To get out of the current crisis, he said the Federal Reserve should be aggressively buying up securitization bonds from banks at the rate of $30-to-$40 billion a day, thereby loosening up the credit markets.

"The sooner the Fed gets this working again, the sooner we can get out of this crisis," Mr. Forbes remarked.