All eyes are on the outcome of a few key races that will determine the makeup of the House and Senate today, and while that conclusion will shape the future of some key economic factors, Insurance Business America has our eye on five issues that have the power to create significant shockwaves in the insurance industry.
These ballot initiatives, races and speculation on legislation warrant a careful eye this Election Day 2014.
1. The future of TRIA reauthorization
The makeup of the 114th US Congress may not only influence the current reauthorization of the Terrorism Risk Insurance Act, but the eventual role of a federal backstop for terrorism insurance. The current divided Congress, with its democrat-controlled Senate and GOP-controlled House, has thus far failed to act on two current versions of a renewal for the program.
After elections, the lame duck Congress may make different choices. Larry Mirel, a partner with Nelson Brown & Co., believes Rep. Jeb Hensarling—a prominent critic of TRIA—may use a Republican victory to champion more extreme changes to the program’s reauthorization.
“I think if Republicans take the Senate and the House becomes more conservative, Chairman Hensarling will be in an even stronger position to get his way than he is now,” Mirel said.
One way proponents of TRIA are concerned Hensarling would use this “strong position” is to reauthorize TRIA for a short period of time and then use a GOP majority in the House and Senate to kill the program altogether.
Joel Kopperud, director of government affairs for the Council of Insurance Agents and Brokers, does not find this outcome likely, however.
“I understand the anxiety and that train of thought, but the combination of the impact it would have on the market combined with Congress’ desire not to have this battle again, I think will see us through,” said Kopperud, adding that he is optimistic regarding the chances for TRIA renewal in December.
2. The fate of NARAB’s producer licensing board
Along with both the House and Senate versions of TRIA renewal is an important piece of legislation industry advocates have been trying to pass for years. NARAB II, which establishes a nationwide producer licensing board, may also be impacted by the outcome of today’s election.
As with TRIA, Kopperud anticipates passage of NARAB provisions before the new Congress takes office.
Industry-wide, the preferred House version would establish the board without any mitigating provisions. The Senate version asks for a two-year sunset on NARAB, after which Congress will reconsider the value of the program.
3. Employee benefits in a Republican Senate
While the property/casualty sector of the insurance industry may stand to gain or lose with a Republican-controlled Senate, it is the employee benefits sector that will be most affected.
Kopperud fears that a GOP majority could put tax exclusions for employee benefits on the chopping block when it comes time to form a budget. And that could mean a significant contraction in the small business employee benefit market, as well as high premiums for remaining consumers.
“If you start taxing these plans, you will quickly see the market erode,” Kopperud said. “That’s our big battle in the benefits space.”
4. Increased power for California’s insurance commissioner
Another ballot measure catching national attention is Proposition 45 in California. This measure would allow the state insurance commissioner to review health insurance rates before they are approved, as well as give an intervener law firm an opportunity to sue insurers for any changes made to plans, whether cost-related or not—with such legal action financed by the insurer.
Proponents believe the law would create lower rates for consumers, but those in the insurance industry say the reverse effect is likely.
“If this passes, there is millions of dollars in bureaucracy costs that would have to be put in place, and to pay for that carriers will have to increase premiums,” said Neil Crosby, spokesperson for the California Association of Health Underwriters. “Even financing the intervener law firm, which could charge up to $675 an hour if they choose to sue, would drive up rates even further.”
Crosby and other opponents of Prop 45 point out that Covered California, the new state exchange, is already meant to ensure health insurance rates do not become too excessive.
“This proposition isn’t giving that a chance to work,” he said.
Additionally, price constraints put on carriers will likely mean less to spend on providers and distribution of products, which includes paying commission to agents.
“If carriers aren’t able to stay in business they may leave the state,” Crosby warned.
5. Increased award limits for medical malpractice
Another California proposition, Prop 46, is also concerning insurance professionals. Passage of Proposition 46 would: raise the $250,000 cap on pain and suffering claims for medical malpractice payouts to more than $1 million, require mandatory drug and alcohol testing for doctors in hospitals and create a statewide database to track painkiller prescriptions.
An increase this steep would be immediately harmful to the medical malpractice insurance market, says Kopperud.
“The cost will be passed on to consumers, and the end result will be endless lawsuits and higher premiums,” he said.
Support for this particular proposition is lagging, with only 32% of likely voters saying they’ll vote in favor of the measure despite support from public figures like Erin Brockovich.
What are you watching this Election Day? Let us know in the comments below!
