ShareThis110th Congress - Outlook - Democrat Takeover
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The attached comprehensive state and federal analysis of the election's meaning for our issues is provided for our reference. Please contact SVP -Federal Affairs Carl Parks, VP - State and Regulatory Affairs Neil Alldredge or VP - Public Policy Bob Detlefsen.
Commenting on the Congressional elections, Carl Parks, NAMIC senior vice president of government affairs, noted that the election was focused on the “I” word, and it was not “insurance.”
Most insurance issues likely to be considered in the 110th Congress are not partisan political issues, although the philosophies and core constituent groups in some cases will drive the approach depending on who is in control. With many new congressional members who have not campaigned on insurance issues, we and our member companies back in their districts will aggressively reach out to the newest members of Congress and offer information on critical and complex insurance issues. We welcome this opportunity.
HOUSE
The Democrats will take control of the U.S. House as a result of Tuesday’s election, but the only question is by how many seats. With the results of several House races still being tallied, it appears that Democrats may have picked up as many as 30 House seats. They needed a net gain of 15.
Rep. Nancy Pelosi (Calif.) is the likely successor to the Speakership. She has solidified her position within the caucus in recent months by raising more than $50 million. Pelosi frustrated more liberal Democrats in recent weeks by announcing that she would not move to impeach the President; however, she appears a lock to assume the top position if Democrats take control of the House. Pelosi has vowed to instead establish an agenda focusing on strengthening homeland security, resolving the Iraqi situation, increasing the minimum wage, promoting stem cell research, and strengthening education.
A leadership battle appears to be shaping up for the position of Majority Leader between Reps. Steny Hoyer (Md.) and John Murtha (Penn.). Hoyer is the party establishment candidate, but Murtha’s vocal opposition to the war has increased his stature among the large liberal contingent of the caucus.
A Democrat-controlled House will face many of the same challenges that have plagued Republicans in recent years, namely challenges from the fringes of the caucus (in the Democrats’ case, from “Blue Dogs” and “New Democrats”). Budget issues and oversight of the Administration will prove to be immediate challenges for the leadership team. The narrow majority coupled with an opposition party White House will place obstacles in the path of moving serious and controversial legislation.
House Financial Services: Rep. Barney Frank (Mass.) would assume the chairmanship of the committee. Frank is a thoughtful member with a reputation of consensus building and the ability to work cooperatively with the other side of the aisle. Despite his more liberal label, Frank generally supports free markets and has a good working relationship with the financial services industry. Insurance is not his strongest suit, and he is expected to grant Pennsylvania Rep. Kanjorski (See below) general leeway on this issue. Frank is close to the realtors and has raised concerns in previous years with respect to the use of CLUE reports.
Kanjorski would chair the Capital Markets, Insurance Subcommittee. Kanjorski is generally considered friendly to the industry, and his staff is well respected and easily assessable. Kanjorski is favorably disposed to an optional federal charter (particularly for the life industry) and has been critical of attempts to overlay federal standards on a state regulatory system. He has also been skeptical of a piecemeal approach to insurance regulatory reform, fearing that interim steps could delay action on more comprehensive legislation.
Rep. Luis Gutierrez (Ill.) would take the helm of the Oversight and Investigations Subcommittee. The chairmanship would allow Gutierrez to steer hearings in areas of interest, particularly in the arena of consumer protection. Gutierrez has taken a lead in data security and other consumer protection measures, favoring provisions for private rights of action and establishing federal standards as floors rather than ceilings.
House Energy and Commerce: The House’s longest serving member and vocal insurance industry critic, Rep. John Dingell (MI) would reclaim his gavel at the Energy and Commerce Committee. Since he last controlled the panel, the committee has lost its power over insurance and securities issues to the Financial Services Committee, and Dingell is already laying the groundwork to try to reclaim at least a portion of the former jurisdiction. Dingell has always been particularly involved in insurance issues, including the failed promises report of the 1990s, and would like to reassert jurisdiction over these issues. It is unlikely that Speaker Pelosi and the Caucus would approve a wholesale return of insurance to the committee, but Dingell is expected to be successful in expanding his jurisdiction over consumer protection to include more oversight of insurance. Proponents of an optional federal charter are already hard at work fighting any attempt to remove insurance to Energy and Commerce or expand consumer protection jurisdiction. Dingell has been a high profile champion of repeal of the McCarran-Ferguson limited antitrust exemptions.
House Judiciary: Rep. John Conyers (Mich.) would assume the leadership of the Judiciary Committee. Conyers has been a strong opponent of legal reform and in previous years challenged the insurance industry over coverage for mold. McCarran-Ferguson Act reforms and any antitrust modifications would be required to make a stop at Conyers’ committee on their way to the floor. Conyers favors strong consumer protection and regulatory oversight. Conyers could be supportive of provisions in OFC legislation to apply federal antitrust provisions to federally chartered insurers, but it is doubtful he would be willing to limit oversight and enforcement by the Federal Trade Commission, as proponents have drafted their bill.
House Ways and Means: Rep. Charlie Rangel (NY) would take over the reins of the powerful tax-writing committee. Rangel is expected to be more inclusive than Chairman Bill Thomas (R-Calif.). Rangel is portrayed as a tax-increase chairman; however, many in the tax community expect him to take a more moderate approach. The Democrat tax staff members are seasoned professionals, many having served in the majority, that bring a moderate approach to tax legislation.
Rangel has publicly pledged not to seek to overturn the recent tax reductions, however, he has said that as they expire he would look less favorably on breaks aimed at high income individuals. Rangel supports efforts to streamline and reduce taxes on middle-class taxpayers and smaller businesses, but opposes efforts to replace the income tax with national retail sales tax mechanisms. The New York Democrat has also been highly critical of U.S. corporations moving operations abroad or exporting jobs and supports removing tax incentives for such actions.
SENATE
As this Advocacy Update is being set to go to press, control of the U.S. Senate favors the Democrats by a 50 to 49 lead as Democrat Jon Tester just took the race in Montana. To gain control of the Senate, the Democrats needed a net gain of six seats. They beat Republican incumbents on Tuesday in Missouri, Ohio, Pennsylvania, Rhode Island, and Montana. The only outstanding race is Virginia showing Democrat Jim Webb holding a narrow lead.
If Democrats ultimately prevail in Virginia, they will take control of the Senate. They will be helped by Connecticut Sen. Joe Lieberman and Vermont Sen. Bernie Sanders, who both won as Independents on Tuesday, but are expected to align themselves with the Democrats.
If the Democrats take control, Minority Leader Harry Reid (Nev.) is expected to assume the position of Majority Leader; however, he could face challenges within his caucus. Margins in the Senate will be razor thin presenting a particularly unique challenge to the leadership given the wide latitude that any single senator has in thwarting a legislative agenda. The role of Majority Leader will prove difficult even under the best of circumstances given the wide variance in the Democrat caucus – from the liberal Feingold of Wisconsin to the conservative Nelson of Nebraska. Procedural rules of the Senate, including points of order and filibusters, virtually ensures the need to secure 60 votes for any major piece of legislation, necessitating coalition building, and raising the specter of essential gridlock.
The most immediate impact of Democrat control would be on administration nominations. Democrat control of committees, particularly Judiciary Committee control of judicial nominees, is expected to significantly increase the scrutiny over nominees. This could be particularly critical in the lame duck days of the administration as senior personnel return to the private sector and open numerous positions requiring Senate confirmation.
If Sen. Allen prevails in Virginia, the Senate would wind up with 50 Republicans and 48 Democrats plus Independents, Lieberman (CT) and Sanders (VT), who would caucus with the Democrats. In that case, the vice president would break the tie, and Sen. Mitch McConnell (R-KY) would become the Majority Leader. He would be unlikely to arrange for a sharing of power, as then-Majority Leader Trent Lott did in 2000; however, this outcome would increase tensions further in the Senate, making it even harder to move any controversial legislation.
Unlike the House, leadership positions in the Senate are less certain as senior members may exercise options to shift among committees.
Senate Banking: Sen. Chris Dodd (Conn.) is in line to take the helm of the Banking Committee. Dodd has a long history with the insurance industry and continues to be a key player in the debate over terrorism risk insurance. Dodd is undecided at this point over optional federal charter, but has indicated openness toward a life-only bill. Despite Dodd’s lack of full support, one cannot underestimate the immense pressure he faces from Connecticut-based stock companies; however, the opposition of agents makes this issue highly problematic for Dodd. Sen. Tim Johnson (SD), sponsor of OFC legislation, could assume the chairmanship of the Financial Institutions subcommittee, giving him the opportunity to promote the legislation. The Senate Banking Committee will take the lead on terrorism risk insurance and without Sen. Shelby (Ala.) serving as a block, the panel is generally united in support of continuation of a federal role. Other issues facing the committee include data security and insurance scoring. It is important to keep in mind that Sen. Dodd is unlikely to devote much attention to committee matters in 2007, as he will be focused on his effort to win the Democratic nomination for president. The result is likely to be less activity on the part of the committee.
Senate Judiciary: Sen. Patrick Leahy (Vt.) is in line to become chair; however, he has less seniority than Sen. Ted Kennedy (Mass.) who is next in line behind him on the panel. The coveted position as chair may initiate a scramble among senior Democrats leading to a chain-reaction of changes in other committees as well. For example, if Kennedy were to become chair of the Judiciary Committee, Sen. Dodd would likely take the chair of the Health, Education, Labor and Pensions Committee, leaving the Banking chair to Sen. Johnson.
As is evidenced by both the Democrat and Republican membership, the panel is generally populated by ideological members from the more extreme wings of their parties. This is expected to hold true in the 110th Congress. The committee is likely to continue its investigations into antitrust issues, including the results of the Antitrust Modernization Commission, and would exercise jurisdiction over any insurance regulatory reform measure. Legal reform, including medical malpractice and tort reform, are under the committee’s jurisdiction, but are unlikely to be priority issues for a Democrat controlled Senate. It is possible that Leahy could lead an anti-business legal reform effort, supported by the trial lawyers, to attack such things as protective orders and arbitration agreements in contracts.
Despite the number of committee man-hours devoted to asbestos in the 109th Congress, the issue was primarily the pet project of Chairman Specter (R-Pa.). Although he was supported in that effort by Leahy, even should he become chair, Leahy would be highly unlikely to continue to place such a high priority on the reform effort.
Senate Finance: Tax legislation could be impacted by changes in the Finance Committee. Sen. Max Baucus (Mont.) is the most likely of the panel’s Democrats to assume the chair. Baucus has a reputation for cooperation and would be expected to work well with both minority party members and the House. Similarly to the House, a Democrat Finance Committee is expected to focus on alternative minimum tax relief and other middle class initiatives. Immediate priorities facing the panel are legislation to extend expiring provisions and a package of technical corrections to the Pension Protection Act.
ISSSUE IMPACT
Insurance Regulatory Reform: Optional Federal Charter (OFC) proponents have courted members from both sides of the aisle, but enactment of legislation remains a long way off. OFC bills will be reintroduced in the House and Senate and continued hearings are anticipated regardless of the controlling party, but consideration by the full House or Senate is not likely in the next Congress. The tone of the hearings is likely to focus more specifically on consumer protection, rather than on increasing competitive markets.
Rep. Frank has indicated little interest in OFC legislation and the issue is problematic for Sen. Dodd given the split between agents and large stock companies over the issue. Frank believes that most members of Congress have little or no desire to regulate insurance, but acknowledges the need to streamline regulation and reduce or eliminate interstate barriers. Frank sees consideration of federal legislation as a means to increase pressure on the states to modernize but does not foresee a general federal charter. However, a federal charter for life insurance could have appeal to members and an effort to move such a bill by Subcommittee chairman Kanjorski could change the dynamic and result in OFC legislation advancing out of the committee. (See Antitrust Modernization for discussion of McCarran-Ferguson.) One other thing that could lead to more action on OFC legislation is the likely disappearance of the SMART approach taken by retiring Chairman Oxley (R-OH), thereby eliminating the division between advocates of an OFC and supporters of federal standards for state action.
Antitrust Modernization: The Antitrust Modernization Commission is slated to release its report and recommendations in the spring of 2007. The mood of many Democrats, including those on the Financial Services Committee, is negative toward corporate business practices, including those of the insurance industry. There is a general bias toward greater, rather than less, scrutiny, including enhanced antitrust enforcement.
In addition any discussion of federal legislation will raise the specter of repeal or reform of the McCarran-Ferguson Act. Rep. Frank is expected to be extremely cautious and is unlikely to press for repeal of the limited anti-trust exemptions. McCarran-Ferguson protections, Frank believes, play a vital role in continued state regulation and he warns members to be aware of the unintended consequences of repeal. Should Chairman Dingell succeed in securing jurisdiction over the issue, he could well seek to repeal the Act. Sen. Dodd similarly has not embraced wholesale reform of McCarran-Ferguson.
Terrorism Risk Insurance: Democrats on the relevant committees have generally been more positive toward government involvement in terrorism insurance than have Republicans and the Administration. Enactment of a permanent terrorism risk insurance solution is a high priority for Sen. Dodd and Rep. Frank believes there is a role for the federal government, including both in pre-event prevention and mitigation, and in post-event recovery and compensation. Dodd and Frank, likewise, are not expected to stress recoupment as have current House chairs.
Efforts to secure a more permanent federal role and to expand the program to cover non-traditional losses (NBCR) and include group life are expected to receive a warmer welcome; however, Democrat staff and members continue to be frustrated by the inability to date of the insurance industry and policyholders to agree on a single proposal. Proposals for NBCR-only are expected to be looked on less favorably by Democrats than current TRIA-like programs. In addition, accounting and tax changes necessary to enhance the ability of the industry to self-fund larger events may face an easier path with the departure of Ways and Means Committee Chairman Bill Thomas.
Asbestos Reform: Prospects for asbestos reform – already on life support – are not expected to move to the front of congressional attention. Senate Judiciary Committee Chairman Arlen Specter was the prime mover and the issue is not expected to rise to the priority list of Democrat House or Senate leadership. Any effort to advance the legislation would face pressure to increase payouts to claimants and be much less favorable to the business community.
Legal Reform: After the passage of class action reform legislation, legal reform proponents have been unable to make significant headway with other legislative priorities, including medical malpractice reform. A Democrat controlled Judiciary Committee will not move legislation that eliminates or caps punitive damages, caps non-economic damages or makes many other reforms sought by the business community. However, House Democrat leaders have indicated a desire to tighten and reform bankruptcy legislation, particularly corporate bankruptcy and reorganization statutes. The Judiciary committees could pursue an anti-business, pro-trial lawyer legal reform agenda to eliminate protective orders (secrecy agreements) and the inclusion of arbitration provisions in contracts.
Catastrophe Losses/Natural Disasters: Continued focus on the insurance industry’s response to Katrina and other natural disasters, as well as development of a comprehensive national catastrophe policy, will continue in the 110th Congress. Democrat members are expected to be sharply critical of the insurance response and calls for reform will take the spotlight. Oversight of the National Flood Insurance Program, including insurer roles and responsibilities, is also expected to take place in the 110th Congress. Additional consumer protection provisions may be considered.
With regard to comprehensive catastrophe legislation, Rep. Kanjorski, expected to chair HFSC Capital Markets and Insurance Subcommittee, has been positive toward the concept of all-perils policies. Sen. Daniel Akaka (Hawaii) is also working on catastrophe legislation and is expected to include all-perils language. Rep. Frank has also expressed interest in exploring a TRIA-like approach for other high risk perils, such as flood or earthquake.
Underwriting Restrictions: A new focus is likely to emerge on various consumer protection issues, including scrutiny of insurer underwriting practices. The Federal Trade Commission and the Federal Reserve are expected to complete and release their study of the impact of the use of insurance scores on protected classes. Regardless of the outcome the debate is expected to be replayed in the Financial Services Committee. Rep. Gutierrez (Ill.), who originally proposed amendments barring the use of insurance scores, is slated to take over the reins of the Oversight and Investigations Subcommittee, which he could use as a platform to raise this issue. Many members of the committee, particularly the minority group members, are concerned with the use of credit in underwriting. Rep. Frank is expected to encourage a broad discussion of the issue. Senate Banking is also expected to debate the issue in the wake of the federal study.
The debate over adverse action notifications is also likely to be joined as a result of the Supreme Court’s consideration of the issue in the case against Hartford and Geico. If the Court rules in favor of insurers, consumer representatives are expected to seek a more favorable audience in the House.
Insurer’s use of Comprehensive Loss Underwriting (CLUE) databases is also expected to reemerge. Retiring Chairman Mike Oxley (Ohio) has had a rocky relationship with the realtors and as a result they have made very little effort to press legislative issues within the committee, including attempts to restrict the use of CLUE databases. A change in leadership may embolden the powerful grassroots organization to renew attempts to challenge the insurance industry. Rep. Frank has also had personal concerns with the use of CLUE.
Data Security: High profile security breaches this year have thrust the issue in the forefront again. At the state level 39 states considered data security legislation and 19 enacted new laws, increasing the pressure for a national standard. Six congressional committees considered legislation, but conflicts between priorities and jurisdictional squabbles derailed the legislation. Data security, along with other consumer protection issues, is a high priority for Democrats and attempts to reconcile the measures and move to passage are expected in the new Congress. Chairman Frank is likely to support Chairman Dingell in a minimum federal standards approach, with the states permitted to adopt more restrictive requirements, and Chairman Frank will aggressively push for a credit freeze provision. In addition, members may also seek to address e-mail marketing, do-not-mail legislation and public records access.
Posted: Wednesday, November 08, 2006 12:00:00 AM. Modified: Thursday, November 09, 2006 12:01:44 PM.
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