Insurers Eyeing Several Amendments as US Senate Nears Financial Reform Vote

The final days of congressional debate on the financial reform bill has turned into a mad amendment scramble, with members not only trying to make last-minute changes to the far-reaching legislation, but also engaging in the Capitol Hill tradition of hanging unrelated bills onto it — hoping that its momentum will help carry pieces of legislation that hadn’t otherwise been granted votes on their own.

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Among those is an amendment to repeal the antitrust exemption from health insurers. Sponsored by Sen. Patrick Leahy, chairman of the Judiciary Committee, it is identical to a stand-alone bill he’d authored and also matches an amendment he tried to attach to the earlier health reform legislation. In this case, he has tried to couch the maneuver in financial-system terms. “It is important to remember that there is another industry that is not required even to play by the same rules of competition as everyone else,” Leahy said in a statement. “Benefiting from a six-decade-old special interest exemption, the health insurance industry is not subject to the nation’s antitrust laws.”

Health insurers have suggested this matter is not a high priority for them, but the property/casualty sector is nervous about the encroachment on the insurance field. ‘We already defeated this once,” said Ben McKay, senior vice president of federal government relations at the Property Casualty Insurers Association of America. “It’s sort of the bill of the living dead.” The effort seems like “gratuitous bashing of the industry,” he said. “While we don’t represent health insurers, we don’t like the precedent.”

A group of 10 property/casualty trade organizations sent a May 13 letter to the Senate arguing that “an amendment dealing with health care issues does not belong in financial regulatory reform legislation. This amendment was specifically not included in the recently enacted health care reform legislation and should be rejected in this legislation.”

The National Conference of Insurance Legislators also weighed in with a letter to Senate leaders from President Robert Damron, a state lawmaker from Kentucky. “Rolling back antitrust exemptions for health insurers would ignore already-existing state antitrust protections and reduce competition while increasing costs,” he wrote.

Senate Majority Leader Harry Reid is expected to push for a final vote on the underlying financial reform bill in the middle of next week. Until then, there is a long list of amendments that may see votes. Beside Leahy’s, there are several others that insurers are watching closely.

— One would exempt insurers from being included among companies having to pay for major financial institution failures under the proposed systemic risk regulations.

— Another would add state insurance regulators as nonvoting members of the council that would regulate the systemically risky companies. “State regulators are uniquely positioned on the front lines of financial regulation and offer critically important perspective, expertise and regulatory data necessary to assess systemic risk,” said Jane L. Cline, president of the National Association of Insurance Commissioners and West Virginia insurance commissioner, in a statement.

— An amendment, which has insurance groups straddling both sides, that would weaken state pre-emption authorities in the proposed Office of National Insurance, reducing some of its ability to negotiate international insurance agreements on behalf of the U.S. insurance market.

— NCOIL also pitched its support behind an amendment that would strike the Securities and Exchange Commission’s claims on indexed annuity regulation and leave the duty firmly with the states.

— An amendment that would expand securities class-action litigation liability to parties who assist primary violators of securities law drew opposition from insurance associations.

Many of the amendments haven’t been officially put on the schedule for Senate consideration, an opportunity that’s narrowing as a potential vote nears.

If the Senate approves a financial reform bill, it would still need to be combined with earlier House efforts into a final version.

(Jesse A. Hamilton, Washington bureau manager: Jesse.Hamilton@ambest.com)