Montana Agent Speaks Of Moment He Questioned President Obama’s Health Care Plan

Marc Montgomery, an insurance agent in Helena, Montana, waited 14 hours overnight to get a ticket for a Town Hall health insurance meeting last week in which President Obama fielded questions from Montana locals, trying to answer and ease their concerns.

In an interview with The Insurance Bellwether, Montgomery of Montgomery Insurance Services, says, “I was really happy to have the opportunity to address the President.”

What he is not so happy about is the Obama health plan and how insurers are being targeted as villains, he continues. “I honestly believe that if this liberal thinking is not slowed down or checked, we will not be able to sell insurance. The public plan will absolutely lead to the demise of health care as we know it today.”
“When the government subsidizes a program, how can regular programs compete?” he asks. He refers to the financial problems programs such as Social Security, Medicare and Medicaid face. Montgomery says that he believes that some plan will pass, although no one can be sure of what it will be.

So, what does Montgomery believe is the solution? First, he would remove the state regulatory system in favor of national regulation so that “the entire nation could be opened up” with options such as a national high risk pool. That pool could be funded by both government dollars and contributions from insurance companies, he says.

Montgomery says that state high risk pools are short on cash and a national high risk pool would take pressure off states. He says that he is familiar with this issue because his wife is part of Montana’s high-risk health pool. It works well, but recently members were informed that the pool is underfunded and will be in financial trouble unless Congress provides additional funds. And for states like California with bigger populations, the problem could be even bigger, he adds.
Other changes would include requiring insurers to cover preexisting conditions, although he notes that this will increase the cost of insurance. Tort reform is also needed, he adds. However, he does say that such change would just be part of the cost.

The biggest reason for health care’s skyrocketing costs is people not being able to pay their bills and many of those people are illegal aliens, Montgomery adds. Illegal aliens are paid little and can’t afford to pay, relegating their bills to the health care system, he explains. “Millions would be saved” if the system did not have to support illegal aliens, he adds.

When asked if he believes that up to two thirds of the cost for this program could come from greater efficiencies as the President said during the Belgrade, Mont. town meeting, Montgomery says that he doesn’t believe it because the “overwhelming majority of Americans are not going to put private information over the Internet.”
“My question to President Obama was ‘how did we start with health care reform and end up with health insurance reform?’”He says that he never received an answer to that question. “They are looking for someone to demonize and they went to the insurance companies.” While there may be some cases in which claims are not paid and should have been covered, Montgomery also notes that millions of Americans are getting their claims paid.

Montgomery said that the town meeting itself was cordial, possibly because Obama supporters had made a concerted effort to get many of the available tickets. However, outside the meeting there were large protests. “Yelling and screaming is wrong but these people need to be challenged on these ideas,” he asserts.

There are signs that the White House might be willing to reconsider the public option although some Congressmen say that a program without the option won’t have their vote. More will unfold in the coming weeks.

Paterson Appoints Wrynn New N.Y. Superintendent

New York Governor David A. Paterson today announced the appointments of James J. Wrynn to serve as New York State Superintendent of Insurance. Kermitt Brooks had been Acting Superintendent since the departure of Eric Dinallo in June.

Wrynn is executive director of the New York State insurance fund. He is a founding partner of MacKay, Wrynn & Brady LLP, where he has litigated cases focused on insurance issues and claims on behalf of major companies, their policyholders, municipalities, and public authorities. Prior to that, Mr. Wrynn worked from 1982 to 1992 as a trial attorney with McCormick, Dunne & Foley, specializing in civil trials and appellate practice related to professional malpractice, subrogation, property and casualty coverage disputes, liabilities and insurance. His professional career has provided considerable experience in the areas of insurance, accounting and tax issues.

Effective August 20, 2009, Mr. Wrynn will begin to serve as Superintendent-designate and assume the permanent appointment pending Senate confirmation.

As Superintendent of the Department of Insurance, Mr. Wrynn’s salary will be $127,000.

A Year After AIG, Regulators Discuss How To Close Regulatory Gaps

Nearly a year after American International Group, New York, suffered a financial blow related to Wall Street’s financial meltdown; state insurance regulators are looking at ways to close oversight gaps because different regulators had jurisdiction over different parts of a company with insurance entities. Talking points are being raised to see if broader oversight might help regulators keep insurance units financially safe.

These potential action items were discussed during a recent discussion of the National Association of Insurance Commissioners’ Group Solvency Issues working group. The group is part of the Solvency Modernization Initiative (Ex) task force. The discussion is at an initial, high level.

Among the issues that are being bandied about are whether regulators should further investigate developing group wide supervision and capital requirements for all companies in the group rather than just the insurance units.

Related to that discussion was how broad the authority of regulators should be and whether broader surveillance would help insurance regulators understand the impact on the financial condition of an insurer.

While it was generally agreed that it would be appropriate to look at how a holding company would impact an insurance unit, it was less clear how regulators could require a holding company to take a particular action because it was creating a perceived risk for that insurance unit. For instance, regulators participating in the discussion maintained that non-affiliated units should not be within the scope of the working group’s research.

And for example, it was asked by Nebraska Director Ann Frohman whether it would be a government jurisdictional issue. The discussion turned to what powers are inherent to an insurance commissioner and whether federal preemption issues may surface and it might be necessary to work with federal regulators, particularly if it dovetails systemic risk work being looked at on the federal level.
Regulators also considered that risk-based capital at the holding company level will also be retained as a discussion item but that could also involve federal preemption issues.

But Steve Broadie of the Property Casualty Insurers Association of America, Des Plaines, Ill., asked whether the end result might be a higher minimum capital requirement for insurers in a holding company rather than in a single entity. “We would have some issues [with that,]” Broadie added.

Enterprise risk management was another point of discussion with most agreeing that the exercise which involves everything from fiduciary and reporting requirement, but also noting that the working group would need to decide how to effectively use this risk management tool. Morag Fullilove, representing the Group of North American Insurance Enterprises, New York, supported the NAIC’s effort to encourage these programs.

Separately, the issue of ensuring sufficient financial cushion for an insurer also surfaced as regulators, actuaries and industry try to fill in details of the principles-based reserving project.

Donna Claire, who is spearheading an effort by the American Academy of Actuaries, Washington, to work with regulators to put principles-based reserving in place, spoke on Aug. 12 during a joint NAIC call of the Capital Adequacy “E” Task Force and the Life and Health Actuarial Task Force. Claire addressed calibration criteria following a discussion of scenario generators. Scenarios will be run by companies to test the likelihood of different events that could impact a company’s financial strength, and hence, reserves.

Claire pointed out that the calibrations would offer not only a regulatory benefit but also would help companies with business planning. Part of the broader argument for PBR is that it is not only a benefit to regulators but also important to companies as a self-assessment tool.

Michigan Domestics’ Dispute Of NAIC Filing Fees Continues

A dispute in Michigan over database fees for receipt, maintenance and analysis of insurance company annual statement filings, will probably not be resolved until the end of first quarter 2010, according to an order by Michigan Administrative Law Judge Renee Ozburn.

Discovery in the case is to be completed by Dec. 11 and a pre-motion hearing will be held by Jan. 15, 2010. A hearing is scheduled for Feb. 16, 17 and 18 of 2010 and interested parties have until March 1, 2010 to file amicus briefs. An initial hearing was held on July 6.

The disagreement arose when some Michigan domestics declined to pay the filing fees stating that they were told by a previous insurance commissioner that they would not have to pay them. On Dec. 15, 2008, the National Association of Insurance Commissioners, Kansas City, Mo., filed a petition seeking an order from Ken Ross, the current commissioner of the Michigan Office of Financial and Insurance Regulation, authorizing domestics to pay those fees. Under state law, an insurer cannot be compelled to pay any NAIC unless the commissioner orders the company to do so.

Ross has not issued an order on this issue at this time, according to Jason Moon, a department spokesperson. Companies still must file the annual statements but have not agreed to pay the fees. They have not paid any fines, he adds.

The following insurance groups are disputing the fees, according to an exhibit to an NAIC petition:
--the combined operations of: Amerisure Co., Auto Club Ins. Association, Auto Owners Ins. Co & Affiliates, Farm Bureau of Michigan Group and Frankenmuth Mutual Ins. Group.In total, 26 companies are questioning the payments.

In its petition the NAIC points out that it is often called upon to use information from filings to provide services to state insurance departments and state legislators. It estimates that filing fees in 2008 totaled $25.1 million while total expenses for solvency regulatory support was $35.9 million during the same timeframe.

Rating Agencies Offer Industry Snapshot

Several interesting reports issued within the past week by rating agencies offer a snapshot of how the industry is faring in the current economic environment.

A recent report from Moody’s Investors Service, New York, asks the question a lot of us are asking: “Are Insurers and Investment Managers on the Road to Recovery?”
There is both good and bad news, according to the Aug. 3 report by Moody’s. While market access has rebounded quite a bit from the fall of 2008, there are still challenges and there is no guaranty that a rebound can be sustained.

The report notes that government interventions have contributed to the stabilization of the investment markets; insurance industry capitalization is starting to improve following a rebound in the markets which have “dented” portfolios; but this improvement remains vulnerable.

Of the North American life insurance industry, Moody’s says that while things are improving of late, the industry still faces an “uphill battle” due to “volatile equity markets, heightened fixed income impairments, and potentially troubled commercial real estate investments.”

The mixed view of what insurers face is exemplified by the situation for variable annuity writers. Equity markets have improved, removing some of the pressure for VA writers but many writers are “still coping with “older blocks of mispriced or underhedged business” and insurers must still contend with the impact of low interest rates, according to Moody’s.

Another market factor that insurers will face through 2010 is exposure to asset impairments and losses from investment grade bonds and commercial mortgages, Moody’s continues.

The North American property-casualty and reinsurance markets have been the least affected by the recent economic crisis, Moody’s continued. Consequently, the report says, downgrades have been modest to date. Rather, most pressure has come from natural disasters such as hurricanes, the report adds.

However, P-C companies with diversified operations have felt the impact of a down economy to a greater degree than pure plays, according to Moody’s. Commercial line insurers, the rating agency says, have a negative outlook reflecting slightly negative pricing and thinner economic cushion in insurers’ claim reserves and “somewhat weakened” capital adequacy levels.

The rating agency also says that “Personal lines insurers have likewise faced some capital strain from catastrophe and investment-related losses, but these concerns have remained offset by their stronger risk-adjusted capitalization levels, and by more responsive pricing in personal lines.”

While the U.S. healthcare insurance sector regained some earnings traction in the first half of this year, Moody’s says, it still faces challenges such as an economic environment that will hinder membership growth and the uncertainty of federal regulatory changes.

Financial guarantors, Moody’s says, remains under “substantial stress” as losses on residential mortgages continue to increase. And, it continues, other insured sectors such as CMBS could become major loss contributors.

Separately, Standard & Poor’s Corp., New York, said that “significant operating losses have applied downward pressure on mortgage insurers’ capital adequacy ratios.” That trend is expected to continue through 2010, according to S&P. The rating agency notes that in the past 27 months six private mortgage insurers rated by S&P had “statutory net losses of $8.7 billion, wiping out $4.0 billion in 2006 and 2005 industry earnings.”

S&P says that although mortgage insurers have “significant claims-paying resources,” companies will have to “pay tremendous amounts of claims in the next few years.” Consequently, the rating agency continues, “mortgage insurers' ratings range from the high end of speculative grade to the low end of investment grade.”

LTC, NARAB Work Progresses At NAIC

Regulators looking at changes to the Long-Term Care Insurance model regulation are trying to create a tool that would allow them to help measure claim denials with industry data without creating a costly IT hurdle, according to a discussion by an LTC subgroup of the Senior Issues “B” Task Force during a conference call this afternoon of the National Association of Insurance Commissioners, Kansas City, Mo. The intention is to begin using the changes for the 2010 reporting period after the work is presented to the Senior Issues Task Force at the September NAIC meeting in Washington next month. The work would also be shared with the NAIC’s Market Conduct Analysis working group.

There are two ways that regulators and industry say are being used to measure claim denials: per person or per transaction. According to industry representatives, roughly half of LTC companies use each method to track claims denial. But they also say that if they are made to report under both methods or the method that they are not using, there would be great cost to change systems. A discussion was made about whether there should be cross-referencing of methods or whether companies should be measured against complaint data according to the method they use.

There was agreement that both state and nationwide data which is available in the blue book financial statutory filings could be used in Appendix E because it would place it in one centralized place. And there was discussion about how there are other factors in claims denial which need to be examined including whether the denial was because the facility was not a qualified institution.

Regulators also adopted a timeline for a checklist that would measure whether states are in compliance with the National Association of Registered Agents and Brokers provision of the Gramm-Leach-Bliley Act of 1999. The provision required the NAIC to come up with standards that 26 states had to adopt to prevent federal oversight of producer licensing. To date, 47 states and jurisdictions are in compliance with those provisions. Four states, according to the conversation, are not yet in compliance: California, Florida, New York and Washington state, the four corners. However, it was noted that Florida maintains that it is largely in compliance. Regulators also discussed how every state can be encouraged to be compliant with the standards.

In 2007, the NAIC started a review to make sure that states are still in compliance. Toward that end, a reciprocity report was recently adopted and could become official NAIC policy if approved by the executive committee and full NAIC plenary. A vote on a timeline on a compliance checklist was advanced by NARAB working group of the NAIC’s Producer Licensing (EX) Task Force. The checklist would have to be completed by no later than July 2010 although earlier compliance would be encouraged.
Wes Bissett, a representative with the Independent Insurance Agents and Brokers of America, Alexandria, Va., recommended that the checklist be turned in sooner rather than later because there would be work needed after the checklist are turned in. That work will take time, he noted. In fact, after the timeline was advanced, the discussion turned to details of the checklist.

State Regulators Reiterate Their Thorough Review of AIG

State regulators continue to deliver their message that they are working hard to make sure that American International Group’s insurance units are sound and able to pay policyholder claims. In a letter to The New York Times on July 31, Acting New York Superintendent Kermitt Brooks and Pennsylvania Insurance Commissioner Joel Ario, both representing the National Association of Insurance Commissioners, reiterated the NAIC’s work on the issue.

In the letter, the two commissioners said that “State regulators are engaged in a virtually non-stop, coordinated, comprehensive review of AIG's U.S. insurance company subsidiaries, both at the level of the individual companies and within and across the entire group of companies.”

They explained that the process includes quarterly and annual financial reports and a thorough review by multiple review teams working through the NAIC, Kansas City, Mo. Ario and Brooks wrote that based on a complete review of available material, state insurance regulators are convinced that the insurance units at A.I.G. , New York, are able to pay claims.