Tuesday, March 23, 2004

"Americans Are Going To Get Ripped Off"

Republicans Push to Deregulate Insurance Industry

Have you ever noticed how Republicans champion states rights until some states impose stricter controls over business than the federal government? (or until they want to select a President -- but that's another story.)?

The latest is an effort by Congressman Michael Oxley to take away states' ability to regulate the insurance industry. including workers compensation insurance. Oxley's bill
would force the states to adopt uniform standards and permit the market to determine insurance prices rather than have them determined by regulators as is generally the case now.

That is music to the ears of many of the biggest insurers. Once content with sluggish state regulation as long as it remained relatively lax, they have been campaigning for a single federal regulator to replace those in each of the states as competition with banks and mutual fund companies has intensified. The insurers say they want efficiency: one-stop shopping and quicker approval of new insurance and investment products. Their critics say that they want less regulation and that customers would suffer.

One force driving the initiative is a desire to end what Mr. Oxley called "the travesty of price controls" in the insurance industry by allowing the market to set prices. He said his changes would increase profits for an industry that has been lagging behind banking and other financial service businesses and would give customers more choices.
Oxley's proposal is strongly opposed by the AFL-CIO and the Consumer Federation of America. According to the AFL-CIO's Rob McGarrah,
While many states have fairly weak insurance regulation, it's better than the total deregulation Oxley has proposed for the American Insurance Association.

Effective insurance rate regulation in Massachusetts and Virginia protected workers from benefit cuts this past year, but skyrocketing workers' compensation rates in Florida and California forced legislators to cut benefits, with Schwarzenegger demanding another $11 billion in benefit cuts by Friday or he'll again put his "jobs" initiative on the November ballot. (Since California deregulated workers' comp insurance in 1993 26 companies have gone bankrupt and rates soared 300% in the last 2 years) In New York, insurers are leading the opposition to our drive to increase the near-poverty $400 week benefit rate.
J. Robert Hunter, a former insurance regulator in Texas and now the director of insurance for the Consumer Federation of America says that
Americans are going to get ripped off. Insurance is not like other products. The policies are complex legal documents. Most people can't look at an insurance policy and tell whether they have a good one. It's hard to compare prices because coverage can vary greatly. You need someone looking out for the customer. The insurance companies aren't going to do that.
If you'd like to sign on to a letter opposing this legislation, contact Rob McGarrah at the AFL-CIO.