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                                                Big “I” Association News

On the Hill
Big “I” Disappointed with Senate Democratic Health Care Bill
Bill includes “public option” and adds unreasonable tax increases.

The Senate Health Care Reform bill that was released by Senate Majority Leader Harry Reid (D-Nev.) on Wednesday evening includes a ”public option” and will ultimately cost billions in taxpayer dollars.

The Senate Democratic Leadership unveiled its 2,074-page bill that is an attempt to combine the work product from the Senate Finance Committee and the Senate HELP Committee, each of which reported separate versions of the health care reform legislation earlier in the year.
 
The legislation has been scored by the Congressional Budget Office (CBO) and is estimated to cost $849 billion in the 10 years. The legislation is largely paid for by taxes on “Cadillac” insurance plans and a half a percentage point increase in Medicare taxes on couples earning more than $250,000 a year. The legislation also includes a government-run health insurance plan or “public option.”

The Big “I” believes that the public option is terrible public policy that will unfairly compete with the private insurance marketplace. The association points to the current government-run health insurance plans as ample evidence that the federal government sets its own rules and there is nothing fair or level about them. Put simply, a public option, no matter whether it is called “robust” or “opt-out,” would ultimately shift billions of dollars in costs to the private market, limit consumer choice, lower the quality of care and increase the taxpayer burden.

While the Senate democratic leadership touts the “opt-out” nature of the public option as a compromise, the association views this as a red herring. The Big "I" does not believe any state legislature or governor will “opt” to take away an entitlement bestowed upon their citizens by the federal government and federal taxpayers. Therefore, the “opt-out” is not a viable compromise and the association believes it is synonymous with the “robust” public option.

Sen. Majority Leader Harry Reid (D-Nev.) has indicated he will attempt to have a vote as early as this Saturday to allow floor debate to commence. If the vote, which is called a “motion to proceed” and requires 60 affirmative votes, does end up passing, it is expected that the Senate will debate the health reform legislation for the next few weeks. The Senate and House could then move to a formal conference to reconcile the House and Senate bills or negotiate more informally on a compromise. Over the course of this debate, the Big “I” will continue to urge Congress to consider the impact health reform legislation will have on both consumers and small businesses and call upon the membership to participate in grassroots efforts.
 
Click here for a summary of notable elements of the Senate Health Care Reform Bill.

John Prible (john.prible@iiaba.net) is Big “I” vice president of federal government affairs.




L-H Trends
Surveys Reveal Host of Misunderstandings Surrounding Long-Term Care Insurance
Long-Term Care Insurance Awareness Month initiatives reveal need for consumer education.

As America’s population ages and baby boomers approach retirement, attention has turned to how they will fund the living and health care expenses associated with growing older. However, a shocking number of people underestimate the cost of care; incorrectly believe government programs will fund long-term care needs; and do not have a plan in place to meet their future care expenses.

A number of studies fielded during Long Term Care Insurance Awareness Month show the disparity between consumers’ expectations and reality when it comes to long-term care insurance (LCTi). A national survey conducted by John Hancock found that of  the 935 people (between the ages of 21 and 65 years old) surveyed, seven out of 10 participants believe the cost of nursing home care is $30,000; the national average cost is actually more than twice that at $75,000. Close to 70% of respondents said they would only be able to pay between $1,000 and $14,000 annually for care, which is a small percentage of the average annual cost of a nursing home or assisted living facility. In addition, almost 45% of those surveyed incorrectly believe Medicare is the main source of funding for the majority of older adults’ long-term care.

“The fact that 83% of people surveyed had made no personal or financial plan to cover costs associated with long-term care is a dramatic figure and underscores fact that people need to plan (more),” says Laura Vail Wooster, vice president of marketing at John Hancock.

Agents are at the front lines of the planning process as they educate and secure coverage for LCTi customers. Bonnie Westfall, a long-term care specialist at Kelly Insurance Agency in Leesburg, Va., has been selling the coverage for years and consistently talks to customers who believe government programs like Medicare will cover long-term care costs down the road. Not only is that assumption largely false, according to Westfall, but the future of government-run programs is an uncertain one. John Hancock’s survey found that 45% of participants incorrectly believe Medicare is the primary source of funding for long-term care, and another study conducted by the nonprofit LIFE Foundation shows 16% of Americans plan to rely on Medicare for the majority of their long-term care needs. Eleven percent will rely on Social Security benefits, which realistically won’t come close to funding a nursing home stay or in-home care.

Westfall adds that securing adequate coverage requires customers to face certain realities, namely that they may need long-term care one day and that coverage is not cheap. A MetLife Mature Market Institute^® survey found that private room nursing home rates rose 3.3% from 2008 to 2009 to $219 per day or $79,935 per year, while assisted living also climbed 3.3% on average to $3,131 per month. Home health care aides now cost 5% more at an average of $21 per hour, and adult day services run $67 per day at a 4.7% increase.

“The person who is the easiest to educate is the person who’s had experience with a family member,” says Westfall. “The No. 1 obstacle is to have people accept the fact that they might need long-term care services someday. Second is putting off the decision and believing that they don’t need it right now because they’re so healthy. In fact, that’s the time to get it.”

Editor’s note: This article is the first in a series exploring trends in the long-term care insurance market. The next installment will examine specific LCTi sales techniques for agents.
 
Veronica DeVore (veronica.devore@iiaba.net) is Big “I” writer/editor.




Pulse on the P-C Markets
Lawyers’ Professional Liability Marketplace Remains Competitive
Underwriting, pricing changes could alter market’s landscape.

Lawyers’ professional liability coverage is typically a steadfast source of business and loyal customers for independent agents. This continues to be the case, but anticipated pricing increases, tighter underwriting and broadening coverages have altered the marketplace recently.

While John Torvi, director of marketing and sales at the Herbert H. Landy Insurance Agency in Needham, Mass., sees an influx of national carriers and agencies entering the lawyer’s professional liability arena, he adds that law firms tend to purchase their liability coverage locally. Therefore, their business is highly prized among insurance agencies.

“In a lot of ways, attorneys tend to be very loyal to carriers and agents,” says Torvi. “It’s a function of the (limited) time they have and how they conduct business. The retention is always very good.”

Greg Ritter, a business agent at Clark Insurance Agency in Portland, Maine, finds that state bar associations are good places to attract new lawyer’s professional liability clients. He regularly participates in panel discussions hosted by the Maine Bar Association, answering attorneys’ insurance questions and providing visibility for his agency in the process. Ritter says that lately, lawyers’ top insurance concerns have involved ancillary coverages such as employee practices liability.

“We have gotten a lot more requests for EPLI coverages,” he says. “Unfortunately law offices are what they consider a high risk, so there are not as many markets, lots of paperwork and pricing is not always that favorable.”

Law firms are increasingly shopping on price just as many carriers are looking to raise premiums, according to Ritter. The lawyer’s professional liability market has been soft for several years, but Ritter says some carriers he has talked to are considering premium increases of 3% to 5%; others have mentioned rate hikes as high as 25%. He says carriers largely view the increase as a course correction, citing that rates have been “too low for too long.”

Torvi has not seen price increases yet; however he has noticed some tighter underwriting since the economic downturn, particularly for attorneys involved in real estate litigation. He is also seeing a heightened interest in cyber liability coverages and a general broadening of coverage language.

Both Ritter and Torvi stress the importance of building strong relationships with carriers and clients, especially on a local level. In addition, Ritter says knowing the ins and outs of the policies, including those offered by competitors, is crucial to getting and keeping business.

“The big thing is to know what the (law firm’s) incumbent policy is,” he says. “You have to have a good understanding of that to market against it.”

Editor's note: This article is part of a series exploring trends in specific coverage areas. Click here for a listing of lawyer's professional liability markets.

Veronica DeVore (veronica.devore@iiaba.net) is Big “I” writer/editor.

On the Hill
Industry Concerned Over Systemic Risk Draft Bill
Big “I” and other property-casualty trade associations send letter requesting fair treatment.

A united group of trade associations representing property-casualty insurers, reinsurers and agents joined forces in a letter this week to U.S. House of Representative Financial Services Committee Chairman Barney Frank (D-Mass.) protesting the treatment of the industry in the discussion draft of a bill titled the Financial Stability Improvement Act.

The bill is part of an ongoing effort in Washington, D.C. to address systemic risk in the aftermath of the nation’s economic crisis.

In addition to the Big “I,” the letter was signed by the American Insurance Association, the National Association of Mutual Insurance Companies, Property Casualty Insurers Association of America and the Reinsurance Association of America.

In the letter, the organizations said they “are concerned that holding companies of insurers and insurers themselves could be subject to bank-centric regulatory provisions that fundamentally conflict with the insurance regulatory model.”

Another concern is that in the current draft, the bill could punish one industry for the mishaps of others.
“On the heels of the recent financial crisis, we believe Congress is right to consider legislation that will enhance the government's ability to monitor and address systemic risk. In this context, we point out that the property and casualty insurance industry did not pose systemic risk to the U.S. financial system or to the economy during this crisis,” says the letter.

The Big “I” is the only producer group that signed onto this effort, and it will work with both sides of the aisle in Congress, the Obama administration and other stakeholders to improve the legislation.

Click here to read the full text of the letter.

Margarita Tapia (margarita.tapia@iiaba.net) is Big “I” director of public affairs.


Legal Advocacy
Accountants Follow Attorneys’ Lead, Sue FTC over Red Flags Rule
Suit challenges rule’s application to accountants and FTC’s view of who is a creditor.

Less than two weeks after the American Bar Association (ABA) won a lawsuit against the Federal Trade Commission (FTC) to keep lawyers from being treated as creditors subject to the identity theft Red Flags Rule, the American Institute of Certified Public Accountants (AICPA) followed that lead and filed a similar complaint against the FTC on Nov. 10 in the U.S. District Court for the District of Columbia – the same court that ruled in favor of the ABA.

Accountants, such as attorneys, were specifically mentioned by the FTC as professionals considered subject to the Rule. AICPA’s lawsuit contains arguments similar to those successfully made by the ABA, asserting that accountants are traditionally regulated by the states and that Congress did not clearly include accountants in the definition of creditors subject to the rule.  Finally, accountants argue that, like attorneys, they are not creditors subject to the rule because they do not regularly extend credit.

Now scheduled to be enforced June 1, 2010, the rule is designed to fight identity theft by requiring creditors with certain kinds of accounts to implement compliance programs to detect and prevent identity theft. The FTC has not listed everyone it considers subject to the rule, but to date it has attempted to broadly apply the term “creditors” to a wide array of trades and professions, including lawyers and doctors who accept insurance as payment for medical services. The insurance industry is monitoring this litigation due to some of the similarities insurance agents/brokers have with accountants and lawyers, such as being licensed and regulated at the state level; being regulated on the handling of sensitive personal information collected; and not being expressly listed by Congress as a group intended to be covered by the rule.

As noted in prior articles, each insurance agency operates differently and therefore needs to assess the definitions under the rule carefully to determine if it must comply. The Big “I” summary of the rule can be found in a memo titled, “Overview of the Fair Credit Reporting Act, the Fair and Accurate Credit Transactions Act, and the Drivers Privacy Protection Act,” starting on page 10 at letter G.  This memo is available to Big “I” members who log on to www.independentagent.com and select Legal Advocacy and Memoranda and FAQs.

The Big “I” will continue to monitor developments about the case and any other lawsuits/regulatory actions filed about the application of the rule and will report on anything that may affect its application to independent insurance agencies.

Scott Kneeland (scott.kneeland@iiaba.net) is Big “I” counsel.