House Federal Charter Bill Could Have CRA Requirements

Washington

Rep. John J. LaFalce, D-N.Y., the ranking Democrat on the House Financial Services Committee, is widely expected to introduce shortly an optional federal chartering bill that could impose community reinvestment requirements on federally chartered insurers.

The legislation, which is tentatively entitled the "Insurance Industry Modernization Act," appears to closely resemble a similar bill that was introduced in the Senate by Sen. Charles Schumer, D-N.Y.

It would establish an Office of National Insurers (ONI) within the Treasury Department to issue federal charters to insurance companies, which would be exempt from most state insurance regulation.

The ONI would be empowered to issue regulations affecting nationally-chartered insurers, examine their solvency and enforce solvency standards, enforce market conduct standards and investigate insurance fraud.

In addition, nationally-chartered insurers would lose their antitrust immunity under the McCarran-Ferguson Act.

However, according to a draft obtained by the National Underwriter, nationally-chartered insurers would still have to pay state premium taxes.

Also like the Schumer bill, the LaFalce bill would require nationally-chartered insurers to participate in "qualified" state guaranty associations. A "qualified" association is one that follows guidelines established by the National Association of Insurance Commissioners, Kansas City, Mo.

The bill would establish separate national guaranty corporations for property-casualty insurance and life insurance that would cover non-qualified states.

However, according to a preliminary analysis of the draft by one industry attorney, who asked not to be identified, the LaFalce bill would impose community reinvestment requirements on federally-chartered insurers, which is in contrast to the Schumer bill, which has no CRA language.

This means that insurance companies would be required to invest a portion of their assets in certain designated areas.

It is unclear whether the CRA language will be in the final draft that Rep. LaFalce formally introduces.

Meanwhile, most of the other news of the week focused on health care and the new initiatives to expand access to health care that are expected to be in President Bushs budget, scheduled for release this week.

Specifically, Health and Human Services Secretary Tommy G. Thompson says that the Bush administration will take a multifaceted approach to expand coverage.

For example, Thompson says, the administration will propose $89 billion in new tax credits to allow those without employer-provided coverage to purchase private health insurance.

Families with two or more children and incomes under $25,000 per year could receive up to $3,000 in credits to cover 90% of the cost of private health insurance.

The credit would phase out for families with $60,000 or more in income.

In addition, Thompson says, the administration will ease restrictions on Medical Savings Accounts and Flexible Spending Accounts to make them more attractive to individuals and employers.

Under the administrations plan, all individuals who purchase a high-deductible health plan would be eligible to contribute to an MSA up to the amount of the deductible.

Also, MSAs would be made available to all employers. Currently, they are limited to small employers.

As for FSAs, employees would be allowed to roll over up to $500 in unspent health care contributions to either use the following year or contribute to a 401(k) plan.

In addition to expanding access to health care, Bush said in his State of the Union speech last week that he planned to offer a $77 billion prescription drug benefit for Medicare recipients and increase payments to health maintenance organizations participating in the Medicare+Choice program.

Finally, Bush called for enactment of patients bill of right legislation that would provide new avenues for patients to challenge payment decisions made by HMOs.

Donald Young, president of the Health Insurance Association of America, praises Bush for proposing actions aimed at expanding health care coverage.

He says the tax credit proposal is a "sound starting point" for action on the problem of the uninsured.

However, Young says, at a time of increasing health care costs, a patients bill of rights is "exactly the wrong approach."

Such legislation, he says, will increase health coverage costs and swell the ranks of the uninsured.

Scott P. Serota, president of the Blue Cross and Blue Shield Association, Washington, agrees. Skyrocketing health care costs are already causing many employers to question whether thay can afford to provide health coverage for their employees, he says.

Patients bill of right legislation will only further complicate a worsening problem, Serota adds.

Serota also praises the president for proposing an increase in payments under the Medicare+Choice program.

He notes that this year, most plans will receive payment increases of only 2% to pay for the cost of all covered benefits.

Meanwhile, Serota says, health care costs under Medicare increased more than 10% last year and costs for prescription drugs have been increasing by nearly 20% annually.

More realistic payment levels, Serota says, could stem the tide of insurers leaving the Medicare+Choice program.

Reproduced from National Underwriter Life & Health/Financial Services Edition, February 4, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

House Federal Charter Bill Could Have CRA Requirements

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