Democratic Sweep Reshapes Congressional Landscape

Leach worked for 4 years, from 1995 to 1999, to ensure that states remained in charge of insurance regulation, and to develop legislation stating that specifically. He is one of the named authors of the bill, the Gramm-Leach-Bliley bill. He was in his 14th term in Congress.

Rep. Sue Kelly, R-N.Y., was also defeated in the Democratic wave. She was chairman of the Oversight panel of the House Financial Services Committee and a strong voice for the industry on the committee, especially on terrorism risk insurance issues.

Regarding issues, AALU's Healey said in a note to members that "key House Democratic leaders have told AALU that they plan on reinstituting pay-go rules for tax cut legislation."

This would mean that any new tax cut or extension of an existing tax cut would have to be offset with a correlating decrease in spending, Healey said, which has "positive implications" for finding a responsible and sustainable resolution to the estate tax issue, even though it would require Democrats to find other sources of revenue to fund other initiatives.

Healey added in his note, written before final results were known, that if the Democrats won control of the Senate "there would be 10 new senators who would grapple with the estate tax issue."

The new composition of the Senate would mean that 5 additional "pro-reform" senators would have the opportunity to weigh in on the [estate tax] debate," he said.

Included with those senators whose positions changed during the last session of Congress, there would be between 49 and 52 senators who have expressed their opposition to repeal either through their recent votes or their stated positions, he said.

"This would be a decidedly different picture than that entering the 109th Congress–when 60 senators entered with past positions in support of estate tax repeal," Healey said. "Many of these same senators have expressed a strong desire to focus first on tax cuts for the middle class."

In a conference call with reporters, American Council of Life Insurers President and CEO Frank Keating said the No. 1 priority for the life insurance industry in the new Congress would be enactment of legislation creating an optional federal charter.

Regarding other issues, Keating said:

–He "doesn't see" the Democrats taxing annuities or the inside buildup in life insurance policies.

"I have not heard that the Democrats seek to tax insurance products," he said. "It would further weaken the ability to deal the crisis confronting retirement security, and weaken the incentive for people to save for their future. It would be counterproductive."

–He believes Republican initiatives for Lifetime Savings Accounts, regarded as anathema by the insurance industry, "are dead."

"They treat short-term savings the same as long-term savings," Keating said. "Because most people would opt to save short-term, LSAs and RSAs [retirement savings accounts] are terrible ideas, and I think they have been laid to rest."

–Proposals by the Commission on Tax Reform that would have limited or eliminated the tax incentives of most insurance products are also unlikely to surface in the new Congress.

"The Commission had some interesting ideas, but some were political non-starters," Keating said. "The types of policies proposed under the Commission would not sit well with the populist Congress coming to power."

–Legislation enacted in 2001 putting curbs on class action lawsuits won't be amended.

"Class action lawsuit legislation passed because it's time had come," Keating said. "I see no rollback."

On healthcare issues important to insurers, Washington Analysis issued a note to investors saying that a Democratic-led Congress would likely consider legislation that would narrow or eliminate the statutory "donut hole" where beneficiaries pay 100% of drug costs from the time out-of-pocket spending reaches $2,250 until it hits $5,100. The analyst said this would be "slightly positive" to purveyors of Medicare drug benefit plans because it may encourage more people to sign up. The analyst said popular support for this proposal is "strong," and odds of House hearings and bill passage are above 50%.

But it is unclear if the Senate will go along "because of the sizable cost of such action and the fact that many plans already offer donut hole coverage," the analyst said.

At the same time, the analysts said that additional incentives for Health Savings Accounts are unlikely to be enacted by a Democratic-controlled Congress, but efforts to roll them back despite Stark's dislike of them won't succeed. "Even though Stark opposes these savings vehicles, we doubt House Democrats would repeal HSAs," the analysts said.