Rational in Business — Not so much in Politics
Those of you whom have worked me over the years have heard me say, ��What is rational in business is just the opposite in politics”! I’d like you to think about this as you read this week’s news. For example, our state faces the single most important decision in its history with respect to how we implement (or not) our nation’s health insurance laws. This past week, Commissioner McCarty in his speech attached indicated that currently the Office of Insurance Regulation will be required to deny filings that comply with federal law but do not comply with the requirements of Florida law. Specifically, Florida law requires an age rating ratio that averages around 7 to 1 conflicting with federal law that restricts the age rating ratio to 3 to 1. The fed’s 3 to 1 ratio will cause an overnight increase in premiums for individuals age 18-49 in our state.
In addition, the raging debate continues about whether our state should proceed with lowering the eligibility requirements for Medicaid which would increase the number of enrollees. “It is correct to say that there are very strong arguments why the state of Florida should go ahead and do the Medicaid expansion, but there are arguments against it that I want to hear and analyze,” said Senate Banking and Insurance Chair David Simmons. “But there is no doubt the arguments are compelling to go ahead and use what one would call OPM: other people’s money. That’s what we’re doing; we’re having other people pay the cost.” The federal government would pick up 100 percent of the cost the first three years and then 90 percent starting in 2020. But those who oppose Simmons view say that “OPM” doesn’t last forever and the money flow could stop with Florida footing the bill if/when that happens. This debate is even more important as the Governor released his record $74 billion budget this week and it did not contemplate expanding Medicaid. I look forward to hearing your thoughts about where this debate should head or the decisions that should be made for Florida. Tomorrow, from 2 to 5 pm, there will be more testimony in the select committees on the Affordable Care Act. Please see the committee page for the Senate Committee on Patient Protection and Affordable Care Act to learn more. Also, see the Florida Channel to view what web channel will televise the meeting.
These debates and conflict have implications of tremendous magnitude and we need smart-minded, rational people to help us find resolution. Even in our every day lives, when a decision or issue just doesn’t make sense, we work it out. Why can’t we use this common sense approach to work in the political arena? It appears that what is rational in every day life is just the opposite in politics and we are seeing this first hand in many facets that will be debated during the 2013 session.
STATE OF FLORIDA’S PROPERTY INSURANCE MARKET
Please take a minute to read Commissioner McCarty’s Speech he gave this week about the State of Florida’s property insurance market. He outlined four guiding principles:
Principle #1—Restructure alternative markets to become residual markets providing quantifiable risk management for FL.
Principle #2 – Maximize the risk-bearing capacity of the private market – including attracting new capital
Principle #3 – Promote consumer choice, responsibility and market power
Principle #4 — Enhance meaningful risk mitigation programs
Commissioner McCarty discussed each principle in his presentation to the Senate Banking and Insurance Committee which took hours of testimony about ideas to “fix” the property insurance market. On Wednesday, February 6, 2013, at 10:30 to 12:30, there will be more ideas presented at the Senate Banking and Insurance Committee (see 2/6/13 meeting entry) and most likely, the committee’s draft bill to address Citizens reform will then be released later this week. The agenda for this meeting includes discussion and testimony Citizens and Property Insurance Corporation Personal Injury Protection (PIP) plus consideration of a bill dealing with “suitability” of annuity sales for consumers.
A NOTE ABOUT WIND MITIGATION
Flash back to 2005/2006 when Florida established the $250 million My Safe Florida Home Program where $5,000 matching grants were distributed to Floridians to “harden” their homes. The program had mixed reviews primarily because billions of dollars were given in mitigation credits to reduce property insurance wind premiums yet no hammers were used to harden the homes. This occurred because inspection data wasn’t verified, therefore an inspection report might indicate roof straps when none were actually a part of the roof! For the past six years, the words “wind mitigation” have not been popular because of, as an insurance executive phrased the problem…“Florida’s dysfunctional wind mitigation system.”
Now come full circle to the past couple of weeks. Insurance Consumer Advocate Robin Westcott has picked up the wind mitigation gauntlet once again, but this time is telling audiences that Florida must get it right this time. I had the good fortune of hearing her speak recently at two separate events. She reminds me of an evangelist preacher – with great passion about this topic. It is truly refreshing in today’s insurance climate. She is recommending transfer of the public insurance model at Florida International University from the Office of Insurance Regulation to the Division of Emergency Management (DEM). DEM would supervise the use of the model and other mitigation-related activities under an advisory council consisting of groups of many stakeholder groups. She advocates that insurers would be allowed to restructure their wind mitigation credits, moving to fill a gap created by a Division of Administrative Hearings ruling which voided certain pre-2001 mitigation discounts.
In the mid-2000’s, there was a handful of us doing our best to spread “the good news” of wind mitigation despite our state’s regulatory abuse of it and we were often called mitigation disciples. It was a case of doing what was rational from a business perspective, yet mitigation public policy took the exact opposite path! Hats off to Robin for becoming a mitigation disciple and doing her best to bring rationality back to this important subject! Please let her know of your support of her work by writing her at [email protected]
AUTO INSURANCE UPDATE
On October 1st, all insurers writing PIP had to submit a rate filing to OIR reflecting:
- at least a 10% reduction in rates;
- the utilization of reductions calculated by Pinnacle’s actuarial report commissioned by OIR; or,
- actuarial justification as to why their savings should vary from these measures.
More than 140 rate filings from 154 companies have been received with the majority of the approved rate filings showing a mitigation of rate increases rather than actual rate reductions for most companies.
Question for our readers: There is a sentiment expressed by Senate Banking and Insurance Chairman Simmons that PIP should be repealed because we now have the federal affordable care act in place. Do you agree? Please let me know as I always value your thoughts.
That’s a wrap for now but I’ll “see” you soon and I am grateful for all you do and your support of our work.
Our best! Lisa
