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In the Coming Year Insurance Regulators Will Be Busier than Lawmakers

For the most part, public attention on insurance-related matters in 2012 will center on the on-going health care debate. This is a presidential election year, and the conservative opposition to the Obama administration will drive home the “failure” of the “Obamacare” package, which has actually caused an 8-9 percent increase in health care premiums. There will also be considerable focus on the Supreme Court’s review, scheduled for March, of aspects of the Patient Protection and Affordable Care Act. Off the radar, however, other elements of insurance regulation are still on the table.

Major Insurance Actions Take Place Behind the Scenes

In January, the Federal Insurance Office will deliver its report to Congress on the modernization of insurance regulation in the U.S. Additionally, provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act will be implemented this year, and the extension and regulation of the National Flood Insurance Program is an ongoing problem for lawmakers. Most industry analysts agree that while few insurance laws are likely to be passed during an election year, regulators, who have the power to define and to implement existing policy, will be busy in 2012.

The FIO report on regulation modernization will set the stage for the interaction of the federal government, the states, and the National Association of Insurance Commissioners for the next few years. It is, in essence, a spotlight on the insurance industry that will no doubt bring new issues to the forefront of lawmakers’ attention. Granted, most politicians play it safe in an election year, thus seeming to gridlock the legislative process, but it’s also important to remember that those same legislators will also be picking their next tier of “battles” for their post-election agendas.

Wall Street Regulation a Response to Factors That Triggered the Recession

The implementation of Dodd-Frank, particularly as it applies to the activities of the Federal Deposit Insurance Corporation, is aimed at clarifying how companies that could pose a systemic economic risk will be subject to regulation. The law was passed in response to the perceived rogue behavior of large Wall Street companies whose internal policies in regard to bonuses, profits, fees and the like contributed directly to the recession that began to cripple the American economy late in 2008. The social unrest about these activities and the growing inequality of wealth in the country was a major driving force behind the Occupy Wall Street protests.

Insurance and its role in the financial well-being of the nation is more complex than efforts to simply reign in skyrocketing health care costs. While the presidential candidates and the voters themselves will be focused on that debate, regulators are always faced with translating the language of legislation into reality. A vivid example of this interplay of policy and regulation can be found in the decision by Health and Human Services Secretary Kathleen Sebelius to allow the states to define key portions of the health exchanges mandated by the Affordable Care Act. The exchanges, which are to be operational by 2014, were becoming a political liability for President Obama as an instance of the federal government meddling in state prerogatives. Insurance in any form is a hot potato issue, and in an election year, the regulators, not the politicians are the ones to deal with the singed fingers.

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