Meet Mr. Dave Jones, California’s elected insurance commissioner. “Elected” is important in that opening sentence because that inherently makes the regulation of insurance in California a political activity. As is typical in current California electoral politics, Mr. Jones is from the left side of the political spectrum, and seems particularly sympathetic to the green lobby. Witness his concern over insurance company investment portfolios that dare to include any companies that derive 30% or more of their revenues from fossil fuels.
Mr. Jones has made waves in recent months by asking that insurers doing business in California provide an annual accounting of their fossil fuel investments. Although he has graciously stated that divestiture in such assets is voluntary, he warned that insurers who do not divest themselves of fossil fuel firms will be publicly identified and subject to examinations due to the concern that such assets might damage the insurer’s financial health. Giving Mr. Jones the benefit of the doubt, it’s possible that he is simply reading the not-so-subtle tea leaves of political statements such as Hillary Clinton’s admonition that “we’re going to put a lot of coal miners and coal companies out of business.” If that political ambition has a genuine chance of being realized, then yes, there is a concern that such investments on an insurer’s balance sheet could impede their long-term claim-paying ability. But this smacks of a chicken-and-egg conundrum… is Mr. Jones acting as a prudent regulator of insurance companies, or is he currying political favor with his fellow leftists to propel his own political ambitions and to eventually lead to the realization of a crumbling fossil fuel industry?
The cynic in me leans toward the latter. There is another effect of this action that concerns me. California does tend to be out in front of (and often alone) the rest of the country on many left-leaning political initiatives. Many of the insurers doing business in California also do business in other states. If the California Insurance Commissioner takes it upon himself to manage the individual investments in an insurer’s portfolio to advance a political agenda that is not directly related to the business of insurance, is that not usurping authority from the other 49 insurance commissioners? What’s a national or regional insurer to do if all 50 state insurance commissioners begin picking favored and dis-favored industries for their regulated insurers to hold in their investment portfolios? Couldn’t the Michigan insurance commissioner take a similar approach toward Silicon Valley tech companies since there has been talk of another tech bubble inflating?
We all like to assume that our elected public officials truly have the best interests of their constituents at heart when they exercise the authority of their office. Unfortunately, I think we’ve witnessed increasing evidence that many such actions taken in the last 10-20 years have been politically motivated and self-serving. My instinct tells me that this is the case here with California’s chief insurance regulator using his authority to sink fossil fuel investments deep into Davy Jones’ Locker – not for the good of insurance companies or customers, but for the advancement of his own political agenda and ambitions.
Last week I wrote about the recent midterm elections and a few potential effects on the insurance industry. In that post, I mentioned the Supreme Court’s acceptance of the King v. Burwell case which could ultimately reverse many of the Affordable Care Act’s (ACA) subsidies, which would ultimately lead to an unraveling of the current law. That eventuality would require the Obama Administration and the Republican-led Congress to reopen the law for significant legislative re-writing. Or under normal circumstances that would be the expectation.
Of course, these are not normal times. President Obama has taken several unilateral steps to modify the ACA without any legislative action. The President’s actions have led to criticisms of lawlessness and anti-Constitutional exertions of power. The Administration argues that they are simply taking common sense steps to smooth the implementation of the complex law. Based on last year’s enrollment troubles, they apparently didn’t take enough such actions. With more unilateral executive orders looming on immigration policy, nothing should be assumed to be beyond the reach of this Administration’s use of executive power, legitimate or otherwise.
I can’t help but wonder when this entire ACA house-of-cards will finally tumble. It has been controversial and lacking any majority public support since its passage. It barely survived its first major Supreme Court challenge but the King v. Burwell case looks rather ominous to the law’s future in my opinion. Then just a few days after the Supreme Court accepted that case, the midterm elections gave new power and emboldened the Republican opposition and their desire to dramatically change, if not repeal, the law. Now this week we’ve seen and heard from economist Jonathan Gruber as he repeatedly spoke of the deceptions built into the ACA law and the selling thereof to the public and to Congress. Dozens of Representatives and Senators who fell for the deceptions and voted for the law have since lost their jobs. Making matters worse for the ACA is that Gruber’s vocalizations were insulting and arrogant, and cannot be dismissed as a one-time slip of the tongue. Here he is calling American voters stupid, and the deception (beginning at the 1:50 point of the video), and more insults. Taxpayers paid this guy to deceive them.
At the Risky Business event hosted on the Ferris State campus last Tuesday, one of our insurance professional panelists was asked about the ACA. The panelist’s response began by saying, “It’s a train wreck.” Indeed. Most shams that are built as a house-of-cards on a foundation of lies, deception, and arrogance do eventually turn into a train wreck. The ACA train has had a bad couple of weeks and the Supreme Court could make it even worse next year. The train is picking up speed on very rickety rails. This is not going to end well. My fear is that we the people are going to be injured far more extensively than the conductors of this runaway train.
The incessant bombardment of political campaign advertisements on television and radio have now given way to holiday advertisements and music. Thank all that is good and holy, amen. While some may say it’s too early for holiday cheer, I for one will gladly trade campaign ads for “Jingle Bells” any day of the week.
The post-election dust is settling and everyone is taking stock of what the results may mean for a myriad of issues, including insurance. Michigan’s political climate remained largely unchanged in terms of the balance of power in the legislature, governor’s office, and supreme court. So what, if anything, does that imply for reforms to the Michigan no-fault auto insurance law and the prospect of some premium relief for Michigan auto insurance consumers? The unlimited lifetime medical benefits that figure prominently in the cost of Michigan auto insurance continue to be an actuarial challenge (I’m being polite). So will another two years of complete Republican control of state government prompt any action when nothing has happened in the last few years of complete Republican control?
More interesting is the sea change at the national level. Republicans rolled to control of the Senate, increased their caucus in the House, and won more Governerships nationally. Most notably, the Republicans took over the Governor’s office in some very Democratic states: Maryland, Illinois, and Massachusetts. This sets the stage for considerable drama over the next two years, and from an insurance perspective the future of health insurance is very much at the center of the drama.
It is clear that the Affordable Care Act will come under fire in the new Republican Congress and that efforts to repeal or fundamentally alter the ACA will be met with Mr. Obama’s veto pen. However, the Supreme Court could force the hand of both sides as early as next June. It was just reported today that the Supreme Court will take up the King v. Burwell case that challenges the legality of some ACA subsidies. If the Court strikes down the subsidies, the ACA crumbles unless and until the gaping hole left by the subsidies is repaired by Mr. Obama and the Republican Congress. That opens the entire law up for legislative remodeling. During the debate over the ACA several years ago, President Obama famously said, “elections have consequences” and “I won.” I wonder how he feels about that same line of reasoning today.