Election is Next Tuesday
IBA West Wants You to Vote -- Tuesday, November 2!
"Voting is the easiest (and cheapest) thing we are going to ask of you this year," said Clark Payan, IBA West CEO. "Voting is the single most important grassroots political action our members can take. Regardless of who you vote for, I urge all of our members to make the time to vote on Tuesday."
Next week Californians will elect a new insurance commissioner. While the race is not getting as much attention from the news media as the top of the ballot races, this office will have an enormous impact on the insurance industry.
Last week we reported the polls indicated a very close race with polling numbers varying depending on the source—one poll has them tied at 39 percent of the vote. Villines internal poll shows he is up by 2 points. A poll conducted by Jones reportedly has him leading by 5 points. All the more reason why agents and brokers and their customers should vote!
In preparation, IBA West asked both candidates to answer ten questions about how they would approach regulating the industry. In case you missed this story last week, here are the answers we recieved from Republican candidate Assemblyman Mike Villines. To date, we have not received a response from Democratic candidate, Assemblyman Dave Jones.
Below are the responses provided by Assemblyman Mike Villines.
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| Assemblyman Mike Villines, Republican Candidate for Insurance Commissioner |
1. As you reflect on Insurance Commissioner Steve Poizner’s term, what things about him and his administrations would you emulate? How would you be different and what would you do differently?
Villines: Mr. Poizner was a strong consumer advocate but also worked hard to keep a vibrant and competitive market and that is important. One of the key barriers to expanding our market and the range of competitive products available to consumers and businesses is the length of time now required for licensing and approval of those products. I will pursue an aggressive program of regulatory reform, through options such as presumptive regulations and expedited approval of rate reductions. California consumers will benefit from having more choices that fit their needs and their budgets.
2. What would be your top priorities for your first year in office as Commissioner?
Villines: I will be looking at everything through the lens of how the Department can assist in restoring California’s competitiveness and work to create the conditions needed to rebuild our economy from the more than 1 million jobs we have lost in the recession.
I will complete a package of administrative actions and if necessary legislation to speed up the licensing of new insurance providers in our state. We need more competition and more consumer options in order to ensure affordable insurance.
I will convene a work group to identify “best practices” used in other states to keep workers’ compensation insurance rates low. Because of the 2003/04 reforms, California has dropped from 1st to the 13th most expensive state for workers’ compensation, but we need to pursue additional reforms that will keep rates low—and if possible reduce them closer to the national average—while ensuring that increased benefits will continue to go to affected workers and their families.
Through emergency regulations, I will institute a requirement that insurance providers indentify their top 3 most expensive cost drivers in any filings for an increase in health insurance rates. I will also convene a working group composed of insurance providers and health care providers to review this data and develop recommendations—regulatory changes, legislative changes, and research priorities—to tackle these items.
I will convene a working group composed of local law enforcement, District Attorneys, insurance providers, and health care providers to conduct a top to bottom review of the anti-fraud programs of the Department, and identify needed changes to conduct a more concerted and effective program to combat the insurance fraud that now adds $500 to the cost of insurance for every Californian.
I will invite the next Governor to have her Secretary of Health and Human Services to join with me in convening a task force of business, health care providers, insurance providers, and others to map out California’s response to the new federal health bill. The sheer scope and the prolonged schedule for a mass of new regulations under this bill threaten the stability, costs, and accessibility of California’s health insurance market for years to come. The state needs to be proactive in tackling this challenge, while ensuring a fully functioning private insurance market that offers businesses and consumers choice.
3. What is your personal experience, as a consumer, with independent insurance agents or brokers (if any)?
Villines: The work done by agents and brokers is critical for individuals and businesses. My relationship with my agent has been one of great trust and huge value. As a business owner, I had a very positive experience with the broker who ran our health benefits program and who we trusted to look out for our bottom line and the best interest of our employees.
4. Based on what you’ve learned during the campaign, what are consumers’ top insurance-related concerns and needs?
Villines: I think most consumers have the same needs – they need insurance they can afford, policies they can understand and coverage they can trust to be there when they need it. I believe the Insurance Commissioner can play a big role in helping to respond to these concerns by reducing the time now needed for licensing and product approvals, increasing competition in the market, and ensuring consumers have access to a range of affordable and available insurance products.
5. How, specifically, do you intend to attract new insurers and new capital to the California insurance marketplace?
Villines: The first step is cutting barriers to competition. A key competitive barrier is the length of time required to be licensed by the Department of Insurance—typically a year or more. Also, expediting the approval process to help companies get products to market more quickly, which can be accomplished, through regulatory streamlining that still retains the public hearing process, standardizing insurance provisions, and use of presumptive regulations.
6. Current prior approval rate regulations (which govern the rates that insurers can charge in most property/casualty insurance lines) include so-called “efficiency standards” that, in effect, disallow credit for legitimate expenses actually incurred by insurers in policy acquisition, and place independent agency insurers (because of the greater expense required to provide greater service) at a competitive disadvantage. Would you support eliminating or loosening the efficiency standard? Why or why not?
Villines: The test for me on this or any other proposal will be the extent to which they increase competition in the California market and provide greater choice for consumers and business. The rules should be flexible to reflect our current situation where insurance is now marketed through a range of options--from brokers and agents to internet based sales—each with a different set of services provided to consumers and businesses.
7. Would you support or oppose efforts to classify all insurance agents and brokers as “fiduciaries,” as a matter of law, to their customers?
Villines: My concern would be opening up new avenues for litigation and creating additional red tape at a time we should instead be focused on restoring the economic competitiveness of our economy and create jobs to replace and increase the over 1 million jobs that have been lost since the recession. I would also be concerned about what value proposals such as this add beyond the extensive disclosure requirements and informed consent provisions that already exist in law.
8. Should Congress create a so-called “optional” federal regulatory system for insurance companies? Why or why not? What specifically do you intend to do as Commissioner to ensure its enactment or defeat (depending on your view)?
Villines: My preference is that agents should be regulated by the states just as they historically have been. The insurance industry is unique in that it is a core component of each state’s economy and it is a critical element of their overall economic competitiveness. States should not surrender this authority to a federal government that has neither the expertise, capability, nor the range of interests the states now have in regulating this business.
9. There were a number of catastrophic workers’ compensation insolvencies in California following the repeal of the minimum rate law. In light of the fact that the Commissioner now has very little real authority over comp rates, and that loss ratios appear to be rising significantly, how would you ensure that that comp companies remain financially secure? What steps will you take to catch insurers in financial trouble early?
Villines: In contrast to my opponent who has joined or led several efforts to overturn the workers’ compensation reforms and reopen the system to new litigation, I strongly support the reforms and believe we need to build on them to keep rates low and California businesses competitive. Specific measures I would take include:
- Pay for Benefit Increases with New Cost Savings. The primary focus needs to remain on workers affected by job injuries and job accidents and ensure they and their families receive benefits that are timely, reasonable, and are applied consistently across the state. To keep the program affordable and make benefit increases possible, any changes must be paid for with cost savings elsewhere in the program. Legislation proposing arbitrary increases in benefits must include compensating cost savings reforms. Rate filings from WCIRB should also include recommended cost reforms that could be used to offset any justified increases.
- Keep Benefits Objective and Consistent Across the State. A key element in attaining the cost reductions in the reforms was the use of objective and uniform standards that treated each worker the same. The reforms took a failing system and made it functional and predictable. This principle should be retained, and administrative actions such as Almaraz/Guzman and Ogilvi that threaten to increase the complexity and cost of operating this program should be dealt with quickly, if necessary through legislative change. If there are inequities within the system in how workers are treated—particularly the most seriously injured—these problems should be addressed through systematic changes rather than destroying the consistency the reforms achieved. Businesses also need a degree of certainty over their costs if they are to invest in the jobs needed for economic recovery in our state, and open-ended litigation undermines this key element of the program.
- Ensure Medical Cost Containment Has Achieved Its Maximum Benefits. SB 899 provided a range of medical cost containment tools as one of the primary ways to reduce program costs. Yet, in his August 2010 letter opposing the current rate increase filing, the Governor noted that workers’ compensation medical costs grew 11% in 2009, far greater than the general medical cost increases of only 2% that year. Prior to considering any rate increase requests, the Department of Insurance and Department of Industrial Relations must complete a review of the effectiveness and use of the available cost containment measures, and identify additional means for savings in the program.
- Fight Fraud and Other Profiteering. The 2003/04 reforms cut down on profiteering under the notion that program benefits should go to injured workers and not to fraud, frivolous litigation, and unjustified medical costs. To complement the medical cost containment proposals, the current fraud enforcement program should be expanded in cooperation with the local district attorneys. Attempts to reopen opportunities for frivolous litigation should be opposed, and additional tort reform pursued to close any remaining opportunities for unnecessary and costly litigation.
- Use Best Practices from Other States. While the 2003/04 reforms knocked California out of first place as the highest cost state, we still had the 13th most expensive insurance rate ($2.72 per $100 payroll) in 2008. Other large industrial states had significantly lower rates, including New Jersey ($2.66), Texas ($2.61), New York ($2.55), Michigan ($2.15), Washington ($1.98), and Massachusetts ($1.39). By June 2011, the Department of Insurance should complete a study of “best practices” used in other states to contain workers’ compensation costs, and identify additional reforms that can be used to make California’s program more efficient and bring costs closer to the national average.
10. What should California voters understand about you and your candidacy before deciding how to cast their vote for Insurance Commissioner?
Villines: If I am elected Insurance Commissioner, I will begin working day one to create jobs and make insurance more affordable. I don’t view this job as a partisan position – Democrats, Republicans, Independents, etc., we are all consumers in California and people across party lines are agents, brokers and small business owners. I will represent everyone and I will work with businesses that follow the law so that they can be successful and in turn create jobs and a healthy, competitive market that ultimately benefits California consumers. I encourage all voters to go to my website, www.mikevillines.com, for more specifics on where I send on the key issues in this race.
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