This was the headline (with link) from Saturday’s NYTimes blog post:
Feinstein to Propose Federal Supervision of Insurance Rates
“‘Next week I intend to introduce legislation to create a Medical Insurance Rate Authority to prevent egregious premium rate increases, like the one recently announced by Anthem Blue Cross of California, which will raise certain medical insurance premiums by up to 39 percent,’ Mrs. Feinstein said.”
As you know, Senator Feinstein first broached the subject of rate authorities last October. But they were to be state-wide, not federal. This is definitely an improvement, although one might ask why such a nationwide rate authority wasn’t included in the Senate bill. And one of our readers pointed out:
“If I'm not mistaken, Feinstein has talked about introducing this legislation and creating this regulatory entity for some time. It took this rate-raising action to get her to actually commit when she should have already done this work – rates have been going up astronomically for the past few years, known to all. And I have to say, there can really be no satisfaction unless legislation can actually be passed, including a bill to repeal the anti-trust immunity insurers currently enjoy. Sky rocketing rates and the ability to spend a mere 70% on medical expenses in California are bothunconscionable. So what took Feinstein so long to use that word?”
To put a reality check on our previous enthusiasm for Feinstein’s regulatory proposals, let’s review what Eliot Spitzer described as “the Regulatory Charade” just weeks ago during his talk in San Francisco. (The subject was financial sector regulation, but it’s worth considering how an enthusiasm for regulatory fixes absent the political will for enforcement would apply to health insurance reform.)
“What we are doing is what I call the Regulatory Charade. What do I mean by that? After a crisis of this sort – and it doesn’t matter whether it’s the Enron crisis which generated Sarbanes-Oxley or other crises – there is always the rush to pass a law. Why do we want to pass a law? The virtue of passing a new law is that malefactors in the private sector get to say: ‘Go pay attention to passing a new law, but don’t worry about prosecuting us.’ And the regulators who should have done something can stand up and say: ‘We would have stopped it but we didn’t have the power, so pass a new law to give us the power, and then it won’t happen next time.’
“This is all a charade because the reality is the regulators had the power, they just refused to enforce it. And the people who did the bad things should have been prosecuted. What we should have been doing is actually using the power that we had.
“Think of it this way, over the past year the Fed, the OCC, and the SEC have been doing an amazing number of things.” (Editor’s Note: Spitzer emphasized throughout his presentation that these organizations are still far from doing enough with their current power.) “They haven’t been granted new power to do it. They’ve been using the power they’ve always had, but never called upon. Why didn’t they call upon it before?
“I’ll give you an example from personal experience. We tried to investigate sub-prime lending back when I was AG. We went and served subpoenas and wanted to gather the data. I’d written an article in The New Republic in 2004 saying: ‘This debt’s not going to be repaid, this is bad stuff.’
“The OCC and the banks went to court to stop us from serving the subpoenas and getting the information. They said ‘You’re pre-empting.’ We had to litigate all the way to the U.S. Supreme Court in order to get the power to actually ask the questions to get the information. But worst of all, it’s not as though the OCC and the other federal agencies said: ‘You stop. We are doing it.’ They just said: ‘You stop.’ Nobody was doing it. So the agencies who had the power simply didn’t use it, and this catastrophe simply grew and grew and grew.
“It’s the Peter Principle on steroids. We all know the Peter Principle, where people are promoted to their level of incompetence and they end there. What’s happened in DC is that people are promoted to their level of incompetence. And now, this will seem harsh, and I don’t want to say anything bad about people, but I will. Because of that incompetence, a huge crisis erupts, and they then use the crisis to argue that they should get even more power. And if you look at who is now in charge, it is basically the people who were in charge of the Fed and the Treasury and the OCC and the OTS throughout the time when this crisis was brewing.”
Shorter Eliot: Feinstein’s proposal for proposing legislation (which is all it is now) will mean nothing without the political will to enforce that legislation. Where will that political will come from, if not from industry (for obvious reasons) and not from our elected “representatives”? Pathetic as it sounds, it has to come from us. I predict that we will see, over the next few years, an increasing level of productive and sound engagement on political issues, especially from highly skilled, recent college grads unable to find employment in a languishing economy.
And having offered that important caution from Eliot Spitzer, I will add that many of us (myself included) are optimistic about the upcoming health care reform summit now scheduled for this Thursday. If nothing else, it provides an opportunity to show the American people how much more the Democrats have to offer than the GOP.
We’ll be catching up with Maggie Mahar (and Liz Warren) later this week.
As always, thanks for hanging in there.
Eva
Unfortunately, Spitzer's right.
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