This has potentially huge ramifications on the insurance industry. Time will tell if it does any good . . . or anything at all.

By Patrick Yoest
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)–The White House on Tuesday publicly backed legislation to repeal the health insurance industry’s antitrust exemption, a small part of the Obama administration’s still-uncertain strategy to pass broader health overhaul legislation.

The bill, which the U.S. House of Representatives will vote on Wednesday, would remove insurers’ long-time exemption to competition laws, which Democrats hope will lower premiums in insurance markets by giving consumers more choices. The exemption for insurance companies was enacted in the McCarran-Ferguson Act of 1945.

Specifically, the bill would strip the exemption for egregious violations such as price fixing, bid rigging and market allocation. The White House Office of Management and Budget in a statement announced its support for the legislation, saying that “this bill will benefit the American health-care consumer by ensuring that competition has a prominent role in reforming health insurance markets throughout the nation.”

House Rules Committee Chairwoman Louise Slaughter, (D., N.Y.), a leading proponent of the bill, suggested that it is a matter of fairness that the industry is subject to the same rules as other companies.

“This industry has enjoyed a big giveaway for far too long, and it’s about time that it plays by the same rules as everyone else,” Slaughter said.

America’s Health Insurance Plans, an industry trade group, said in a statement Tuesday that the health insurance industry is already highly regulated and that mergers and other business practices are already subject to federal antitrust laws. Further, it cited “legal uncertainty” that would be created by the new law, which it said would chill developments in the industry.

Leading insurers in AHIP include Aetna Inc. (AET), Humana Inc. (HUM), Cigna Corp. (CI) and UnitedHealth Group Inc. (UNH).

It’s uncertain how Republicans will come down on the bill. A spokesman for House Minority Leader John Boehner (R., Ohio) said Boehner had not announced how he would vote.

Congressional Democrats are still trying to find their footing on health care, even though the White House introduced an 11-page document intended to act as a road map for blending House and Senate-passed versions of the legislation.

House Speaker Nancy Pelosi (D., Calif.) said she is “very pleased” with the White House proposal and that it is “getting a good reception” with House Democrats. But Rep. Peter DeFazio (D., Ore.), who appeared with Pelosi as part of a push for the anti-trust legislation, cited his own concerns about the omission from the plan of a government-run health insurance plan and a nationwide exchange for buying insurance.

DeFazio suggested the White House plan has not been presented as a take-it-or-leave-it proposition.

“We’re really beginning the process in the caucus over again,” DeFazio said. “There’s no fait accompli. There’s been no whipping, there’s been no pushing.”

-By Patrick Yoest, Dow Jones Newswires; 202-862-3554; patrick.yoest@dowjones.com

for full article go HERE

There was an interesting take-away from one of the PLUS D&O Symposium sessions today I think might be worth sharing. The application of the concept extends to all insurance policies, not just D&O or E&O. This was the first time I had heard this particular concept expressed in this way.

In simple terms, from a legal standpoint, the burden of proof is shifted from the insurer to the insured when exclusionary language is moved from the exclusions section of a coverage form to the definitions section. This explains why the definitions sections in policies have been growing. When there is an interpretation in coverage to be made having the restrictive language reside in the definitions section allows the insurer to more safely interpret things in their favor without a court looking over their shoulder and applying the rules for contracts of adhesion we all know so well. The take-away was when possible to negotiate this stuff and to keep the definitions section in a policy as short and concise as possible with out a lot of “xyz does NOT mean or does NOT include exclusion”…

The above was shared by David Shaefer of AH&T Insurance.

To take a look at the PLUS blog go HERE

I gave my first directors and officers (D&O) liability insurance presentation to a board of directors in 1996. The CFO of this publicly traded company asked me to discuss the highlights of its recently renewed D&O insurance program. The presentation lasted less than five minutes—and not one question was asked by any of the board members present. In fact, most of them were engaged in other conversations that they must have deemed more important or more interesting than insurance. My presentation was a mere formality: the board essentially rubber-stamped the CFO’s insurance
decisions.

Since then, a board’s involvement in insurance decisions, like D&O coverage, has changed dramatically. Now our firm presents to its client public company boards and audit committees at least once a year. Board members are no longer passive and disinterested when it comes to insurance. Instead, most are well informed about the liabilities directors face and want to fully vet their D&O insurance protection—specifically its structure, limits and scope of coverage. Questions often arise about insurance carrier solvency, the importance of differences in conditions A-side coverage, appropriate coverage limits and the terms and conditions of the policy. A decade ago, CFOs generally made all these decisions; in today’s ever-litigious corporate environment, many executives now defer these important decisions to their entire boards for input and formal approval before finalizing major insurance placements.

Risky business

Boards are also becoming more engaged in risk management, specifically enterprise risk management (ERM). Traditional risk management identifies exposures to loss, examines various techniques to address the risk and then selects the most appropriate techniques to control it. Note that risk management focuses only on accidental losses, not all losses. A key technique used in risk management is insurance or risk transfer; however, insurance is only one facet of risk management. It’s been suggested that the paradox of insurance is that it is a good first and last response to managing risk, but is not always the most appropriate response. There are other important risk management tools, such as risk avoidance, self insurance, loss prevention, loss control, contractual risk transfer and alternative forms of risk financing.

All-encompassing risk

In contrast, enterprise risk management deals with all aspects of an organization’s risk, not just accidental loss. The Risk and Insurance Management Society defines ERM as “a strategic business discipline that supports the achievement of an organization’s objectives by addressing the full spectrum of its risks and managing the combined impact of those risks as an interrelated risk portfolio.” The Committee of Sponsoring Organizations of the Treadway Commission defines ERM as a “process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.” Both definitions are mouthfuls, but the point is that ERM is all-encompassing and comprises the spectrum of organizational risk. Note the key takeaway that ERM is a process “effected by an entity’s board of directors.” Since the recent financial and economic meltdown, the board’s involvement in ERM has grown significantly. Boards are expected to more effectively identify and assess risks across the organization, driven in large part by anxious shareholders and other stakeholders who want to ensure that both the balance sheet and shareholder value is properly protected. As such, the board’s role in ERM is one of the hottest topics in corporate governance.

Proposed rules

In July 2009, the Securities and Exchange Commission (SEC) took these responsibilities even further by proposing new disclosure rules regarding board oversight of ERM, which could impact how boards approach and manage risk in the future. The proposed amendments include newly mandated disclosures on the boards’ increasing involvement with ERM. If you thought directors of a public company had a tough enough job fulfilling traditional fiduciary and stewardship duties, imagine how those directors must feel knowing they could be held responsible for not accurately identifying and assessing all entity risks and for not properly planning a response for each one. If the SEC proposal passes, Christmas will come early and often to the plaintiff’s bar.

More responsibility?

The process of identifying and managing traditional and known risks is certainly doable for directors. But should they also be held accountable for the highly improbable “Black Swan”? According to Black Swan author Nassim Nicholas Taleb, “a Black Swan is a highly improbable event with three principal characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was.” He considers 9/11 the prime example of this phenomenon. Think about being responsible for identifying something that is unpredictable, something that has a huge negative impact, and after the fact, experts assert that you should have predicted it. That is one tough exercise for anyone. Boards need to be well equipped to deal with these increasing responsibilities, relying heavily on outside professional service providers to guide them through the labyrinth that is ERM. Whether or not the proposed SEC risk management oversight rules are enacted, ERM will become a recurring theme in boardrooms across America. In fact, it just moved to the top of the agenda.

by Spence Hoole