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

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

- Diversified Insurance Group was a title sponsor of the Summit 2009 Director & Officer Conference –

SALT LAKE CITY – December 11, 2009 –

“Requirements for today’s corporate directors and officers are evolving more quickly than ever before,” said David W. Steuber, partner in Howrey LLP, Los Angeles, Calif. Steuber joined a capacity group of more than 140 leading executives who participated in the 9th Annual Summit Conference for Directors and Officers (www.summitconf.org) at Stein Eriksen Lodge in Park City, Utah last week. SageCreek Partners, Ernst & Young and Diversified Insurance, along with several additional business support organizations, co-hosted the event.

“The Summit Conference is an event that is well worth attending,” Steuber continued.”It is a practical program for the director and officer who is serious about understanding cutting edge corporate governance issues and implementing measures designed to meet the ever-evolving legal, ethical, and social requirements imposed upon today’s businesses.”

Additional presenters at the event included Reatha Clark King, Ph.D, a member of the board of directors of Exxon Mobil, and Doyle Arnold, the Chief Financial Officer at Zions Bancorp. Working panels and topics included discussions of new SEC regulation, accounting changes and strategies for dealing with risk in organizations and industry. Keynotes included a discussion via satellite with U.S. Senator Bob Bennett. Additional presentations included keynotes by Bob Gay of Huntsman-Gay Capital and Lynn Blodgett, CEO of Affiliated Computer Systems, who spoke about company culture and the importance of being a good human while returning value to shareholders.

The Annual Summit Conference has featured senior management from the SEC, Nasdaq, PCAOB, CALSTERS and ISS, as well as leading industry executives and even a few controversial figures such as now-disbarred plaintiff’s class-action lawyer Bill Lerach. At the Summit, directors and officers of public or nearly public companies meet to receive updates on legal, financial, regulatory and business trends so that they can focus on their responsibilities in their professional roles.

Adult obesity rates increased in 23 states and did not decrease in a single state in the past year, according to F as in Fat: How Obesity Policies Are Failing in America 2009, a report released today by the Trust for America’s Health (TFAH) and the Robert Wood Johnson Foundation (RWJF).

How Obesity Policies are Failing in America

July 2009

The percentage of obese or overweight children is at or above 30 percent in 30 states. Mississippi had the highest rate of adult obesity at 32.5 percent, making it the fifth year in a row that the state topped the list. Four states now have rates above 30 percent, including Mississippi, Alabama (31.2 percent), West Virginia (31.1 percent), and Tennessee (30.2 percent). Eight of the 10 states with the highest percentage of obese adults are in the South. Colorado continued to have the lowest percentage of obese adults at 18.9 percent.

Adult obesity rates now exceed 25 percent in 31 states and exceed 20 percent in 49 states and Washington, D.C. Two-thirds of American adults are either obese or overweight. In 1991, no state had an obesity rate above 20 percent. In 1980, the national average for adult obesity was 15 percent. Sixteen states experienced an increase for the second year in a row, and 11 states experienced an increase for the third straight year.

Mississippi also had the highest rate of obese and overweight children (ages 10 to 17) at 44.4 percent. Minnesota and Utah had the lowest rate at 23.1 percent. Eight of the 10 states with the highest rates of obese and overweight children are in the South. Childhood obesity rates have more than tripled since 1980.

The F as in Fat report contains rankings of state obesity rates and a review of federal and state government policies aimed at reducing or preventing obesity. Some additional key findings from F as in Fat 2009 include:

* The current economic crisis could exacerbate the obesity epidemic. Food prices, particularly for more nutritious foods, are expected to rise, making it more difficult for families to eat healthy foods. At the same time, safety-net programs and services are becoming increasingly overextended as the numbers of unemployed, uninsured and underinsured continue to grow. In addition, due to the strain of the recession, rates of depression, anxiety and stress, which are linked to obesity for many individuals, also are increasing.
* Nineteen states now have nutritional standards for school lunches, breakfasts and snacks that are stricter than current USDA requirements. Five years ago, only four states had legislation requiring stricter standards.
* Twenty-seven states have nutritional standards for competitive foods sold a la carte, in vending machines, in school stores or in school bake sales. Five years ago, only six states had nutritional standards for competitive foods.
* Twenty states have passed requirements for body mass index (BMI) screenings of children and adolescents or have passed legislation requiring other forms of weight-related assessments in schools. Five years ago, only four states had passed screening requirements.
* A recent analysis commissioned by TFAH found that the Baby Boomer generation has a higher rate of obesity compared with previous generations. As the Baby Boomer generation ages, obesity-related costs to Medicare and Medicaid are likely to grow significantly because of the large number of people in this population and its high rate of obesity. And, as Baby Boomers become Medicare-eligible, the percentage of obese adults age 65 and older could increase significantly. Estimates of the increase in percentage of obese adults range from 5.2 percent in New York to 16.3 percent in Alabama.

Key report recommendations for addressing obesity within health reform include:

* Ensuring every adult and child has access to coverage for preventive medical services, including nutrition and obesity counseling and screening for obesity-related diseases, such as type 2 diabetes;
* Increasing the number of programs available in communities, schools, and childcare settings that help make nutritious foods more affordable and accessible and provide safe and healthy places for people to engage in physical activity; and
* Reducing Medicare expenditures by promoting proven programs that improve nutrition and increase physical activity among adults ages 55 to 64.

The report also calls for a National Strategy to Combat Obesity that would define roles and responsibilities for federal, state and local governments and promote collaboration among businesses, communities, schools and families. It would seek to advance policies that

* Provide healthy foods and beverages to students at schools;
* Increase the availability of affordable healthy foods in all communities;
* Increase the frequency, intensity, and duration of physical activity at school;
* Improve access to safe and healthy places to live, work, learn, and play;
* Limit screen time; and
* Encourage employers to provide workplace wellness programs.