Skip to main content



) -- The nation's health insurers are still fighting to limit the affects of health-care reform on their profitability and see regulators, rather than lawmakers, as the best way to spend their political dollars.

A quick comparison between the top 10 federal lobbying clients for 2010 and for the previous midterm election cycle in 2006 using data provided by the Center for Responsive Politics through their website, shows that health care concerns dominate the insurance sector's lobbying efforts:

According to Gavin Magor, the senior health insurance analyst for Weiss Ratings (formerly TheStreet Ratings), the health insurance industry is fighting to protect its "slim-line profits" by influencing the way regulators interpret language contained in a section of the Public Health Service Act, which was incorporated in the Patient Protection and Affordable Care Act that was signed into law on March 23.

The language in question concern's the health care reform act's requirement that insurers of individuals and small groups spend at least 80% of premiums on medical care or efforts to improve quality of care. This requirement increases to 85% for insurers of large groups, and both requirements are set to go into effect on January 1, 2011.

Insurers who don't meet the goals will be required to rebate some premiums to customers.

In order to calculate this "medical loss ratio" (MLR), the legislation says that "Federal and State taxes and licensing or regulatory fees" will be excluded from total premium revenue.

This is the crux of the lobbying battle, since health insurers are interpreting the language to mean that payroll taxes would be excluded from total premium revenue.

This would make it much easier for them to meet their MLR requirements.

Meanwhile, six members of Congress - including Sen. Christopher Dodd (D-Conn.) and Rep. Henry Waxman (D-Calif.) - sent a letter on August 10 to Health and Human Services Secretary Kathleen Sebelius, clarifying that the "Federal taxes and fees" referred to in the bill was meant only to include annual fees and the special tax on "high-cost employer-sponsored health coverage." The senators went on to say that "Federal income taxes or payroll taxes were not intended to be excluded from the denominator."

In a letter to the general counsel of America's Health Insurance Plans -- a industry group representing 1300 health insurance companies -- the law firm O'Melveny & Myers said that the letter from the members of Congress "should not" affect the interpretation of the language in the health care reform act. The firm went on to say that the act's language was "unambiguous," containing "no qualification or limitation on the taxes."

The National Association of Insurance Commissioners (NAIC) is charged with defining the standards set out in the health care reform act, which will then be certified by Secretary Sebelius before January 1.

While it's reasonable to assume that the NAIC and Health and Human Services Secretary will agree with the clarifications set out in the letter from the members of Congress, Magor said "this one will be settled in the courts."

Annuities on Life Insurers' Political Radar

In addition to health insurers and industry associations, there's plenty of representation on the list for the life insurance and property and casualty insurance industries. These industries haven't faced the upheaval the health insurers are experiencing, but for P&C insurers, the Dodd-Frank Wall Street Reform and Consumer Credit Protection Act points the way to a growing federal role in industry supervision.

The two organizations spending the most on federal lobbying so far in 2010 were Blue Cross/Blue Shield and America's Health Insurance Plans, while in 2006, the American Council of Life Insurers took first place, followed by

TheStreet Recommends

American International International Group

(AIG) - Get American International Group, Inc. Report

which, as a ward of the state, is no longer allowed to lobby Congress.

Other publicly traded insurance companies among the top ten spenders on federal lobbying efforts during 2010 include

Prudential Financial

(PRU) - Get Prudential Financial, Inc. Report



(MET) - Get MetLife, Inc. Report



(AFL) - Get Aflac Incorporated Report



(ALL) - Get Allstate Corporation Report


Prudential's Chief Communications Officer, Bob DeFillippo, questions the accuracy of the data. While he described Prudential's reporting of its lobbying activities as "extraordinarily conservative," he also said there were no guarantees that other companies were "reporting to the same level."

Among the concerns of the American Council of Life Insurers (ACLI) -- which is fifth on the list of top federal lobbying clients in the insurance industry during 2010 -- were the rulemaking process for financial reform and the tax treatment of income from life insurance and annuity products, according to spokesman Jack Dolan.

According to Frank Meyer, a partner with Pepper Hamilton LLP in Philadelphia, life insurers emerged as "the winners" from the financial reform bill's enactment, since the

Securities and Exchange Commission

will no longer be involved in the regulation of variable annuity products, thus removing overlapping supervision of activities primarily regulated by the states.

Property and Casualty Focus on Fed Oversight

While insurance companies will continue to be supervised by the states, the financial reform act included the immediate creation of the Federal Insurance Office within the Treasury Department. The Federal Insurance Office will serve to monitor insurers - except for health care, long-term care and crop insurance -- and will have the authority to gather information from companies and issue reports. The new office will also recommend which non-bank financial companies will be regulated by the Federal Reserve and subject to federal capital requirements.

Meyer said this was the first federal office for insurance other than deposit insurance. He also said that as the new agency is staffed by industry experts and gains an understanding of the industry, "there may even be multinational companies that include insurance being supervised by the Federal Reserve." He also said that over time there "may start to be an interest in having a national insurance charter," and that some industry players won't be against this, as "there could also be simplicity in having their products approved," rather than going through 50 separate state processes.


Written by Philip van Doorn in Jupiter, Fla.

>To contact the writer of this article, click here:

Philip van Doorn


>To follow the writer on Twitter, go to


>To submit a news tip, send an email to:


Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.