When Insurers and the State Commissioners Who Regulate Them Get Too Close
Connecting state and local government leaders
A new study by the Center for Public Integrity found conflicts of interest abound and a revolving door between the industry and government.
Just how cozy are state insurance commissioners and the industry they help regulate? During the past decade, in at least six of the 11 states that elect insurance commissioners, the top political donors were insurance companies and their employees.
That’s according to the Washington, D.C.-based Center for Public Integrity’s most recent investigation.
That closeness creates conflicts of interest when commissioners must resolve disputes between hospitals and health insurers and can see the officials vacate their positions early to join their courters’ ranks. Half of the 109 commissioners leaving office in the past 10 years went to work for the industry.
Insurance lobbyists can just as easily find themselves commissioners, according to the report:
Consumer advocates and some commissioners say the tight bond between regulators and industry—reinforced by campaign contributions, lavish dinners and the prospect of future employment—diminishes consumers’ voices as insurers press rate increases, shape regulations and scuttle investigations. "It's very difficult at times to take a stand for consumers and have your voice heard," said Sally McCarty, a former Indiana commissioner and retired consumer advocate. "A lot of commissioners don't bother doing that for that reason—and they don't want to alienate the industry. … Many people consider the job an audition for a better-paying job."
The insurance companies argue lobbying is a necessary part of informing government officials.
Insurer rate changes, complaints and mergers fall under commissioners’ purviews, but often the officials are exempt from disclosure requirements.
New Jersey’s insurance commissioner, for instance, only moved to sell his prohibited insurance stocks upon learning of CPI’s investigation.
But kickbacks also come in the form of trips to fancy conferences with buffets and cocktail receptions.
Only four states ban insurer donations to commissioner campaigns. And while the Consumer Federation of America suggests 10 percent of insurance department revenues be spent on regulation, the average is 6 percent—understaffing being an issue.
Compare that to insurers, who are becoming increasingly skilled at incorporating personal data through social media into their models, and consumers are significantly outgunned.
Insurance taxes reap $2 billion in Texas, which should be reason enough for greater enforcement.
“It gets at the whole integrity of the process,” Bob Hunter, a former Texas commissioner who runs the insurance program for the advocacy group Consumer Federation of America, told CPI. “It raises among the public more and more doubt about the honesty of government and about government generally.”
CPI’s full report involved the investigation of lobbyist records, regulator financial disclosures, campaign finances, and more than 3,700 pages of emails from 13 states and can be read here.
Dave Nyczepir is a News Editor at Government Executive’s Route Fifty and is based in Washington D.C.
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