Rep. Speier is concerned that the bill's provisions, which would grant the Treasury Secretary broad power to preempt state insurance laws and regulations, will endanger consumer protections instituted by Proposition 103, a 1988 ballot initiative dealing with California insurance rates.
PIA is opposed to the current version of H.R. 5840. This legislation started out with good intentions, but as often happens good intentions can go awry. While some aspects of this bill have merit, a plain reading of the actual language of the current version of the bill that emerged from the subcommittee markup demonstrates serious problems.
H.R. 5840 now grants new powers to the U.S. Treasury Secretary, making the Secretary the principal federal authority for domestic and international insurance issues of "national interest" with the power to determine which state laws, regulations and industry practices will be preempted. In so doing, it effectively guts the McCarran-Ferguson Act of 1945 and the Gramm-Leach-Bliley Act of 1999, which establish and affirm that the States are the regulators of the business of insurance.
Supporters of H.R. 5840 are now attempting to convince members of Congress that these powers are not new, will only be exercised under very limited circumstances, and only as a last resort. Unfortunately, the actual language of the bill does not track with the narrowness of these comments, and press comments do not mitigate that problem. Hence, those that desire to transfer insurance regulation from the states to the federal government may do so under this current language.
PIA has sent a letter to Members of Congress outlining the serious, material legal questions raised by the current draft of H.R. 5840. In addition, PIA has written a letter expressing our concerns with H.R. 5840 to each individual state insurance commissioner.
This bill was approved by the House Capital Markets Subcommittee on July 9 and supporters wanted to get the full House to approve it before the August recess. Now, the earliest it could come up is when Congress re-convenes in September. No companion bill has been introduced in the Senate, however Senate Banking Committee Chairman Chris Dodd (D-Conn.) said it is conceivable that it could see action in the upper chamber soon, along with H.R. 1065, the Nonadmitted and Reinsurance Reform Act.
Dodd admitted that the window for passing both bills in narrow and will soon close. Congress is expected to want to adjourn quickly after returning in September, because of the need for members to campaign. "Once that 101st senator [time] shows up, things get very, very difficult to move forward on," he said. "But I appreciate the importance of a couple of these issues that I think there is some consensus on."
PIA believes that H.R. 5840 is the first step in the campaign to create a system of federal insurance regulation. We believe that H.R. 5840 will also be used to advance dual regulation under an Optional Federal Charter.