When Democrats controlled both ends of Pennsylvania Avenue, the insurance industry was continually cast as a villain that needed to be reined in. The barons of Capitol Hill threatened to repeal its antitrust exemption and scrutinize its finances. Even worse, the Clinton Administration made insurance companies the heavies in its push for health-care reform.
That all changed when the Republicans seized control. The election tidal wave swept away much of the power of such key Democratic foes as former House Judiciary Committee Chairman Jack Brooks of Texas. Now, the insurance industry may be the biggest beneficiary of the GOP's new, business-friendly policies (table).
WISH LIST. For starters, insurers stand to gain from several planks in the House GOP's Contract With America. Tort reform could reduce their exposure to big jury awards, while a cut in corporate capital-gains taxes would produce a windfall for their massive investment portfolios. Plus, a House GOP tax bill will make it easier for the industry to sell insurance policies that pay for nursing-home care.
Next on the wish list: Many insurance lobbyists are counting on key Republican allies to help defeat or scale back an Administration proposal to give banks further entree into insurance sales. On Mar. 27, new House Commerce Committee Chairman Thomas J. Bliley Jr. (R-Va.) introduced a plan that would allow state regulators to override any federal rules granting banks the right to sell insurance. Bankers fear that lobbying efforts by insurance agents will prevail, producing an unacceptable eventual compromise. "They have the clout to destroy the whole process," laments a bank lobbyist.
It's no accident that the insurers are sitting pretty with the GOP. They have a huge campaign war chest of $6.8 million, and for last year's elections they made nearly half of their contributions to Republicans--more than most other industries. Insurers also have some well-connected Republican ex-lawmakers going to bat for them. One example: former Ohio Representative Willis D. Gradison Jr., who heads the Health Insurance Assn.
Then there's the powerful American Council of Life Insurance. Last year, it replaced retiring President Richard S. Schweiker with outgoing South Carolina Governor Carroll A. Campbell Jr., a former House Republican with close ties to the new GOP leaders. "Every Republican in town will return his calls," sighs an envious bank lobbyist. Indeed, the ACLI risks losing Campbell to the next Presidential campaign: BUSINESS WEEK has learned that Senate Majority Leader Bob Dole already is considering Campbell as a running mate.
ACLI officials insist Campbell has yet to buttonhole his former colleagues. If so, insurers are doing pretty well without him. After House Republicans introduced product-liability reform to reduce manufacturers' exposure to punitive-damage awards, they persuaded lawmakers to cover service and nonprofit companies, too. "All our suggestions were incorporated into the final [House] bill," boasts one insurance lobbyist.
Insurers also lobbied to guarantee that the House GOP's tax bill included a corporate capital-gains tax cut. Cutting the tax would help all business, but it would help insurers more than most: Citizens for Tax Justice, a Washington policy group, figures they reaped one-fourth of all corporate capital gains in 1991, the latest data available.
GO PRIVATE? Life and health insurers also may cash in on the GOP's hopes of replacing federal health spending with private coverage. "The budget cutters know that they're really going to have to attack Medicare and Medicaid," says John Rother, lobbyist for the American Association of Retired Persons. "Boosting long-term care insurance is their political answer." Indeed, the GOP tax bill, set for a House vote in early April, would give policies that pay accelerated death benefits or cover nursing-home care the same tax-exempt treatment that health insurance now enjoys. Those moves, which would cost the Treasury $6.7 billion over six years, could boost sales of such products by 20%.
To be sure, the industry's gains in the House could be reversed by Senate Republicans more eager to cut spending than reduce taxes. But for now, insurance lobbyists can breathe easy. At least when they head for Capitol Hill, they don't have to wear the black hats.
GIVING OUT THE GOODIES
With the GOP in control of Congress, 1995 is shaping up as a banner year for the insurance lobby:
TAX BREAKS Under the House's tax bill, insurance companies get preferential treatment that would help them market lucrative products, such as long-term care policies.
ENVIRONMENTAL RESPITE One likely reform to Superfund legislation would allow less-rigorous cleanup of polluted sites where there will be little human exposure--reducing insurers' liabilities
TORT REFORM Insurance lobbyists succeeded in extending limits on legal liability for negligent behavior to service companies and nonprofits, in addition to manufacturers
COMPETITION A House measure that would allow state regulators to restrict insurance sales by banks could derail the Administration's efforts to give banks broad entree into the insurance business