Little Insurance Reform in Louisiana

Thursday, May 1^st, 2008

Baton Rouge, Louisiana

FLORIDA OUTSHINES LOUISIANA

IN INSURANCE REFORM

In the short list for vice president, two names that regularly appear are Louisiana Governor Bobby Jindal and Florida Governor Charlie Crist. And as part of the discussion, there are naturally comparisons as to the economic progress being made in both states. One area where Florida leaves Louisiana in the dust is in insurance reform.

Crist has been in office a little over a year, and from the get go made insurance issues his front burner concern. When he took office in January of 2007, Crist called off his inaugural ball saying his full focus needed to be directed towards insurance reform. He called the Florida legislature into a three-day retreat with insurance restructuring being the only thing on the agenda.

In fairness to Jindal, he has only been in office four months but has yet to designate one official on his staff to be the point person for much-needed change in the Louisiana insurance laws. Meanwhile, the Florida Legislature has been dealing with high profile insurance issues as top priorities in its present legislative session. In the Louisiana legislature, insurance issues are rarely mentioned. The comparisons are striking.

In the health-insurance area, Florida just this week completely revamped payment procedures from health insurers to doctors, making major strides in cutting down on red tape and putting the focus on doctors practicing medicine rather than being bogged down in reams of paperwork.

In addition, Governor Crist has taken a completely different approach on mandates as compared to Louisiana. He has legislation that will offer stripped-down health-care benefits where purchasers can choose their mandates. By not making so many procedures and coverage types mandatory, Florida can now offer a basic health policy for only $150 a month. It's the choice of the patient. And it offers a basic health policy to thousands of citizens who are uninsured in Florida. Nothing like that has even been considered in Louisiana

The words "homeowners insurance" has nary been given a mention during the current Louisiana legislative session. Affordable insurance to cover one's property has been the single biggest detriment for rebuilding in south Louisiana. And yet there has not been one creative idea put on the table by legislators. In Florida, finding ways to reduce the cost of basic home insurance has been the front burner issue for months.

Just last week, the Florida Senate approved sweeping property insurance changes that have been touted in the Florida press as a "homeowner’s Bill of Rights." The changes in Florida are directly opposite from the direction being taken in Louisiana. Florida legislation holds insurance companies too a much higher degree of accountability when it comes to antitrust laws and violating a litany of other state laws. Insurers are now required to get state approval before raising property insurance rates, and are prohibited from using arbitration panels when there is a disagreement with property owners. Rates charged to those who purchased Florida Citizens Property insurance have been frozen, and can never be higher than competing company rates. All these changes fly in the face of the insurance company favoritism that dominates both the Louisiana insurance department and the Louisiana legislature.

Florida has also put in place a series of strong consumer laws with an insurance advocate uncontrolled by the insurance department. In Louisiana last year, efforts to create a separate insurance consumer advocate, independent of the insurance department, met a chilly reception by legislators, who allowed (perhaps tongue in cheek?) for such an office to be created in the insurance department itself. The fox guarding the hen house?

The comparisons between the Florida Citizens Insurance Corporation and a similar company set up by Louisiana are striking. Florida initially set up its company by doing what any normal business would do. Capital and surplus were put in place of over $700 million, and reinsurance in the private European market was obtained to protect the Citizens plan in case there were major losses. And there were adequate professionals hired to run the company on a daily basis.

Louisiana did none of the above. From the day the Louisiana company was created by the insurance department and the legislature, Louisiana Citizens Property Insurance Corp. was a disaster waiting to happen. We have read about the incompetent management and the rip-offs of millions of dollars in illegal spending. Even today, this company has yet to file financial statements or balance their checkbooks. Not one dollar was allocated to the new start up company created by the legislature. Is there any business that can start from scratch without having any money in the bank?

And if the failure to not adequately build in safeguards by Louisiana Citizens and the Louisiana Insurance Department officials who were running the company was not bad enough, the decision not to buy adequate reinsurance has turned out to be the biggest single financial disaster in Louisiana’s history. Louisiana taxpayers will spend the next 20 years paying off the bonds that were sold to cover the losses, now well over $1 billion.

We have not even begun to discuss automobile insurance, where just last week Louisiana was listed as having the third highest rates in the country by the National Association of Insurance Commissioners. One could make an argument that for the financial well-being of the state, insurance restructuring and reform should be the major issue in this current legislative session. The fact that insurance issues are almost nonexistent is a reflection of how far the state has to go in creating a more affordable climate for its citizens.

Louisiana and Florida are two troubled states when it comes to affordable insurance, and each are taking a dramatically different direction. Right now, it looks like Louisiana, made the wrong turn in the fork of the road.

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You are the person who has to decide. Whether you'll do it or toss it aside; you are the person who makes up your mind. Whether you'll lead or will linger behind. Whether you'll try for the goal that's afar. Or just be contented to stay where you are.

Edgar A. Guest

Peace and Justice.

Jim Brown

Jim Brown’s weekly column appears in a number of newspapers throughout the State of Louisiana. You can read Jim’s Blog, and take his weekly poll, plus read his columns going back to the fall of 2002 by going to his own website at http://www.jimbrownla.com.

Jim’s radio program on WRNO (995 fm) from New Orleans starts up again this week, with a Sunday show from 11:00 am till 1:00pm. Other changes will be announced in the weeks to come.