Nelson sticks to NAIC preservation of state system

Nelson to attend to domestic matters, says state system will work in partnership with FIO, Feds

(AP photo/Harry Hamburg) (AP photo/Harry Hamburg)

Former Nebraska governor and senator Ben Nelson echoed the sentiments of the NAIC leadership in his first public press conference as new CEO of the organization by casting the desired  relationship with the federal government as one of a “partnership,” not one allowing incursion, pre-emption or even dual regulation.

Nelson, a moderate, plains-state Democrat flanked by NAIC president-elect Adam Hamm, commissioner of North Dakota’s insurance department; Michael Consedine commissioner of the Pennsylvania Insurance Department, and Commissioner William White of Washington, D.C., stuck to the script of state regulatory authority and ability to keep insurers solvent and customers covered in the face of a new set of challenges from the Federal Insurance Office (FIO) and the federal government.  

There is not a role established for the federal government on insurance regulation (perhaps not referring to healthcare but to FIO), "nor should there be," Nelson said. State regulation is a “system that is not broken.”

Nelson, who just saw his office for the first time today in the Hall of States across from the U.S. Capitol building in Washington, joined in among the state commissioners' voices championing the state system and its ability to work together and respect others' views, despite differences.

Nelson pointed to disasters such as Hurricane Katrina and Superstorm Sandy as proof that the states can handle insurance issues in a national response, and that the role of the federal government should be “limited.” 

“There is no need for dual regulation, but...a partnership,” he said during the press conference. Later, in response to a reporter’s question, he said that the federal government role should not be one of "incursion or even pre-emption."

Nelson acknowledged, in reference to the year-overdue FIO modernization report on insurance, that the fear is not discussion of insurance, but some sort of increased role for itself to be gained through legislation. At the outset, Nelson noted that the federal government/FIO is not a regulator. 

“This is about state-based regulation...to take care of the folks back home,” said the former Nebraska governor, insurance director and one time NAIC executive vice president and chief of staff (1982-1985). It is about “availability and affordability” of insurance, he said.

However, when differences among states arise on issues such as health insurance exchanges he demurred to the state differences. “Uniformity is desirable in some cases ... and not desirable in others,” Nelson said.

“NAIC is not a superstate agency,” he also clarified. The NAIC is a “facilitator.”

Hamm chimed in, noting that the difference of opinion among states is a “strength, not a weakness,” of the states working together and on their own to get ready to open enrollment in the exchanges starting in October 2013. It is unclear if some in the NAIC are asking for an extension of exchange deadline dates after an interview given by Jim Donelon, NAIC president and Louisiana’s insurance commissioner, yesterday to Bloomberg News. Nelson said he was just speaking about potential possibilities, not making an NAIC statement. 

Consedine, who helps lead an NAIC health insurance committee  with the Wisconsin Commissioner Ted Nickel, on the concerns of states that have taken alternative routes to ACA health insurance implementation, i.e. not opting for state-based exchanges, said the NAIC is “not picking sides on exchanges,” but that the NAIC will help facilitate during the “turbulent transition” to the exchanges to make it as least painful as possible. More than half of the states have chosen a different route in dealing with the Patient Protection and Affordable Care Act (PPACA), which includes, for states, implementing state health care exchanges and addressing Medicare expansion funding.

Hamm, later in the press conference, referenced the NAIC’s flagship principles-based reserving (PBR) Valuation Manual, which the NAIC leadership shepherded through the plenary committee, hopes will be adopted by state legislatures in the coming year, as a “sea change” in actuarial methodologies, but it requires a buy-in from more than 40 states. Forty-two state bodies need to pass PBR so that it can become the defacto model of reserving by 2015. California and New York are major states resisting it for reserving model concerns involving future life insurer solvency.

On the specifics of his contract with the NAIC, and his financials, Nelson was forthcoming, noting his base salary is $950,000 per year with a two-year renewable contract. Nelson said he was pretty far down the road with other suitors, and the NAIC salary offer was competitive, and he really wanted to rejoin the NAIC because he could have taken jobs that would have entailed less work. The almost $1 million base salary is comparable with insurance trade association executives base salary, in some cases higher, but the bells and whistles of options and continuing salary after the role is over, are unknown. 

The NAIC does not have to file a form 990 as do trade associations and other 501(c)3s, for unclear reasons. The IRS does not comment on these matters, it said. However, Nelson’s acknowledgement of his salary is the first in the years since the NAIC stopped making the top five salaries available to the public. Nelson also said he and his wife, Diane, had divested and liquidated their considerable Berkshire Hathaway stock before the end of the year, on the advice of tax and investment advisors, unrelated to his position.

Nelson’s name first came up as a candidate given to headhunters back in November, before the NAIC fall meeting at National Harbor, Md., with interviews to begin in December. 

Nelson also dismissed lobbying restriction concerns, saying that he took the NAIC job because he felt comfortable with the two-year cooling off period as an immediate past member of Congress, because the NAIC CEO is not a lobbying position. He said NAIC staff will meet with Hill personnel as appropriate but the restrictions he faces are as they should be.

Nelson said being CEO will be his primary function, perhaps a nod to his other position, also announced this week, as an advisory board member at public affairs shop, Agenda, in Washington. Nelson said the timing of the two hiring announcements was unfortunate, coming as they did within 24 hours of each other.

Nelson said later to reporters that this did not pose a conflict and that he was just on the board there and not lobbying, and made clear his day-to-day job would be with the NAIC.

In response to queries, the press conference focused a lot on health care reforms and the health care exchanges. Nelson, as a member of Congress, worked on the PPACA, and was the instrumental vote in the Senate for its passage, for which he continues to take a lot of gruff from unhappy insurance agents, state constituents and others.

Nelson said that it was envisioned during the crafting of the PPACA that states would create their own exchanges to keep control of their state regulatory arenas. The federally facilitated exchange, expected to be prevalent now, with more than half the states unready or unwilling to set up a state-based exchange, was only a backstop and not a real option, according to Nelson. 

State regulation though, remained the theme Hamm and Nelson and others stuck to throughout the press conference, with Hamm noting that the most important question of the exchange implementation in his state would be how it affects or impacts the authority of state regulation through the North Dakota Insurance Department. 

 On international involvement, Nelson said he would be involved and one of the goals is to work with “international forces,” but said after the formal press conference it was unclear if he would be the designee to the International Association of Insurance Supervisors (IAIS) Executive Committee.  

The NAIC has said previously that the representatives at the IAIS Executive Committee and the US-EU Dialogue are the NAIC CEO and the NAIC president or their designees, but Nelson offered no specifics on his actual role with the IAIS, saying when he travelled internationally it would be with staff (as is the case when the NAIC CEO attends meetings internationally). One member of the NAIC leadership team told National Underwriter that Nelson would focus first on domestic matters before international ones.

Nelson will likely come to be working with FIO Director Michael McRaith, who heads the IAIS technical committee, on international matters. Nelson spoke to McRaith, he said, near the beginning of McRaith's appointment to the FIO.

Nelson replaces NAIC Acting CEO Andrew Beal, who stepped into the role after former CEO Dr. Therese (Terri) Vaughan left the association in November. Beal now returns to his roles as COO and chief legal officer.

“I am proud (to have been asked) and honored to hold this position.” Nelson said. The new CEO included his wife, Diane, and his brother and sister-in-law in the press conference appearance and deflected no questions.

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