KANU News Retention: Election Project

[MALE ANNOUNCER]: The following program is a special presentation of Kansas Public Radio. The views expressed are not necessarily those of Kansas Public Radio, its affiliates, staff, or management. [MARY WHITEHEAD]: Welcome to a special presentation of Kansas Public Radio's Election Project. I'm Mary Whitehead. One of the more hotly contested races this year is for the office of Kansas insurance commissioner. You're about to hear excerpts from a debate between the candidates in that race which was recorded last Friday in Overland Park. The Republican incumbent is Ron Todd, who has worked for the State Insurance Commission since 1956. He served as assistant state insurance commissioner for 20 years before being elected commissioner in 1991. His opponent, Kathleen Sebelius is a Democrat who served four terms in the Kansas house of representatives, where she was a member of the house Financial Institutions and Insurance Committee. The moderator is Fran Stowell, director of training for Puritan-Bennett Corporation in Overland Park. The event began with Ron Todd's opening statement. [RON TODD]: Well, I've been with the department basically all my adult working life. I've worked in

several of the sections -- actually, in all of them. And basically, that's the real crux of my campaign -- is to point out that in this complicated area of insurance that I don't have to certainly explain to this group, but in order to help the consumers I believe the most qualified person available is going to be able to handle that job better in the face of all the problems we're going to have and do have. I've had the experience in actually doing the job. We've got a proven track record of doing a good job for the consumers. The one I like to talk about the most is what we can do for consumers

in helping them with problems like disputed claims. Since I've been insurance commissioner, we've been able to return $20 million to consumers over and above what they'd been offered before in regard to claim disputes. I'd like to point also to another area. Nobody likes to have high auto insurance rates -- I don't. But Kansas only is really the sixth lowest -- there's only five states in the United States that have a lower average auto insurance rate than does Kansas. I'm also very proud of the record we have in keeping the insurance companies that are operating here relatively solvent. And I think all of you are familiar with the National Association of Insurance Commissioners Accreditation Program toward increasing the financial

solvency and effectiveness of it for all the state insurance departments -- and we were tied for number five in states meeting those requirements. And we have to constantly adopt more laws, more regulations, do more things in order to keep those accreditations, and I think that behooves the consumers very much. [FRAN STOWELL]: Fifteen seconds. [RON TODD]: And the other two things I want to mention is I have been involved in the last three years in considerable health insurance reform in the state of Kansas, especially on the small employer groups, and also in the reform on workers' compensation, where we've saved employers in the passage of that bill $115 million already. Thank you very much. [FRAN STOWELL]: Thank you, Ron. Kathleen? [KATHLEEN SEBELIUS]: Well I also, like Ron, would like to thank you for inviting us here today. We decided this is our fifth joint appearance this week, so we've seen a lot of each other in various corners of the

state, and it's always a good opportunity to do more than 30 second soundbites -- to discuss issues at some length with people who are clearly interested in this office. So thank you for inviting us, and I applaud you for attending this meeting. I'm Kathleen Sebelius, and I'm running for insurance commissioner because I think it's a job that is critical to most Kansans, in spite of the fact that many of them are really unaware of this office. Kansans buy $5 billion worth of insurance every year. They spend more on insurance than they do on state taxes. And yet since those bills don't come in one or two lump sums, many people are really unaware of what portion of their family income or their pocketbooks are affected by this business. And I see the job as insurance commissioner in two capacities. One is to ensure that the companies doing business in the state are solvent -- that they have the means to pay the

claims -- and secondly that consumers in Kansas and policyholders have the opportunity to buy good products at a decent price. And the regulatory operation is really almost exclusively now with the states. I know that debate is raging at the federal level of how involved the federal government may or may not get in insurance regulation, but certainly the effort right now is focused almost exclusively at the states. And so the job is really critical to the policyholders of this state. I think we can stand for some real improvements. There is certainly a high level of technical expertise in that office, and I applaud that and would like to see that continue. On the other hand, I think there are areas that many states are well ahead of Kansas. We can enhance and focus and prioritize the Consumer Protection Division to make sure that claims complaints are handled in a

much more timely fashion. There are states that have gone a long way with mediation and arbitration techniques, which have been very successful -- giving people an open forum and actually reducing litigation about claims complaints. I think we need a Fraud Unit, a top-notch, focused, active Insurance Fraud Unit. It's estimated that fraud costs about $50 million a year in Kansas. All policyholders pay for it. I know a lot of your companies have ended up enhancing the amount of revenue they spend in fraud- [FRAN STOWELL]: Fifteen seconds. [KATHLEEN SEBELIUS]: And that isn't available right now. But voters have lost faith in this office, and I think that's really a bottom line. They see it as the worst in politics, as public officials who have betrayed their trust, and that's one of the reasons I'm running. [FRAN STOWELL]: Thank you, Kathleen. Ok, you've heard their opening comments so we'll get right into some issues. First question -- Ron. What steps should the state of Kansas take towards

healthcare reform? [RON TODD]: Of course what Kansas does in healthcare reform is contingent a lot on what the federal government says we can do or what they mandate. I was aware of that some time ago, and that's why I mentioned in my opening comments that I had concentrated on trying to get some health insurance reforms done in the state, which is something we can help do -- propose to the legislature and make some regulatory changes. And we were able to do that by getting guaranteed issue policies on small employer groups; by now having an assigned risk plan for people that can't be insured -- the "uninsurables" -- can get coverage for the preexisting conditions; and also as far as group policies are

concerned, we have the job portability that they talk about in the national plan. The commissioner can't do too much directly. They can do a lot working with the legislature. And right now the legislature has a joint committee to work on those health reform matters, and the commissioner by statute is a technical adviser to that. And I think it's important to have the expertise that we've used in the past in order to work for that. There's a big difference in healthcare reform and what they've been talking about in Washington is basically just health insurance reform. The one thing I think needs to be done is to have the medical malpractice liability changed, or you're not going to be able to do very much of anything on the cost of healthcare. [FRAN STOWELL]: Thank you,

Ron. Kathleen, same question -- two minutes. [KATHLEEN SEBELIUS]: Well, I think that Kansas has a real opportunity now that the curtain has fallen on what was getting to be a real fractious and partisan Congressional debate. We're a lot better off, it seems to me, if we figure out what is going to work within the borders of Kansas, both for our healthcare system and health insurance system -- and there are a couple of real problems. I've been in the legislature for eight years and participated in the reform efforts that Mr. Todd has just referred to. They still don't apply to individual policies; they apply only to group policies. So that's one further step. I think we need to move further toward community rating -- back to community rating. Not pure community rating, but there are still far too many variations in terms of policy drivers that still impact small employers and elderly that could be helped to be balanced by a level rating

system. But as we do that I think it's critical to look at the self-insured market and to look at potential ERISA waivers so we don't drive people out of the private market into a self-insured market as we're trying to move to a level playing field. I think companies should have opportunity to compete, but they can't compete if people can dump their way out of the mandates or the reform efforts and offer totally different products and different packages as self insured. The state, I think, would be wise to put some money into extending some of the Medicaid benefits as people transition into the workforce. That's entirely within our state capacity, but what we do too often now is make people choose between healthcare insurance and going to work. And either choice really is a bad one for taxpayers -- we either continue to pay while they stay on welfare or if they go to work with no health insurance benefits, we pay again

as taxpayers as they come back in through the emergency room door. [FRAN STOWELL]: Fifteen seconds. [KATHLEEN SEBELIUS]: We also don't have the data in this state. We are missing large pieces of data so that one of the first things that needs to be done is really get a level on who is uninsured for what periods of time, and then we can focus on a much more specific plan. [FRAN STOWELL]: Considering the makeup of this audience, the following question might have some considerable impact. And the question for Kathleen is what would be your first move if your staff advises you that a particular Kansas insurance company appears to be in financial trouble. [KATHLEEN SEBELIUS]: Well, I think the first move -- which as far as I'm concerned has to be done in total confidence, because it seems to me that the worst of all worlds is to have some preliminary red flags in a stock company that there is trouble on the horizon; that would only enhance the trouble -- to basically have some

discussions with that company and put some steps into play: more frequent financial reporting -- quarterly reports, even monthly reports -- are possible; I think a careful analysis of what the factors are that got that company into the shape it's in, and what sorts of preliminary plans could be impacted by some sort of early rehabilitation plan. But it seems to me that long before you get to the formal procedures of a formal rehabilitation plan, you need to look at every way possible to analyze the sort of trouble signs on the horizon, do it in total confidence, and then use whatever expertise is there in the department to try and enhance that company's future. It doesn't serve us at all well, I don't think -- policyholders in the long run and certainly the overall economy -- to have companies who continue to

slip further and further into a black hole. So the kinds of things that the department can do to both monitor very closely what's happening and attempt to help that company back to a solvency shape I think are very important. But they need to be done in confidence, and I think sometimes that does not occur. The word leaks out very early that there's trouble on the horizon, and it enhances the downward spiral that's already started. [FRAN STOWELL]: Ron, same question. [RON TODD]: Well, what I would try to do is hopefully maybe a better -- we learn more all the time -- surveillance on our domestic companies' solvency than we now do. We basically do try to keep track as closely as possible with all companies doing business in the state, but the way it generally works through the NAIC examination system is that,

as you know, the states are basically responsible more for the financial condition of their own domestics. We now have under the NAIC Accreditation Program the same basic laws that the other states have, or that they have prescribed for other states in receivership -- Model Receivership Act -- which also has provisions for rehabilitation, early access to try to get certain things done if we notice there is a problem. Already we've always been is if there's a solvency problem that needs to be monitored closely, we have the authority to and do require reports

more often than just the annual statements. We have a lot of companies on quarterly reporting and some of them on monthly. We need to continue what we've done in the past, and I think we've been successful at it -- visiting with the management; if there's any problems, encourage them to come to us with problems that we might not know about; and to try to negate any immediate and unnoticed or sudden demise that you just notice one day. And sometimes, especially with foreign companies, that happens no matter how close you watch it. And we're working with the other 13 states in the midwestern zone of the National Association of Insurance Commissioners to -- this is a little

off the subject -- but you have more of like a state compact that we'd have to get legislative approval on to handle receiverships. Even though we have a Model Act, there is still so much problem when these companies get into receivership, because every state's law and their courts handle them differently. [FRAN STOWELL]: Ron, next question. Is there anything wrong with accepting campaign contributions from either the insurance industry or the plaintiffs' bar? In return for their donations what do these camps expect? And they would like for you to be specific on this, by the way. [AUDIENCE LAUGHTER] [RON TODD]: Well that's one that in regard to contributions from the insurance industry, I believe it's appropriate for individuals in the insurance industry to

contribute to the campaign. As a matter of fact, I think it's a most natural thing to do, because those are the people that are most aware and most familiar with what the full meaning of the office is, the way it's operated. And if you're talking about from the individual or specifically the agents' point of view, I always consider that is basically the consumer point of view anyway. Now, my opponent will have a difference on that, because she doesn't think that people in the industry ought to contribute -- but she does accept contributions from the Trial Lawyers Association. I think they're an integral part of the insurance industry. I wouldn't mind. [AUDIENCE LAUGHTER] I'd accept contributions from the trial lawyers, but they haven't offered very much.

[AUDIENCE LAUGHTER] But I see nothing wrong with the law that we now have in the way of contributions, which it puts a limit on it. And Kathleen is familiar with that law. She's in the legislature now, and they have set the limits at what's designed to be reasonable and not so that they can pour a lot of money in and influence things. And I think if you didn't have people that were somewhat interested in the insurance business, whether it be the trial lawyers or the agents, you'd probably have a hard time getting very many contributions. The reporters like to jump on me about that, and I remind them that I'll accept contributions from reporters. [AUDIENCE LAUGHTER] [FRAN STOWELL]: Ron, time is up. [RON TODD]: Thank you very much. [LAUGHTER] [FRAN STOWELL]: Kathleen, same question.

[KATHLEEN SEBELIUS]: Thank you. Well, we do have a fundamental difference on that issue. I made a decision in January that given the regulatory nature of this office and the fact that as a regulator, the insurance commissioner has a unique relationship with the insurance industry, I would not accept any campaign contributions from anybody who is regulated by this office. And I did it really for two reasons. I first of all felt that policyholders needed to be assured that there was not a financial tie between the regulator and the industry that's regulated. But in addition I found as I traveled the state this fall talking to people about this race, that I heard from agents and company presidents throughout this state that they felt like they have been systematically shaken down for years by this office -- that it's very difficult if you have a new product pending or if your rate filing is pending or if

your regulator visits town to turn down the invitation to the golf tournament or the $50-a-plate lunch, particularly when somebody is there from the office who you then have to turn around and deal with. So I decided that it was important for those in the industry to understand that there was a level playing field -- that they had access to the office, but they didn't have to pay to be there -- and that nobody making regulatory decisions would ever be able to check a campaign finance report to figure out who the friends were and who weren't the friends. I do take campaign contributions from plaintiffs' attorneys and defense attorneys, from CPAs and doctors and hospitals and housewives. I've been really pleased that to date we have about 1600 people who have contributed to this campaign, most of whom are not attorneys of either ilk. The difference between Mr. Todd's attorney contributions and mine are, first of all, that he's gotten about twice as much attorney money as I have, but also that those attorneys first of all

made $16 million over the last four years from the state and of policyholder dollars. They get hired to represent the state, and then they turn around and make campaign contributions. So there is a difference in the attorney contributions, although the fundamental difference between us is that I do not take industry contributions and he does. [FRAN STOWELL]: Kathleen? [KATHLEEN SEBELIUS]: Yes? [FRAN STOWELL]: We'll keep this interesting. Should the insurance commissioner in Kansas remain an elected position or be appointed by the governor as in some states? [KATHLEEN SEBELIUS]: It depends on who wins. No, just kidding. [AUDIENCE LAUGHTER] [FRAN STOWELL]: I knew that would be interesting. [LAUGHTER] [KATHLEEN SEBELIUS]: I have twice during my eight years in the legislature cosponsored legislation to suggest that we at least look at an appointed commissioner in Kansas. In neither case was that topic greeted with much enthusiasm by my colleagues. I frankly have mixed feelings.

I think that certainly there is a level of accountability that elected officials have with the constituents that is not there in an appointment. I am concerned that there is- there are- a lot of the people in the office do not serve in civil service capacities. They are unclassified, so the potential is there to sort of turn that office over frequently. And one of the things that I would like to do if I'm successful in this is look at locking in a lot of that professional staff into a civil service capacity, so that regardless of what would happen at the commissioner's level, even if there is more frequent turnover then there's been, that the professional staff stays in place, and the industry is assured of some real continuity. Because I think that's critical -- not to have a volatile turnover. But, you know, we're one of only 12 states with an elected commissioner. They run the gamut. The last two commissioners in Louisiana are doing

time in federal prison. I mean there've been some interesting people out there who have served in this capacity. And I think when you have a $5 billion industry on one hand and a regulatory office it's very difficult to ensure that there is sort of an arm's length removal, and that's one of the decisions that I made about the financial insulation. I thought that was an important step to take. [FRAN STOWELL]: Thank you, Kathleen. Ron, same question. [RON TODD]: Well I think and hope that the office remains elected in Kansas, whether I win or not. For one thing, it's the office continuity. That sounds funny, and so will this next statement. But the office is really less political, because if it's appointed by the governor what you get into is we've got it all over in the other states, just kind of a swinging door. They use it as a political plum to appoint people to, and they don't stay very long. They're usually lawyers, and they leave

for another job in the industry. The average life of an insurance commissioner throughout the United States is less than two years. So if you get one elected -- they're all elected for four years -- you're already way ahead of the game. [AUDIENCE LAUGHTER] And that- you're just going to perform a little better when you answer directly to the people, I think. And I think the reputation we've had in the past will bear that out, and I hope that continues. [MARY WHITEHEAD]: You've been listening to a debate between Republican Ron Todd and Democrat Kathleen Sebelius, candidates in the race for Kansas insurance commissioner. This event was sponsored by the Kansas City chapters of the Risk & Insurance Management Society and the Society of Chartered Property & Casualty Underwriters -- our thanks to those organizations. I'm Mary Whitehead. This is Kansas Public Radio.