Actuarial VOLUME 21 NUMBER 1
In this issue
Upda e t
AMERICAN ACADEMY OF ACTUARIES
The 102nd Congress : Poised for Action in 1992 By Gary D . Hendricks
From the Executive Vice President
Letters to the Editor
Meeting Report: Council on Professionalism
Medicare Supplement 9 Policies-Changes from OBRA 90
11 Ready to Hand Off Cases to ABCD
Enrolled Actuaries Meeting,
Enclosures Included in this month's issue of The Update are the following: 0
• In Search Of . . . • ASB Boxscore • Actuarial Standard of Practice No . 19
By the time the 102nd Congress adjourned for the year on November 27, it had enacted little legislation ofinterest to the actuarial community . Nonetheless . 1991 was an unusually active year in Congress . Multiple committees were simultan-eously debating major policy changes in areas where the actuarial community has substantial expertise : health insurance, the regulation of insurance solvency, the antitrust treatment of insurance industry activities, and the simplification of the tax treatment of qualified private pension plans .
Other important but less sweeping issues addressed this year included the development of federal standards for long-term care insurance, expansion of the 1990 standards for Medicare supplemental insurance policies, and changes to Social Security . Extensive public hearings on many of these issues, as well as lengthy party caucuses and efforts tobuild bipartisan support, characterized the year . Congress Is now poised to enact substantial new legislation In 1992 that could affect the work of actuaries .
Health Insurance Reform This year more than a dozen bills were introduced that would provide nearuniversal access to health care . Proposed approaches ranged from requiring employer-provided coverage and covering the unemployed through a public program to expanding Medicare to all age groups and limiting private Insurance to
supplemental coverages . Many bills also would preempt state-mandated benefits and expand tax incentivesfor uninoorporated businesses . Some would expand Medicaid to cover many more of the currently uninsured or even establish Medicaid buy-in arrangements . Congressional committees held more than forty hearings to explore options and alternative approaches . By the session's close, the most talked about approach on the Democratic side of the aisle was an expansion of the current employer-based system through some form of enforced "play-or-pay" scheme . This approach would require employers (continued on page 4)
1991 Enrolled Actuaries Meeting Transcripts The Academy office recently has received a number of calls asking when the transcripts for the 1991 Enrolled Actuaries Meeting will be available . The transcripts are scheduled to be mailed In early January . The Joint Program Committee recognizes the importance of the transcripts to pension actuaries and deeply regrets the delay in releasing them . Unanticipated difficulties involved in producing two volumes with more than 2,000 pages of text and Illustrations have delayed publication .
The Actuarial Update
the profession In the months ahead . For the past two years, the Academy
leadership, committees, and gover ment relations staff have been workin (behind the scenes, for the most part) to position the profession to assist In further strengthening solvency regulation . Back in 1990, after the Dingell report had been issued, the Academy Committee on Property and Liability Financial Reporting published its findings on the effectiveness of casualty loss reserve opinions in preventing insurer insolvencies .
Vice President President Harry D . Garber President-Elect John H . Harding Vice Presidents Robert H . Dobson R. Stephen Radcliffe Richard H . Snader Michael A . Walters Larry D . Zimpleman Secretary/Treasurer Thomas D . Levy
Executive Vice President James J . Murphy Executive Office 1720 I Street, N,W, 7th Floor Washington, D .C . 20006 (202) 223-8196
FAX (202) 872-1948 Membership Administration Woodfield Corporate Center 475 N. Martingale Road Schaumburg, Illinois 60173-2226 (708) 706-3513
Chairperson Committee on Publications Roland E . King
Editor E . Toni Mulder Executive Editor Erich Parker Associate Editors Gary D . Lake Stephen A. Meskin Charles Barry H . Watson Managing Editor Jeanne Casey Contributing Editor Ken Krehbiel Production Manager Renee Cox
American Academy of Actuaries 1720 1 Street, N .W. 7th Floor Washington, D .C . 20006 Statements of fact and opinion in this publication, including editorials and letters to the editor , are made on the responsibility of the authors alone and do not necessarily imply or represent the position of the American Academy of Actuaries, the editors, or the members of the Academy.
James J. Murphy
out from the Sidelines on Solvency An unprecedented number of major life insurance companies have failed or gone into conservatorship in the past year. We're familiar with most of them : Executive Life, First Capital, Fidelity Bankers, and Mutual Benefit. Property/ casualty Insurer insolvencies have subsided since 1985, but given recent events in the life industry and the notorious cases of Mission, Integrity, and Transit companies-the subject of a widely circulated congressional report by Rep, John Dingell's subcommittee, Failed Promises-the specterof insurer insolvency is on the public's mind . Unfortunate analogies are made in the media, comparing the insurance industry's current woes to the savings and loan crisis of the 1980s . Of course, we can argue that the insurance industry as a whole remains strong, that with few exceptions property/casualty and life companies will be, able to weather the current recession and decline in real-estate assets, having already survived the bottom falling out of the high-yield, j unk bond market . The problem is that public confidence In the insurance industry has declined so significantly that such arguments may notbe heard . And decline in public confidence, as we've seen In the case of Mutual Benefit, can itself precipitate a failure when jittery policyholders and annuitants begin to cash out, starting a run on the bank . Restoring public confidence Is critical to the continued health of the industry . The regulatory oversight of the insurance industry is being scrutinized, and given the pressure that state and federal legislators feel to prevent another savings and loan debacle, the time Is right to make ourselves Increasingly known to policy makers.
The Academy has formed a highlevel task force that includes actuaries from the highest leve is within insurance companies and actuarial consulting firms, and represents all thekey practice areas . This task force will mobilize some of the best talent we have within
Academy leaders and staff have had periodic contact with Rep . Dingell's congressional staff to relate information about the appointed actuary system in the United Kingdom and Its possible application in the United States. At present, the Academy has representatives on the advisory group assisting the National Association of Insurance Commissioners (NAIC) in the development of a risk-based capital formula to measure the relative risks associated with a company's investments and products . We also have ongoing formal liaison with the NAIC . And we should never lose sight of the regulatory ground the profession has gained in just the past two years . The Joint Committee on the Valuation Actuary, under the leadership of Walter
Rugland, labored for many years to strengthen the life insurance actuary's role . Recently, these efforts were rewarded . Model regulations drawn up by the NAIC in 1991 for adoption by the states will require the life insurance valuation actuary (now referred to as the "appointed actuary") to assess not only whether minimum reserve standards are met for a company's liabilities, but that re serves are adequate considering assumed risks and asset mix. The model regulation also requires that the appointed actuary be a member of the Academy, meet the Academy's qualification standards for such work, and comply with any applicable standards of practice issued by the Actuarial Standards Board . Regulatory support for qualified property/casualty actuaries signing company loss reserve opinions has been enhanced as well . In 1990, the NAIC adopted a model regulation requiring that actuarial loss reserve opinions be flied with annual statements in every state . Previously, many states did not require opinions . Moreover, before this regulation's adoption, loss reserve opinions, when required, could be signed by nonactuaries in some states. Years of work by the Academy's
January 1992 Committee on Property and Liability Financial Reporting were brought to uition under the leadership of hairperson David Hartman and Past President Mavis Walters. Additional ground was gained in 1991, when the NAIC adopted a regulation requiring that the actuary signing a company's loss reserve opinion be appointed by the company's board of directors and not dismissed from the post without the company notifying the state insurance regulator. This requirement was intended to prevent a company from "shopping around" for a favorable actuarial opinion .
Obviously, the profession should be proud to have gained increased statutory responsibility and recognition in the solvency regulation of insurance companies . However, in the current environment, these enhancements are simply not enough . The actuary could be much more effective once given more regulatory support. Either insurance regulation will be kept at the state level and strengthened, a federal agency will be given regulatory oversight, or Congress will authorize a self-regulatory mechanism for the industry . Whatever happens, any regulatory approach that does not strengthen the role of the actuary will be deficient . We need only to look at the regulatory models to the north in Canada and across the Atlantic in the United Kingdom to see the role that we could play-a role for the appointed actuary that includes a dynamic view of a company's total financial condition .
U .K . Government Actuary Chris Daykin has met and discussed the U .K. appointed actuary system with congressional staff. (See December Update.) In such meetings, he reports this striking fact : Since the appointed actuary conceptwas adopted seventeen years ago in the U .K ., there has been no life insurer insolvency in the U . K. Of course the United States corporate and regulatory environment is different from the U.K .'s . And the U .K . has notyet applied the appointed actuary concept fully to the regulation of property/ casualty companies ; therefore, even that model is still incomplete . Nevertheless, we should carefully study the U .K. and Canadian models and consider how they could be adapted to insurance regulation in the United States . We must continue to make ourselves available to legislators and regulators and communicate how we can help . And because public confidence is so important to the industry being able to make good on its promises, we will be
Letters to the Editor Valuation at Home and Abroad When I scanned the article on the valuation actuary concept (October 1991 Update), the following sentence stuck out like a sore thumb : "I don't think that regulatory authorities in the United States are apt to allow actuaries to set lower than minimum reserves on the basis of their actuarial judgment ." I think this statement is actually a bit misleading because it implies that this is permitted in the United Kingdom . In the United Kingdom, regulations specify how statutory minimum reserves are to be calculated, and the reserves that are actually set up have to exceed the statutory minimum reserves. The way the regulations were written Implies that this test was to be done in the aggregate, but to the best of my knowledge It's administered on the basis of an aggregate test for each material block of business . The company I am with does the test this way too . (It might be of interest to note that the statutory minimum reserves are dynamic in that the assumptions should be revised annually if appropriate . An obvious factor here is the movement in the market values of the assets . From the professional viewpoint, a continual rather than an annual monitoring of the situation by the appointed actuary is called for .)
I was also interested in the comments concerning the exemptions for smaller companies . Working for a large multinational company that has to grapple with the valuation regulations in several different territories, I have no sympathy whatever for the idea that the smaller companies should be exempt from proper reserve testing . If
taking our message to the public as well, via Forecast 2000. We have a very i mportant role to play in insurer solvency . Our expertise will be critical to strengthening the regulatory oversight of insurers' longterm solvency, whether that oversight is set up on a state, federal, or selfregulatory basis . Up until now we have been content to work with regulators and legislators on the sidelines. It is time for us to step forward and be countedl A
anything, it should be the other way aroundi On logical grounds, of course, there should be some alleviation for the financially strongest companies, no matter what their size . Owen A. Reed Toronto, Ontario
Presumptuous Assumptions? In recent letters to the editor, Robert Myers and Bruce Schobel appeared to be in agreement with the public trustees' statement in the 1991 Hospital Insurance (HI) Trustees Report that my actuarial opinion was improper because I declined to certify that all the assumptions and methods were appropriate . They seemed to imply that the experts all disagree with my assessment that the real-earnings assumption (growth in personal earnings in excess of inflation) and the method for summarizing the seventyfive-year projections are inappropriate . That is not true . My opinion is based upon compelling evidence and is supported by persuasive studies by highly respected economists . With regard to the intermediate realearnings assumption used, there has been virtually no growth in real earnings during the past twenty years . Yet the trustees are projecting that real earnings will increase at the rate of 1 .1% or more annually for the next seventy-five years. Incredibly, under this intermediate assumption, the assumed annual increase is well above the cumulative increase of the last twenty-one years . Even the pessimistic assumptions are well in excess of the experience of the last quarter century .
The assumption that real earnings will abruptly begin increasing signifl(continued on page 11)
The Update welcomes letters from readers . Letters for publication must include the writer's name, address, and telephone number, and should be clearly marked as "Letters to the Editor" submissions . Letters may be edited for style and space requirements .
The Actuarial Update
4 102ND CONGRESS (continued from page 1)
between new business and renewal business could not vary by more than five percentage points .
either to provide health insurance for their employees or pay an earmarked tax to support a public program for their employees . A federally specified minimum -benefit package would replace the current state mandates, and many current underwriting practices would be prohibited .
Rostenkowski's bill would also establish a minimum-benefit package for small-employer health insurance with coverages similar to Medicare Parts A and B. And, in an effort to contain costs, the Rostenkowski bill would establish medical-care provider rates .
One of the most prominent bills of the play-or-pay genre is S . 1227, "Health America: Affordable Health Care for All Americans Act ." Senate Majority Leader George Mitchell (D-ME) is the principal sponsor of the bill, and its cosponsors include senators Kennedy, Riegle, and Rockefeller. In addition to requiring employers to pay for health insurance for their workers, the bill would make other changes that would affect insurers, consumers , and medical care providers . (See August 1991 Update.) The Senate Democratic leadership's bill undoubtedly will spawn new hearings during 1992 . However, few expect the bill to become the centerpiece of health care reform. By the end of the first session, Republicans and Democrats alike seem to agree that any sweeping change is unlikely . Reform aimed at providing health insurance to those Americans who are withoutitwill proceed incrementally, if at all .
Although such incremental reform could take many forms, three bills introduced late in the year suggest the direction Congress is likely to take . H .R . 3626, introduced by Rep . Dan Rostenkowski (D-IL) in October, focuses on the small-group market, employers with two to fifty employees . The bill would require insurance carriers in this market to offer policies to all takers, to accept all members of a group regardless of health status, and to guarantee renewability of all policies . However, insurers could refuse to insure groups that failed to meet or maintain a minimum participation rate . Exclusions for preexisting conditions would be permitted, but only for up to six months for policyholders who had not been continuously covered under a health plan (including public health programs and self-insured plans) .
The bill would permit insurers to recognize geographic cost differentials . Within a geographic area, however, community rating would be required ; except that, within limits, premiums could vary by the age and sex composition of the group . Within a block of business . the rate differential
On the same day that Rostenkowski introduced H .R. 3626, Senator Lloyd Bentsen (D-T)Q introduced S. 1872 in the Senate . Although the bills are
price tag, though . The total cost of the bill is estimated to be $150 billion over ilve years . The bill includes no provision for financing. The pronouncement by administration officials at congressional hearings in October that the administration would support changes in small-group insurance practices indicates broad consensus In this area and suggests that Congress might well enact legislation in 1992 . The details of such legislation will be hotly debated .
Long-term Care Standards
The pronouncement by administration officials at congressional hearings in Octoberthat the administration would support changes in small-group insurance practices indicates broad consensus in this area and suggests that Congress mightwell enact legislation in 1992 .
similar, there are differences, such as the permissible variation in premiums . Some of these differences may be important to actuaries . The Academy Committee on Health is currently reviewing the bills . In early November, Senator John Chafee (R-Rl) introduced S. 1936, the first major health reform bill from the Republican camp . The bill, with twenty cosponsors at the time of introduction, is the product of sixteen months of meetings among thirty-four of the Senate's forty-three Republicans . With respect to small-group insurance, the Chafee bill closely parallels the Bentsen and Rostenkowski bills . However, the Republican bill would limit payments in medical malpractice suits. Itwould also institute refundable tax credits forlower-Income individuals and families to help defray their health insurance costs and outof-pocket medical expenses . Finally, the Senate Republicans would encourage small businesses to provide health insurance by offering tax credits to help defray the cost for five years and by preempting many state laws that discourage managed care . The tax incentives have a hefty
In the area of long-term care, Congress has been considering possible changes along three different lines : establishing a public program to meet the nation's long-term care needs, Increasing tax incentives to encourage individuals to save for these needs, and setting minimum federal standards for longterm care insurance policies . Many in Congress support establishing federal standards for longterm care policies and are convinced that such policies should include inflation protection as well as some form of surrender values . Four bills are now before Congress that would create federal standards for long-term care policies . Although the specifics of the bills vary, all four bills include provisions intended to give consumers better access to information, and all require insurers to file more extensive information with the states than is currently required .
Under these bills, policies would all be guaranteed renewable and could not be canceled by the insurer, except for nonpayment of premiums or material misrepresentation by the policyholder . Policies could exclude preexisting conditions from coverage, but only for the first six months of the policy . Replacement policies could not exclude coverage for preexisting conditions . Limited inflation protection is a key element in all proposals . The provision that appears to have general acceptance in Congress is that each policy must include a specified annual percentage increase ofat least 5% in dollar payment levels and maximum payment limits . Nonforfeiture is also a key element in the proposed federal standards, but there does not yet appear to be agreement on how this should be handled . Federal standardswould apply to sales practices, although there are substantial differences in the bills' provisions .
January i.992 All proposals would rely on the states for regulatory enforcement . The bills .l fer, however, in the way they would ave appropriate regulations drawn up . H .R. 1916, Rep . Ron Wyden's (D-OR) bill, would have Congress establish general parameters, with details to be developed by the National Association of Insurance Commissioners (NAIC) in conjunction with industry and consumer groups . H .R. 2378, Rep . Terry Bruce's (D-IL) bill, would have the Secretary ofHealth and Human Services establish regulations with NAIC and industry assistance . Forty-three states recently have passed legislation or adopted regulations on long-term care, based on a 1990 NAIC Model Act and Regulation . However, critics have argued that the NAIC model standards do not address vague or Inconsistent terminology and eligibility criteria and that the NAIC should extend its standards to provide greater protection against loss of coverage . Moreover, in concurrence with several members of Congress, a representative of the General Accounting Office testified at an October hearing that, "the potential for abuse here is much, much greater than in the Medigap area," Tax Incentives for Long- term Care It is widely agreed that, for now, a new public program to cover the nation's long-term care needs must take a back seat to the needs of Americans with no health insurance coverage at all . However, many in Congress are also aware that unmet needs in the longterm care area cannotbe ignored for too much longer . According to the Academy's Committee on Health, the aging of the population, along with inflation and Improvements in medical technology, will result in a near explosion of total long-term care expenses in little more than a decade .
The alternative to a public program is expanded long-term care protection through private insurance or other forms ofprivate savings. Undercurrent law, long-term care insurance and other savings for long-term care do not receive the same favorable tax treatment accorded health insurance and private savings for events like retirement . In addition, benefits received and costs incurred for such care either are not tax deductible or their tax treatment is unclear . In the 102nd Congress, over a dozen bills were introduced thatwould provide more favorable treatment for long-term
care insurance, for other forms of savings for long-term care, and for the costs incurred for such care . The bills include such suggestions as excluding employer-paid tong-term care Insurance premiums from workers' taxable Incomes, permitting long-term care insurance as an option in cafeteria plans, excluding from taxable Income Individual Retirement Account (IRA) withdrawals used to pay long-term care insurance premiums, and giving tax credits for individual contributions to long-term care savings accounts and for long-term care insurance premiums .
Although the earlier suggestions were wide ranging, bipartisan support for S .
The quid pro quo for favorable tax treatment will be the requirement that long-term care policies meet certain federal standards .
1693, a bill introduced by Senator Bentsen, suggests that Congress could be reaching a consensus in this area. Bentsen's bill is cosponsored by Finance Committee Ranking Minority Member Bob Packwood (R-OR) .
Bentsen's bill would treat long-term care insurance policies the same as health and accident policies under the tax code . This treatment would be extended to both the employer and the beneficiary. Hence, employers could deduct contributions for long-term care insurance, and beneficiaries could treat payments from these plans the same as reimbursements for medical expenses . The quid pro quo for favorable tax treatment will be the requirement that long-term care policies meet certain federal standards . Bensten's bill also would extend favorable tax treatment to accelerated benefits paid to the terminally ill under a life insurance policy . Such tax incentives as Bentsen proposes would put long-term care on a parwith other insurance and employee benefits in terms of their tax treatment .
Multiemployer Welfare Arrangements (MEWAs) Among the many smaller bills and proposals to ease access to health Insurance, is Rep . Thomas Petri's (RWI) bill, H .R . 2773, the "Multiple
Employers Health Benefits Protection Act of 1991 ." This bill was developed in response to various states' actions that appear to be eliminating selfinsured MEWAs . The bill would amend the Employee Retirement Income SecurityAct of 1974 to establish federal certification standards for MEWAs that provide health benefits . MEWAs that met the federal standards as well as actuarial ones would be exempt from state regulation . TheAcademy's Committee on Health and Welfare Plans reviewed initialdrafts of the bill for congressional staff and have recently prepared a statement for Rep . Petri and his . staff to consider as they continue to refine the bill . A number of other health bills, including Senator Chafee's, Include provisions to encourage the development of MEWAs for small employer groups . However, most other proposals require that these arrangements be insured through a licensed carrier .
Federal Medigap Standards In 1990, Congress enacted new federal standards for Medicare supplemental insurance (Medigap) policies . (See related story on page 9.) Accordingly, all newly issued Medigap policies must now conform to a set of standardized coverages specified in one of ten standard packages . All insurers offering this type of insurance must offer the basic benefit package, and Medigap policies that do not conform to one of the ten standard packages cannot be sold . To simplify consumer choice, all insurers must use a standard format for presenting the packages and associated premiums .
The 1990 law also : ∎ increases the loss ratios for individual policies to 65% ; ∎ requires refunds when the loss ratio falls below 65% ; ∎ requires that policies be guaranteed renewable ; and ∎ prohibits medical underwriting for six months after an individual becomes entitled to Medicare Part B . Technical corrections bills before the House and Senate (H .R . 1555 and S . 750) include corrections to the 1990 Medigap provisions . In general, the corrections relate to minor drafting errors In the law enacted in 1990 and changes that incorporate the basic benefit packages and the accompanying NAIC regulation into the Social Security Act . There is one "technical correction" of note .
The Actuarial Update The 19910 law required refunds for failure to meet the 65% loss ratio, but this applied only to new policies issued after the regulations took effect . However, the Technical Corrections Act would extend the original loss ratio and refund provisions to all Medigap policies . Anumberoforganizations have been lobbying against enactment of this proposed "correction ." On November 26, the House passed H .R . 1555 However, the Senate failed to act on companion bill S . 750 before recessing .
introduction, the Bentsen /Pryor bill had thirty- one cosponsors : There are many similarities among the more than thirty - six separate provisions contained in the bills . However , there are also some major differences . Although details vary, all three bills would : ∎ liberalize the rollover rules :
and Chandler bills would make additional changes . The latter proposals would make changes to the minimu participation requirements, offer relic from required minimum distributions for those who do not retire, clarify the voluntary employee benefit arrangement (VEBA) rules for affiliated employers, and exempt government plans from several benefit limitations .
∎ repeal five-year averaging for lump sums taken at retirement ;
The C handler bill would also simplify the nondiscrimination rules and the separate-lines-of-business rules and change the integration rules to disregard Social Security supplements in testing the permissible disparity . This bill would also change the rules for calculating the portion of the accrued benefit attributable to employee contributions in defined benefit plans . None of these bills have met with much enthusiasm within the employee benefits community. Employers have generally opposed the provisions in the bills designed to raise revenue . They are especially concerned by certain provisions in the Rostenkowski bill, such as repeal of the grandfathering of ten-year averaging and elimination of the unrealized appreciation provisions for employer stock distributed in a lump sum . The Treasury Department, on the other hand, supports Rostenkowski's bill . According to the Treasury, the bill is revenue neutral, simplifies the tax code while expanding pension access, and does not alter current tax policy . Treasury believes that both the Chandler and the Bentsen/Pryor bills would be significant revenue losers and considers some of these bill's provisions to alter tax policy substantively . One thing seems clear : The employee benefits community is not particularly pleased by the effort, one that was presumably designed to offer them some relief from complexity and compliance costs . A number of the changes proposed in Rostenkowski's bill (such as the change In definition of leased employees) will undoubtedly be enacted if there is a tax bill In 1992 . However, anything more meaningful than longoverdue fixes to a few definitions In the tax code seems unlikely at this time .
∎ extend the option of establishing salary - reduction Simplified Employee
Tax Simplification for Pensions Even before the Internal Revenue Service could begin Issuing the many employee benefits regulations required by the Tax Reform Act of 1986, practitioners began to complain about the many complexities and new administrative burdens introduced by the act . The change that received the most attention was Section 89, which caused such consternation among employers and practitioners that, in 1989, Congress repealed It . Section 89 was by no means the most complicated or burdensome change in the employee benefits area . The nondiscrimination rules for qualified pension plans rival Section 89 in both complexity and potential administrative cost. In addition, the many piecemeal changes in the qualified plan rules during the 1980s have resulted in many idiosyncrasies in the tax code, such as several different definitions of highly compensated and key employees, different definitions of wages for different sections of the code, and different interest rates for the various actuarial calculations required in applying the tax code to qualified pension plans . In response to growing dissatisfaction with the ever increasing complexity of the tax code, the House Ways and Means Committee initiated a major tax simplification study in 1990 and called for written proposals . The committee published a 1,164-page compendium of the proposals it had received, and in late 1990, Senator David Pryor (D-AR) and Rep . Rod Chandler (R-WA) introduced the first pension simplification bill . Although hearings were held, the bill died without action at the close of the 101st Congress . Throughout 1991, tax simplification discussions have continued, and in June three bills were introduced : one by Rep . Chandler, one by Rep . Rostenkowski, and one by senators Bentsen and Pryor. At the time of its
One thing seems clear : The employee benefits community is not particularly pleased by the effort, one that was presumably designed to offer them some relief from complexity and compliance costs .
Plans (SEPs) to employers with up to 100 employees and provide safe harbors to avoid nondiscrimination testing for these plans ; ∎ permit tax-exempt organizations to establish 401(k) plans (albeit only Rostenkowski would extend the option to state and local governments) ; ∎ replace the "historically performed" test for defining a leased employee with a test based on control over the employee's work; ∎ change the current nondiscrimination test for 401(k) plans :
∎ simplify the definition of highly compensated employee; ∎ base indexed values for employee benefits on changes in values from September to September instead of December to December, as is now done : and ∎ repeal the family aggregation rules for plans maintained by the self-employed . Rostenkowksi's bill would repeal the exclusion for unrealized appreciation and the 1986 provisions that grandfather capital gains and ten-year averaging . It would also conform the vesting rules for multiemployer plans to those forsingle-employer plans. The other two bills do not propose this change .
This is where the Rostenkowski proposal stops, while the Bentsen/Pryor
Social Security Funding The most contentious Social Security issue during the current Congress has been the legitimacy of partial-reserve funding . A number of analysts have criticized the shift to partial-reserve funding for Social Security . They point out that the trust fund buildup, which
January 1992 will presumably pay a portion of the # baby boom generation's benefits, will not relieve future generations of the burden of paying ,the full cost of the baby boomers' Social Security benefits . The only change that partial-reserve funding makes is in the distribution of the burden among the members of the generation that will be paying taxes during the baby boomers' retirement years. Based on this observation, a number of analysts have proposed returning to pay-as-you-go financing . Within Congress, Senator Daniel P . Moynihan (D-NY) has been this method's most vocal proponent. In 1990, Moynihan's bill to rescind the 1990 payroll tax increase and return Social Security to pay-as-you-go funding was rejected on a procedural vote . In January 1991, Moynihan again introduced his proposal . In April, the proposal was rejected as an amendment to the Senate's budget resolution .
At the moment, there appears to be little support in Congress for returning Social Security to a pay-as-you-go basis, and no new bills have been introduced . However, were there to be substantial reductions in the budget deficit, such a change might be reconsidered. Other Social Security Initiatives Since the 1983 financing reforms, most of the changes in Social Security have been directed at making small enhancements in benefits and Improving the administrative process for delivering benefits . The major Social Security bill before the 102nd Congress continues this trend . In July, Rep . Rostenkowski and Social Security Subcommittee Chairman Andrew Jacobs (D-IN) introduced a bill that would enhance Social Security benefits in two ways . The bill first proposes to improve Social Security benefits for working senior citizens by phasing in an increase in the retirement test for persons aged sixty-five to sixty-nine . The amount of earnings that would be exempted before earnings begin to offset Social Security would be increased from $10,200 to $11,400 in 1992 .
The bill would also strengthen the financing of Social Security through a phased-in $3,000 increase in the Social Security wage base thatwould increase maximum taxable wages from a projected $69,600 to $72,600 in 1996 . In addition to raising revenue to finance the proposed benefit enhancements . this change would increase the
proportion of total wages subject to the payroll tax . The proportion has been declining because the wages of upperincome workers have risen more quickly than average wages .
The most controversial change proposed in the bill is the establishment of the Social Security Administration as an independent agency . The principal aim of this change is to protect the
In fact, enactment of a federal regulatory scheme anytime during the next four or five years seems somewhat remote at the moment. However, the situation could change rapidly if the financial condition of several major insurers were perceived to be seriously deteriorating . . .
Social Security Administration from short-term political pressures . in an effort to improve administrative efficiency, the bill would mandate that the General Accounting office study ways to improve the accuracy of the disability determination process under Social Security . During congressional hearings it was revealed that almost 66% of the Social Security Administration's initial disablilty determinations are reversed upon appeal . The high reversal rate indicates that the determination process needs substantial improvement . Although this bill has not attracted much attention, at least some of its provisions would likely be rolled into any major tax bill enacted during 1992 .
Insurance Company Solvency Failed Promises, the 1990 report of the House Energy and Commerce Committee ' s Subcommittee on Oversight and Investigations, raised many questions regarding the adequacy of insurance company solvency regulation . During 1991 , the failure of several large life insurance companies heightened congressional concern, and over a dozen congressional hearings were held regarding the failure of Executive Life alone .
In August, Rep . John Dingell (D-MI) began circulating an outline of a legislative proposal to establish a federal regulatory system for insurance company solvency . At the same time, Senator Howard Metzenbaum (D-OH) introduced S . 1644, a bill that parallels Dingell's proposal in many regards . S . 1644 would establish an independent insurance regulatory commission at the federal level . The commission would develop minimum federal solvency standards and accredit states based on their Implementation of the standards . In addition, the commission would have the power to revoke state accreditation and prohibit these states' domiciliary companies from engaging in interstate commerce . The commission would also house a securities valuation office and an office of reinsurance regulation . S . 1644, unlike Dingell's proposal, would create a national guarantee fund, the National Insurance Guaranty Corporation, thatwould supersede state guaranty funds . The guaranty corporation would be funded by preinsolvency assessments against member companies and would serve as the exclusive liquidator for insurers operating In Interstate commerce . At the close of the first session of the 102nd Congress, staff of the House Energy and Commerce Committee were preparing a draft bill for the committee's consideration . However, any rapid movement toward federal regulation during 1992 seems unlikely . In fact, enactment of a federal regulatory scheme anytime during the next four or five years seems somewhat remote at the moment . However, the situation could change rapidly if the financial condition of several major insurers were perceived to be seriously deteriorating and if the states did not appear to be making progress in strengthening current solvency regulation .
The McCarran-Ferguson Act Rep . Jack Brooks (D-TXl, chairman of the House Committee on the Judiciary, continued to pursue his efforts to amend the McCarran-Ferguson Act, which, since 1945, has extended an antitrust exemption to .insurers, allowing them to share data for ratemaking purposes .
Brooks introduced H .R. 9, which would amend the McCarran-Ferguson Act to eliminate the antitrust exemption applicable to the business ofinsurance in cases of price fixing, certain (continued on page 12)
The Actuarial Update
1991 Annual Meeting Report
The Academy committees related to professionalism convened at the Academy Annual Meeting Last September. Here is a brief report .
Richard Snader, a new Academy vice president, guided the discussions of the professional committees . The most important goals of the session were (1) a review of the committees' task forces for both this past year and 1992 and, (2) the evolution of the group of committees into an established practice council . Snader reported on the altered status of the original committees : The Committee on Guides to Professional Conduct was recently disbanded ; the tenure of the Committee on Discipline will end when the Actuarial Board for Counseling and Discipline (ABCD) becomes official on January 1, 1992 . The remaining two, (the Committee on
Ask Dr. OPEB Dear Dr . OPEB ; All of us doing the analyses called for by Statement of Financial Accounting Standards (SFAS) 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, should be aware of some details that are easy to overlook . Paragraphs 452-454 of the accounting statement show that the average future service calculations used for amortizing unrecognized costs ignore :
∎ fractions of employees not expected to receive employer-provided benefits under the plan : ∎ employees who are not yet to the start of their attribution period ; ∎ employees with zero future service as of the valuation date (or those past their "full eligibility" dates for amortizing prior service cost) ; and ∎ projected future service after full eligibility is expected to be reached . (However, this exclusion applies only to the amortization of prior service cost, and service after projected full-eligibility dates is to be reflected in the amortization of the transition amount, gains, and losses .)
Professional Responsibility and the Committee on Qualifications) have attained permanent status . The ABCD and the Actuarial Standards Board (ASB) also will be represented on the council . (The formal name of this council is undecided .) John Fibiger led the discussion on the Discipline Committee's actions during 1991 . Allegations of misconduct that are now under review have often fallen into two major categories . First, Fibiger noted, is the failure of actuaries to respond promptly to clients on matters related to Form 5500 filings . Referring to this as the "soft underbelly of actuarial practice," [t occurs, he commented, either because of sloppiness or as a way to ensure the collection of fees . Although in some sense it's a commercial dispute, one can't say, "it's not our problem ." It was noted, "unhappy clients are going to be unhappy with the profession ." In addition, six to eight cases settled by the Discipline Committee concerned
The year-by-year projections of service needed for the standard amortization of prior service cost ignore the same fractions of employees and service ignored above . Since the results of actuarial calculations are sensitive to changes in average future service measurements and each of the above points can significantly affect average service, our procedures should be checked to see if they conform to SFAS 106 . A quick check with colleagues at major firms revealed that not all of these details have been considered . Analogous remarks apply for purposes of attributing benefits to periods of employment, in order to calculate service cost and the accumulated postretirement benefit obligation . Of course, in this case, service after each employee's full eligibility date is excluded . -T.S ., Ohio Dear T .S. : Thank you, you took the words right out of my mouth .
The opinions expressed in this column should not be considered formal gutdancefi-om either theActuarial Standards Board or the Academy .
actuaries' qualifications to file statements .
For Harper Garrett, the profession's formulation of the ABCD was of Interest . Starting early this year, representatives for the Academy, the Canadian Institute of Actuaries, the American Society of Pension Actuaries, the Casualty Actuarial Society, the Conference of Consulting Actuaries, and the Society of Actuaries solicited comments from members concerning the ABCD . Most of the thirty-five responders were concerned about concentrating too much power in one entity, lengthy terms of office, and dueprocess provisions . Within a year from now, Garrett expects all these organizations to agree to adhere to the ABCD's provisions .
John Booth, who is chairperson of the Committee on Qualifications, noted that the major complaint arising from the January exposure draft of the proposed revisions to the continuing education requirements of the qualification standards was the ambiguity about the two types of continuing education credit, one given for attending formal presentations and another type for informal sessions . There was discussion aboutthe educational value of certain meetings and how those meetings should be classified for possible continuing education credit . Representing the Committee on Professional Responsibility, Christine Nickerson, director of the standards program, discussed the problems that actuaries might have in keeping up with the many professional standards being promulgated by the ASB and the Academy . The overall issue was how to publicize professional standards enough to ensure that actuaries gained exposure to them . She mentioned a few options being discussed by the committee : (1) Bringing standards into a computer, on-line format, and (2) working standards education into various seminars and general discussions . It was also noted that the Society of Actuaries and the Casualty Actuarial Society have incorporated standards of practice into their exam syllabuses . Finally, ASB Chairperson Jack Tumquist reported on the ASS's activity . I n addition to the eighteen standards of actuarial practice already published, there are fifteen standards now on the drawing board or in the pipeline . About thirty topics for possible additional standards are being considered . A
Medicare Supplement Policies S-Changes from OBRA 90 by Mark Peavy and Bill Weller Back in November 1990, the Congress passed, and PresidentBush signed, the Omnibus Budget Reconciliation Act of 1990 (OBRA 90) . Included in that law were sections making major changes to the way in which Medicare Supplement (MedSupp) policies can be designed and priced . And because certain studies had shown low loss ratios (ratio of claims to premiums) on some MedSupp business, OBRA90 provided forrefunds to policyholders if payouts fall below a certain ratio .
Congress gave the National Association of Insurance Commissioners (NAIC) nine months from the date the law was enacted (November 5, 1990) to revise NAIC model standards to reflect the new federal provisions . The NAIC fulfilled this charge and adopted revised standards for MedSupp policies on July 30, 1991 . While this Is the first time Congress has called for refunds to policyholders, it should not be seen as an aberration . As of this writing, the proposed technical corrections bill to OBRA 90 would expand the refund requirements to all MedSupp policies in force . Current long-term care insurance legislation includes a refund provision (see September 1991 Update . Meanwhile, NAIC model guidelines for loss ratios for individual health policy forms are being reviewed, and one approach has been suggested that includes an alternative filing approach involving refund requirements .
Although MedSupp policies have been around for twenty-five years and there are plenty of data on them, developing standards to comply with OBRA 90 proved to be a complicated and controversial exercise .
Changes Under OBRA 90 OBRA 90 included a number of new requirements . First, it called for the creation of a maximum of ten standard benefit packages. Although states will not have to approve all ten standard packages, they will have to approveand companies that sell MedSupp policies will have to offer-a "core" benefit package . In addition, all MedSupp policies must be guaranteed renewable . The policy application must indicate
whether another such policy is in force (increased penalties are provided for the sale of multiple policies), and the insurer may not deny coverage to an applicant during the first six months the applicant is enrolled in Medicare Part B . Loss-ratio requirements for individual MedSupp policies were raised to 65%. New provisions were included for states to gather information about the companies' last three years' loss ratios, as well as the companies' premium rates and policy forms, and to provide this information to senior citizens . Finally, refunds (ora credit against premium) were required in the event a company's experience does not equal or exceed the new loss-ratio requirements .
MedSupp Standards' Developers The NAIC Task Force on Medicare Supplement and Other Limited Benefit Plans, chaired by Insurance Commissioner Earl Pomeroy of North Dakota, was given the task of developing new NAIC standards . An advisory committee was formed including insuranceindustry representatives and consumer advocates for senior citizens. Responsibility for the loss ratio and refund standards was given to the regulatory actuaries, who were assisted in their analysis by the Medicare Supplement Actuarial Advisory Group, which is made up of members of the Academy's Committee on State Health Issues and several other actuaries with experience in the Medicare Supplement business .
Loss-Ratio and Refund Strategies Many discussions took place between the regulatory and advisory actuaries to determine an appropriate way to implement the loss ratio standards mandated by OBRA 90 . The result of those discussions was an agreement that (1) the 65% and 75% loss-ratio targets (for individual and group policies, respectively) could be achieved over the lifetime of the policies, and (2) the only test that would measure whether the loss-ratio standard was being met over the lifetime of a policy was one thatused cumulative premium
and claim experience . The consensus was that there was no test that measured each year's experience independently or excluded early durations from measurement that would be correct for judging compliance with OBRA 90 in this regard .
The actuarial advisory group believed that a literal reading of OBRA 90 would temporarily allow a refund methodology that excluded the first two years of experience, but they also recognized that OBRA 90 makes it clear that Congress is looking for a methodology that would ultimately include the first two years of experience. Therefore, an approach was developed to ensure that (1) the loss-ratio standards would be met over "the entire period for which rates are computed to provide coverage," per OBRA 90, and (2) the loss ratios after the second year were high enough to offset the lower loss ratios in the first two years, in order to produce the minimum loss ratio over the lifetime of the policy . The actuarial advisory group developed a form for calculating benchmark loss ratios for individual policies on the basis of the following assumptions . ∎ A particular year's issues will achieve the loss ratio standard by the end of a fifteen-year period . (Fifteen years was adopted as a compromise between the companies' desire for pricing flexibility and the regulators' desire for a reasonable period within which to demonstrate compliance .) ∎ Issuance of policies is assumed tobe spread evenly throughout the year, so that one-half of the premium is earned in the calendar year of issue. ∎ A 10% annual trend increase In the premium rate is assumed to occur on each policy's anniversary. ∎ Loss ratios by policy year are assumed to be 40%, 55%, 65%, 67%, 69%, 71%, 73%, 75%, 76% for three years, and 77% for the last four years for individual policies . Group policy loss ratios were 75/65 times these factors rounded to two places. ∎ Lapse rates for each year are assumed to be 30%, 25%, 20% for three years and then 17% thereafter . All lapses occur at the end of the policy year .
Using these assumptions concerning new premium issued in one year, the advisory group projected for fifteen calendar years the premiums, accumulated premiums , claims, and accumulated claims ; then cumulative loss ratios were determined . By meet(continued overieafi
The Actuarial Update
ing these benchmark loss ratios, policies could have up to fifteen years to meet the required loss ratio standards of 65% and 75% . The flexibility provided by looking at experience on a cumulative basis has an advantage in that both one-year-term and longer duration pricing techniques are compatible with the approach, since policies that are priced to meet the 65% standard every year (or 75% standard for group policies) should not have any difficulty meeting the benchmark levels .
it is true that this benchmark approach ignores Interest . Pricing and rate-increase filings should reflect interest when required . Thus, a rating structure that produces a 65% loss ratio (with interest) over the lifetime of a policy should meet the refund loss ratio requirements, except for statistical fluctuations . When a company's experience is credible but less than the benchmark requirements, a refund or credit will be required . Just as the benchmark is cumulative, so the actual experience is reported on a cumulative basis . Over time, this provides the potential for fluctuations in experience above the benchmark values to offset subsequent fluctuations in experience below the benchmarks, without a refund or credit being triggered . It should be noted that this calculation is for refund or credit purposes, and the recovery of prior adverse fluctuations can be incorporated into rate increases only to the extent permitted by applicable statutes and regulations .
Both the actuarial advisory group and the regulators thought that additional averaging was appropriate, so that early refunds did not occur so frequently that later premium rates would be raised more than necessary . Two aspects of the refund calculation
were meant to address this issue . The first proposal, which was adopted by the NAIC, includes a credibility factor or tolerance value (see table below) that is added to the actual experience loss ratio for each year's calculation based on cumulative life years exposed .
The Broader Issue
The second proposal was to combine a company's results on a nationwide basis to determine if a refund should be paid . If a refund was due, it would then be allocated to those states in which the experience loss ratio (adjusted for credibility) was below the benchmark loss ratio . This approach would have minimized fluctuations in the reported experience and provided more rapid credibility growth, while providing for payments of refunds or credits to those individuals in states with low loss ratios .
in developing these standards . When the next product for which refunds may be mandated comes along, there won't be an equivalent amount of data available for analysis . In addition, the fundamental assumptions used for benchmark loss ratios will be very different from those that were developed for Medicare Supplement policies . But given many voters' perceptions of what is fair and equitable and the lack of
Final NAIC Refund Provisions Ultimately, the second proposal was determined to be outside the bounds of OBRA 90 and was not accepted . A definitive opinion as to the acceptability of combining all states for both calculation and payment purposes was never reached, although some regulators expressed concern about refunds in one state being influenced by experience in another . Time constraints did not permit the review of other options . All other aspects of the refund calculation approach were acceptable and adopted by the NAIC .
The result is that refunds will be calculated separately for individual and group policies, for each state, and for each standard benefit package. Completed forms for each state are due by May 31, and the refund or credit must be paid by September 30-following the effective date, which will be determined by each state .
In spite of the fact that twenty-fiv years of history exists for MedSup* policies, the development of a refund methodology was complicated by the different perspectives of groups involved
data, even a sound, objective argument may not be sufficient to prevent the legislation of similar insurance standards . Actuaries need to recognize the value of working with legislative and regulatory bodies in the long-range design and regulation of health Insurance products . In these efforts, actuaries must couple their criticisms of proposed regulations with sincere efforts to communicate with public officials regarding "actuarially sound" approaches to the underlying problems as early in the process as possible .
NAIC Actuary Peavy was part of the regulatory team in charge of this project . Weller, an actuary with the Health Insurance Association of Amertca, was a member of the actuarial advisory group.
Copies of the reportingforms can be obtained from the Academy's headquarters .
Medicare Supplement Credibility Table
OOPS! Life Years Exposed Since Inception
10,000+ 5,000 - 9,999 2,500- 4,999 1,000 - 2,499 500-999 If less than 500, no credibility
5 .0% 7 .5% 10 .0% 15 .0%
The December Update's Standards Outlook story sported a picture of a new Actuarial Standards Board (ASB) member, Richard S . Robertson . We inadvertently left off the caption that would have identified him . Our apologies .
Robertson is executive vice president and chief financial officer for Lincoln National Corporation, a company he has served since 1963 . He has also served on the Financial Accounting Standards Advisory Council and has been involved in the development of standards for insurance accounting over the years .
Discipline Committee Ready >o Hand Off Cases to ABCD by Gary D. Simms To help usher in the new era of the Actuarial Board for Counseling and Discipline (ABCD) . the Committee on Discipline wrapped up a number of cases . This new body, which went into effect on January 1, 1992, will assume responsibility for handling matters still on the committee's docket as it ends its period of service . This year the Committee on Discipline closed eleven cases that had been on its agenda . Three involved pension consultants who had failed to respond promptly to client requests . The cases were dropped after the complainants said they no longer wanted to press the matter. Three other cases were related to the qualifications of actuaries to engage in particular activities ; in each case the actuary was found to have been qualified .
Two other cases related to complaints that upon examination lacked any ba-
LETTERS TO THE EDITOR (continued from page 3)
cantly faster than they have in the past, unsupported by analytical justification, impresses me as being unrealistically optimistic . Respected economists, such as John Cogan and John Raisian ofthe Hoover Institution ; Finis Welch of the University of California, Los Angeles ; Kevin Murphy of the University of Chicago ; and Henry Aaron, Barry Bosworth, and Gary Burtless of the Brookings Institution have completed independent studies of the real-earnings (or productivity) assumption used by the trustees and have concluded that the assumption is excessively optimistic . Additionally, the Health Technical Panel of the 1991 Social Security Advisory Council recommended that the real-earnings assumption be reduced to less than 64% of that assumed In the 1991 Trustees Report . Thus, I feel it is not I, but the trustees, who have Ignored the advice ofexpert economists regarding the real-earnings assumption .
With regard to the method for sum-
sis for Investigation. Another case was closed because the Society of Actuaries had completed a disciplinary process against the individual and further action was deemed unnecessary . One case was closed following litigation that took almost a decade to be resolved because the committee could not obtain sufficient information . (All sides to the litigation refused to divulge any information as part of the settlement agreement .)
The final case closed by the committee dealt with allegations of impropriety by a pension actuary in backdating Internal Revenue Service filings . Alack of evidence and the staleness of the allegations prompted the committee to close the case. The twelve cases that remain on the committee's agenda were turned over to the ABCD on January 1 . According to Committee Chairperson John
marizing the status of the program, the actuarial balance is an artificial statistic created to summarize the seventyfive-year projections . The actuarial balance of the program, broadly defined, is the difference between Income and outgo, expressed as a percentage of taxable payroll . The actuarial balance computed using the present-value method is so inconsistent with the basic projections that It actually contradicts them . For example, when the real earnings assumption is reduced, the basic projections establish unambiguously that the fund is more insolvent under the revised assumptions, because the projected fund balances are lower in every year. However, the present-value method "summarizes" these projections by indicating that the program is less insolvent under the revised assumptions . These results are not only misleading, they are absurd . Myers and Schobel have implied that, regardless of the flaws in the method, l should have certified it as appropriate because the experts have found it appropriate . Once again, that is not true . Many knowledgeable actuaries, (Rick
Gary Simms resigned from his position as general counsel effective November 15, 1991 . The Academy is indebted to him for his hand in many facets of the growth and expansion of the Academy during his nine years of service, and we all wish him well in his law practice . Next month's Update will include a piece on Gary and his near decade of contributions to the actuarial profession .
Fibiger, most of these complaints are probably best handled with counseling rather than disciplinary action . Several relate to insurance company insolvencies that are currently in litigation, and others relate to pension consultants' problems in dealing effectively with clients .
Strains is the Academy's former general counsel .
Foster, Steve McKay, and Toni Hustead, to name a few) have publicly criticized it. In addition, an independent evaluation of the present-value method in the broader policy context of the federal budget by economists at the Hoover Institution concluded that the presentvalue method can provide a misleading and imprudent estimate of trust fund solvency . In summary, there is substantial expert opinion that agrees with my assessment that the present-value method is inappropriate . Finally, I want to make it clear that, although I disagree with them, I do not consider It improper that Bob Myers and Bruce Schobel have publicly expressed disagreementwith my opinions . Nor would I consider it improper for the public trustees to disagree with my opinions . However, the public trustees went considerably beyond disagreement . They stated that I had acted improperly in disagreeing with them, thus setting themselves up as the ultimate judges of what constitutes a proper actuarial opinion .
Roland E . (Guy) King Baltimore, Maryland
The Actuarial Update
12 102ND CONGRESS (continued from page 7)
allocations of markets among competitors, unlawful tying arrange-ments, and monopolization or the attempted monopolization of such business . The most recent action on H . R. 9 was on November 19, when the full Judiciary Committee voted to order the bill reported . The bill will now go to the House Rules Committee and be put on a House calendar. It is likely to be voted on by the full House sometime during 1992. Metzenbaum has introduced a similar bill in the Senate, on which there has not been any action at the commitee level. What ' s Ahead in 1992? It is always difficult to predict in what areas Congress will take final action In any given year . 1992 is no exception . Although Congress was not in session in December, both the House and Senate tax-writing committees held hear-
1992 Enrolled Actuaries Meeting The 1992 Enrolled Actuaries Meeting is set for March 18-20 at the Sheraton Washington Hotel . This spring's three-day meeting will offer more than eighty-eight sessions designed to meet enrolled actuaries' continuingeducation requirements .
In years past, registration for the meeting has topped 2,000 . Because of the size of the meeting, the Convention Department recommends that you register soon . Please register using the form you received in the mail . Note that if you register before January 29, the registration fee Is $475 ; after that date, the registration fee is $575. For additional information about the meeting, call (301) 654-4967 .
ings on a possible economic-growth package, and a major tax package could move to the House floor as early as March . Such a package could Incorporate many projects that Congress has worked on during the past year, including small-group health insurance reform, federal standards for
"Burt, hurry up and sign the policy!"
long-term care policies, a presidential commission to study the insurance industry, or tax-code changes for qualifled pension plans .
In addition, because 1992 is a presidential election year, both Congress and the president will be eager to demonstrate that action has been taken to improve the nation's domestic situation. However, a Democratic Congress may not be eager to enact essentially Democratic legislation that bolsters the president's sagging image . The strength of the economy, the political polls, and election campaign strategies all will be important factors in shaping congressional debate, and there could be surprises. A reduction in the payroll tax for the Old-Age, Survivors and Disability Insurance portion of Medicare, which now seems a remote possibility, could easily become an election-year reality . Congress may indeed act more quickly than we expect in some of these areas . The good news is that the Academy committees are in close contact with many of the congressional staffers who will assist in drafting final legislation . In any case, even if Congress takes no action in 1992, the Academy committees will have more than enough to do just evaluating proposals and working to better educate members of Congress and their staffs .
Hendricks is director of government information for the Academy .