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Auditions planned

“Seeking Business-Experienced Candidates for Public Office. Is It You?”

That’s the headline on a message the Reno Chamber of Commerce sent out last week, also signed by the Associated Builders and Contractors, Associated General Contractors, Builders Association of Northern Nevada, and the Reno/Sparks Association of Realtors. The message promoted a workshop for prospective candidates to be held at the real estate offices in January.

“[T]he business perspective must be brought to the table when issues such as taxes, education, transportation, energy, and many others are discussed in the political arena. Our public boards, commissions, councils and legislative bodies need leaders with experience in making a payroll, sticking to a budget, and making the tough decisions that you make every day.”

Water grab fails court test

In scathing language, a state court judge has overturned the state water engineer’s approval of the planned transfer of water in eastern Nevada and western Utah to southern Nevada to feed growth. Judge Robert Estes of the Seventh Judicial Court of Nevada called the decision by State Engineer Jason King to approve the transfer “subjective, unscientific, arbitrary and capricious,” and “not in the public interest.”

To pass muster, the water engineer must recalculate available water to guarantee “the basin will reach equilibrium between discharge and recharge within a reasonable time.” Estes also said King must include the impact on Utah territory in his calculations.

The judge seemed to think King’s approval decision was uncooked and that he had become too cozy with the Southern Nevada Water Authority, writing that the water engineer had effectively “relinquished his responsibilities” to SNWA.

“There are no objective standards to determine when mitigation will be required and implemented,” Estes wrote. “The engineer has listed what mitigation efforts can possibly be made, i.e., stop pumping, modifying pumping, change location of pumps, drill new wells … but does not cite objective standards of when mitigation is necessary.”

“That is exactly the kind of analysis needed,” the Deseret News— owned by the Mormon Church—editorialized in Salt Lake City. “As Utah officials and environmentalists have been saying for years, the results of such pumping could be disastrous. Utah’s deserts contain fragile plant species that keep the soil in place. This allows ranching to thrive while also sustaining wildlife that feed on the plants. Drain water from beneath these plants and they might die, leading to dust storms and destroying the area’s economy..”

Sandoval’s mixed week

The same week that Gov. Brian Sandoval took heat for his lethargic response this year to the mental patient dumping scandal, he attracted attention in a major news organ for not blocking the Affordable Care Act.

The Sacramento Bee, following up on its summer disclosure of Nevada’s dumping of patients from Rawson-Neal Psychiatric Hospital, reported last week that crimes followed in cities where those patients were dropped. Sandoval said—through a spokesperson—that he was “appalled” and then appointed a committee to examine state mental health policies, prompting the Bee to editorialize, “So far, Sandoval has been minimizing the problem and seeking to whitewash it.”

Meanwhile, under the headline, “In Nevada, the Republican governor who doesn’t completely hate Obamacare,” the Washington Post observed, “Only eight states run by Republican governors moved to expand Medicaid to cover residents making less than 138 percent of the federal poverty level. Only three states with Republican governors set up state-based health-care exchanges. Just two states led by Republicans—Nevada and New Mexico—did both. And Nevada is the only Republican-led state with an exchange that’s actually signing people up for insurance.” —Dennis Myers

U.S. Sen. Patrick McCarran, left, is pictured  here with his senior Nevada colleague, Key  Pittman, at a meeting of the Senate Judiciary  Committee in 1937 during hearings on the  Roosevelt court-packing plan, about eight years  before McCarran’s bill exempting insurers from  anti-trust law was enacted.

Protected industry

Congress looks at repeal of an old gift to insurance corporations

There are efforts underway to repeal the protection insurance corporations by enjoy from anti-trust law. That protecDennis tion was conferred on the insurers by Myers the McCarran-Ferguson Act, approved by Congress in 1945. McCarran is Patrick McCarran, a right wing U.S. senator from Nevada who teamed up with Homer Ferguson, an equally corporate-cozy Republican from Michigan—Lloyd Bridges portrayed his shilling for

“McCarran is the bedrock of the state insurance regulatory system.”

National Association of Insurance and Financial Advisors

General Motors in Tucker—to shield the insurance industry from the law. It happened after a 1944 U.S. Supreme Court decision in United States v. South-Eastern Underwriters Association. In that case, the court ruled, “The conspirators [member insurance companies of the SouthEastern Underwriters Association] not only fixed premium rates and agents’ commissions, but employed boycotts together with other types of coercion and intimidation to force non-member insurance companies into the conspiracies, and to compel persons who needed insurance to buy only from S.E.U.A.” The court found that the industry could legally be regulated by Congress under its interstate commerce authority.

In response, McCarran and Ferguson sponsored legislation to keep regulation of insurance companies at the state level and also to shield insurance corporations from anti-trust laws in most cases. Although the court had empowered Congress to regulate the corporations, the new law left most of the business of regulating insurance to the mostly corporate-friendly states and provided that federal anti-trust law does not apply in states where the industry is regulated.

The law has long been a lightning rod for criticism. With the advent of the Affordable Care Act (ACA), the level of criticism has risen. At least five measures have been introduced in the current Congress to repeal it, sponsored by U.S. Reps. John Conyers of Michigan, Peter DeFazio of Oregon, Paul Gosar of Arizona, Phil Roe of Tennessee, and Steven Lynch of Massachusetts. Lynch, DeFazio, and Conyers are Democrats, Roe and Gosar Republicans.

The bills take different approaches. Roe’s bill is likely a non-starter because it links repeal of McCarranFerguson with repeal of the ACA, which cannot pass the Senate, much less survive a veto in either house.

The Act can cut across ideological lines, drawing support and criticism from both left and right. Some conservatives see it as anticompetitive. Jon Hall wrote last month on the American Thinker website, “The United States has not had a true market for health insurance since at least the passage of the McCarranFerguson Act in 1945. That act gave an anti-trust exemption to the health insurance industry, which severely limited competition.” (The exemption applies to the entire insurance industry, not just health insurers.) On the other hand, another conservative, John Pryor, wrote this month in the Bakersfield Californian, “What would have been unmanageable at the federal level functioned efficiently at the state level. It has worked well for 68 years!”

How well state regulation of insurance works is also up for debate. In some states—particularly those without a large population base—if insurance companies dislike the regulatory or legislative climate, they can pull out altogether without losing much trade. Nevada legislators often tread lightly around insurance legislation because of exactly that threat.

Repeal of McCarran-Ferguson is often portrayed by the insurance industry as meaning an end to state regulation, which is not necessarily the case. A 2009 repeal measure sponsored by Sen. Patrick Leahy of Vermont provided for continued state regulation (“Partial anti-trust repeal planned,” RN&R, Oct. 22, 2009).

One telling indicator is that both insurance corporations and local agents are apprehensive about losing McCarran-Ferguson. “There have been recent attacks by the Congress to repeal the act,” wrote Florida insurance agent Bob Fowinkle in his home town paper, the Bradenton Herald. “This would cause great danger to the insurance industry and states. The revenues to the states from license fees, premium taxes and fines are substantial and could be at risk. Repeal would give the Department of Justice and Federal Trade Commission the power to enforce federal anti-trust laws and regulations within our state relating to the business of insurance. Each state has enjoyed more than 64 years of regulating insurance within their borders and has done a reasonably good job, in my opinion.”

The National Association of Insurance and Financial Advisors, which calls itself the “voice of the agent,” says it “cannot support any effort to repeal the McCarran anti-trust exemption for any line of insurance. McCarran is the bedrock of the state insurance regulatory system because it dictates that the states—who currently

have the only insurance regulatory expertise—are the sole regulators of the business of insurance.”

Just as telling is that state regulators also seem apprehensive about repeal. Their National Association of Insurance Commissioners takes the position that “outright repeal of the McCarran-Ferguson exemption risks creating unintended consequences by threatening state-regulated, procompetitive collaborative activities among insurers.” That regulators and the regulated take the same stand on repeal is an indicator all its own.

The man who now occupies the Senate seat McCarran once held has no doubt about the need for repeal.

“Since 1945, the insurance industry has enjoyed exemption from federal anti-trust laws because of the McCarran-Ferguson Act,” U.S. Sen. Harry Reid testified at a 2009 Senate hearing. “Pat McCarran, who was the senior senator from Nevada at the time, lent his name to this piece of legislation. ... I’m not sure what Pat McCarran had in mind when he pushed this bill. And if Pat were around today, he couldn’t be happy with the state of the insurance industry. … There is no reason why the insurance companies should have exemption from anti-trust laws. To the extent insurance companies need to share information to provide their services, let them do what other industries have to do—seek prior authorization and guidelines from the Department of Justice for how they can work together.”

Some observers say state regulation is no prize, that local regulators are either unable under state laws to be effective or are too cozy with the industry they are supposed to scrutinize.

“Almost all health insurance markets are highly concentrated and many are dominated by one or two insurers,” former Federal Trade Commission policy director David Balto wrote in April. “Congress hoped that state regulation would suffice, but the states bring few if any meaningful cases against health insurers. In addition, there is no need for an exemption since the practices that led to the Act are now considered legal under standards of anti-trust law. … If there was one thing clear from the Congressional debate over health care, it is that health insurance markets are unhealthy. Over the past few decades, profits have increased dramatically, and the market has become one of the least transparent and most anticompetitive markets in the nation. Indeed, few markets are as concentrated, opaque and complex, and subject to rampant anticompetitive and deceptive conduct.” Ω

“Thestatesbringfewifany meaningfulcasesagainst healthinsurers.”

David Balto Former Federal trade Commission staffer

Building down

The now-vacant Getchell Library building, whose striking profile dominated the main campus and became a symbol of the University of Nevada, Reno, looks like a war zone now. Demolition of the building began last week.