Whether the attorney is in Grand Prairie or Dallas or Fort Worth or wherever, you need an attorney who knows insurance law and will fight the insurance companies. An insured starts out with the cards stacked against him as is illustrated in a Washington Post story titled, Drinks, Junkets and Jobs: How the Insurance Industry Courts State Commissioners.
When the Arkansas insurance commissioner weighed the merits of a hospital’s billing complaint against United Healthcare, her interactions with one of the nation’s largest health insurers extended far beyond her department’s hearing room.
During months of deliberations, Commissioner Julie Benafield Bowman met repeatedly with United Healthcare lawyers and lobbyists over lunch and drinks at venues such as the Country Club of Little Rock.
“I had a blast with you Monday night,” Benafield emailed United Healthcare lawyer Bill Woodyard, himself a former state insurance commissioner. “Thank you so much for entertaining us.”
Benafield ultimately decided the case in United Healthcare’s favor — a 2008 ruling that stood to save the company millions of dollars. Nearly two years later, by the time a judge vacated the commissioner’s orders because there was “an appearance of impropriety in the proceedings,” Benafield had moved on: She was working for United Healthcare, having joined at least three of her predecessors representing insurers in Arkansas.
Woodyard is deceased, and Benafield has said her meetings with United Healthcare lobbyists did not influence her decisions as commissioner. United Healthcare has said it did not discuss employment with Benafield until after she had issued her final ruling in the case.
It’s a common career move. An investigation by the Center for Public Integrity found that half of the 109 state insurance commissioners who have left their posts in the past decade have gone on to work for the industry they used to regulate — many leaving before their terms expire. Just two moved into consumer advocacy.
The revolving door swings in the other direction, too. For almost a year, Connecticut’s insurance commissioner was overseeing a merger involving a company where she had been a lobbyist. She recused herself last month amid a state ethics review.
Consumer advocates and some commissioners say the tight bond between regulators and the insurance industry — reinforced by campaign contributions, lavish dinners and the prospect of future employment — diminishes consumers’ voices as insurers press rate increases, shape regulations and scuttle investigations.
“It’s very difficult at times to take a stand for consumers and have your voice heard,” said Sally McCarty, a former Indiana commissioner and retired consumer advocate. “A lot of commissioners don’t bother doing that for that reason — and they don’t want to alienate the industry. . . . Many people consider the job an audition for a better-paying job.”
Insurers counter that the industry is highly regulated and say that their lobbying efforts are key to informing commissioners and other policymakers who oversee a part of the financial sector that touches millions of Americans’ lives.
“It is crucial for commissioners and other state and federal policymakers to understand the products and services we provide to people,” said Jack Dolan, a spokesman for the American Council of Life Insurers.
The stakes are enormous.
Because Congress has long left regulation of the insurance industry to the states, these little-known regulators, one per state, wield immense power over one of the largest segments of the U.S. economy. Charged chiefly with protecting consumers, commissioners review rate changes, investigate complaints and make sure insurers have enough money to pay claims.
Their decisions affect nearly every American. And yet, most commissioners operate outside of public view, sometimes exempted from disclosure requirements that cover other state officials and often ignored by the decimated statehouse press corps.
The cozy relationships between regulators and the industry were revealed in the Center for Public Integrity’s review of lobbyist reports, regulator financial disclosures, campaign finance records and more than 3,700 pages of emails obtained through open-records laws in 13 states.
Four commissioners had direct financial ties to firms their offices oversee, either through business holdings, a spouse’s job or a retirement plan from a former employer. New Jersey’s top regulator sold his insurance stocks — prohibited investments under state ethics laws — only after the Center for Public Integrity asked the State Ethics Commission about the shares.
Many more have accepted thousands of dollars in trips to conferences sponsored by insurance companies and their trade groups at such locales as the Four Seasons resort in Jackson Hole, Wyo.
Multiple commissioners rely on industry campaign contributions. Over the past decade, insurance companies and their employees were among the top donors to commissioner candidates in at least five of the seven states that elect regulators and allow campaign contributions from the insurance industry, according to the National Institute on Money in State Politics.
Above all, there is a steady drumbeat of lobbyists wining and dining commissioners. Often, the ones picking up the tab are former insurance commissioners.
In Mississippi, George Dale, who served as commissioner for more than three decades before becoming a lobbyist, represents at least two insurers, including Allstate. Eight years after he left office, department staffers still address him as “Commissioner,” keep him abreast of employees’ birthdays and retirements and share internal reports on legislative developments, according to the documents obtained by the Center for Public Integrity.
“It impresses our clients that we know the commissioner,” Dale wrote to Insurance Commissioner Mike Chaney after a night out in 2010.
In an interview, Dale said his close ties with the department were the inevitable result of his 32-year tenure. “They’re friends of mine,” he said. “If that’s wrong, I’m guilty.”
Allstate declined to comment.
Emails from other states also show personal relationships between regulators and insurers and their representatives, who share dinner invitations, family news and friendly sports wagers.
“It gets at the whole integrity of the process,” said Bob Hunter, a former Texas commissioner who runs the insurance program for the advocacy group Consumer Federation of America. “It raises among the public more and more doubt about the honesty of government and about government generally.”
While several current and former insurance commissioners lament the outsize influence of the industry, they reject the notion that coziness breeds corruption.
To counter industry influence, the National Association of Insurance Commissioners (NAIC) pays for a small group of consumer advocates to attend its meetings, where regulators set insurance standards and draft model laws.
“State insurance regulators are committed to their shared dual responsibilities of consumer protection and the regulation of insurance company solvency,” said NAIC President John Huff, who is also director of the Missouri Department of Insurance.
Still, often underfunded and understaffed, commissioners face a number of political and financial head winds.
Because most are appointed officials serving at the pleasure of governors, turnover is high. According to a Center for Public Integrity analysis, the median tenure of a commissioner is less than four years.
On average, NAIC data from last year shows that 6 percent of the annual revenue collected by insurance departments was spent on regulation — well below the 10 percent that the Consumer Federation of America says is needed to properly staff regulatory functions. In most cases, the rest of the money is deposited into states’ general funds and used for other government services.
The workload is considerable. At best, when everyone from secretaries to the commissioners is taken into account, each employee of the average department oversaw 14 insurance companies and 1,150 agents.
Yet insurance companies are economic development engines for many states, as well as cash cows. Texas reaps about $2 billion a year from insurance taxes, more than it collects from levies on natural gas production.
Of the 50 sitting commissioners, 24 came directly from the insurance industry or had worked for an insurer.
“You get somebody with expertise, and you get someone who is qualified to do the job from Day One,” said Kathleen Sebelius, a former Kansas insurance commissioner who served as U.S. secretary of health and human services in the Obama administration. But, she added, there is a fine line between “appropriate expertise and overly cozy” relationships.
For much of the last year, New Jersey Commissioner Richard Badolato and his spouse held at least $10,000 worth of stock in two insurers that his office oversees, a violation of the state’s ethics code. After an inquiry from the Center for Public Integrity, he got rid of the shares — and all of his remaining stocks “out of an abundance of caution,” an insurance department spokesman said on his behalf. Badolato told ethics investigators that he failed to identify the insurance stocks as prohibited holdings after a broker purchased them on his behalf.
Consumer advocates say that weak ethics laws — and lackluster enforcement — encourage officials to push the boundaries.
For example, Connecticut’s top regulator, Katharine Wade, had been overseeing the merger of health-care giants Anthem and Cigna, even though she is a former Cigna lobbyist and her husband is a lawyer with the company. For months, she resisted calls from lawmakers and consumer groups to recuse herself, agreeing to step aside last month after state ethics officials pressed her for financial information to determine how she and her spouse would benefit from the health-care deal.
Even then, Wade told the state ethics board that she was recusing herself from her office’s review simply because the controversy had “created unwarranted and unfair distractions for the department.” No conflict of interest exists under Connecticut law, she said, because her husband is not an officer of Cigna and the couple does not own 5 percent or more of the company. Cigna declined to comment.
Consumer advocates also point to Kentucky, where new Insurance Commissioner Brian Maynard, a former life insurance executive, sided with life insurance companies this year in a legal dispute over a consumer protection law.
The action was surprising given that the state — under the previous administration — had spent years defending a portion of the law, which sought to force life insurers to find and pay beneficiaries when policyholders die.
Maynard told the Center for Public Integrity that the state “believed that the statute was not intended to apply retroactively” to policies that predated the 2012 law, the same argument used by the life insurers.
The law’s sponsor in the legislature and the state’s former insurance commissioner, however, sharply disputed that interpretation.
“I thought it was a very good consumer-protection bill, worth defending, and that was the department’s position,” former commissioner Sharon Clark told the Lexington Herald-Leader. “I don’t know exactly what changed other than, obviously, the new administration came in with a different philosophy.”
At least 33 states ban former legislators and sometimes other officials from lobbying their past colleagues during a “cooling-off” period, according to the National Conference of State Legislatures, but in many cases, relationships endure and interactions continue.
In Iowa, where the law prohibits insurance commissioners from lobbying for two years after leaving office, emails show that former commissioner Susan Voss began contacting her old office within months of stepping down in 2013, first as a consultant and then as an executive for American Enterprise Group. She repeatedly asked her successor and his top aides for information on insurance matters, even attending breakfast regularly with a deputy commissioner.
In 2014, Voss asked Commissioner Nick Gerhart’s assistant for five minutes of the commissioner’s time. Within two hours, Gerhart phoned her.
“How was that for efficient,” the assistant wrote back. “You ask, and he calls.”
“Wow! Awesome power!” Voss replied.
In an interview, Gerhart said his office also meets with consumer groups regularly. Still, he said frequent communication with insurers is essential.
“Our job is to really make sure we understand their business,” Gerhart said, “and understanding their business is about more than just reviewing their financial books.”
Voss said that she did not violate the lobbying ban because she did not seek to influence legislation or regulations, the official definition of lobbying under Iowa’s laws.
For five days in April, commissioners and their staffs convened for a meeting of the National Association of Insurance Commissioners. Gathered at the Sheraton New Orleans Hotel, they were outnumbered by insurance representatives. Among the industry advocates were 21 former commissioners from 18 states and the District of Columbia, many wearing special NAIC badges advertising their status as ex-officials.
One night, lawyers and lobbyists mingled with regulators at a cocktail reception sponsored by Locke Lord, a law firm with a roster of blue-chip insurance clients. The event at Roux Bistro featured an open bar and buffet stations of crab cakes with roasted corn couscous and Cajun-dusted beef with horseradish cream.
Year-round, company representatives treat commissioners — and sometimes their family members — to dinner, emails show. But in nearly a dozen states, the public may never know: Nine don’t require commissioners to file public disclosure reports, and two others do not consider food or drink for “immediate consumption” a gift.
The industry also offers commissioners and their top aides scholarships to attend corporate-sponsored training sessions and conferences.
Each year, the Insurance Regulatory Examiners Society Foundation hosts what it calls “a national school on market regulation,” usually at a luxury hotel in a scenic location. In 2013, the most recent data available, the foundation spent $13,554 on 16 scholarships.
The three-day, industry-backed summit affords insurance companies extraordinary access to regulators. Firms pay as much as $7,500 for special privileges, including a book of 50 drink tickets, attendees’ email addresses and exclusive marketing opportunities. According to the foundation’s website, insurers can sign up for private 15-minute sessions with “a regulator of your choice.”
The foundation declined to comment but says on its website that it organizes such events “to promote professionalism and education in the insurance regulatory community and to educate the private sector about state insurance regulation.”
In September 2008, a little more than a week after Benafield rendered her decision on the United Healthcare case in Arkansas, she had lunch with one of the company’s lobbyists. According to court records, Benafield asked him whether the division of UnitedHealth Group might be interested in employing her.
The lobbyist passed along Benafield’s résumé to an executive, saying, “She believes she has contacts among many state insurance commissioners and staff that would be beneficial to an insurer.”
Two months later, she was regulatory affairs director for United Healthcare in Arkansas and Tennessee.
Benafield declined to comment for this article but told Arkansas Business in 2009 that she had done nothing wrong.
“No matter how I ruled on anything, this hearing or anything else, during the last year, somebody would have said, ‘She’s ruling that way so [she] can get a job,’ ” Benafield said.
The state subsequently passed a “revolving door” law that bars former insurance commissioners and others from lobbying for one year.
In 2015, the door turned again. Benafield is now Arkansas’s chief deputy attorney general, a job in which she oversees a variety of departments — including one charged, in part, with helping consumers in health insurance disputes.