Director Reggie James of Consumers Union's Southwest Regional Office

Election results raise questions for consumers as 78th legislative session nears (Nov. 2002).
by Reggie James

Insurance reform will pose early test for lawmakers and governor

We delayed the release of Consumer OnLine until after the elections based on the belief that the returns and possible changes in leadership would give us a better sense of the legislative agenda and how consumers might be affected by any electoral mandates. I'm seriously questioning the validity of this belief, however, in light of the relative absence of clearly stated and debated legislative positions.

The lion's share of political communication was devoted to attack ads and vague posturing on a narrow range of issues. The notable exceptions were the refreshing, near universal support for insurance reform and the more predictable but unrealistic promises to deal with the budget shortfall without reducing necessary services or a tax bill.

The trend in political ads — long on emotional appeal but short on relevant information — bears a striking resemblance to the trends in commercial advertising, also long on emotional appeal but short on usable information. Neither provides enough clear information to enable us to make an intelligent choice between competing products or candidates.

The first exception I noted in the campaigns pertains to insurance. Here the candidates were clear — each supported reform and promised to work to reduce insurance rates. When pressed for more specifics about reform by Consumers Union, Texas Watch and AARP, most of the candidates were forthcoming. I attribute this to the fact that voters were quite well versed on the impact of insurance company practices on rates and services. The candidates were aware of the public's level of knowledge and were forced to address voter concerns.

Compare the candidates' willingness to get more specific on insurance with their near universal side stepping on budget and revenue issues. With few exceptions, they correctly assumed that the average voter is not as well informed on the immediate and long-term effects the budget shortfall will have on crucial services such as education, health care and the maintenance of roads, bridges, water systems and other important infrastructure.

Most candidates for both major parties swore they would oppose an income tax and would deal with the budget by eliminating waste rather than reforming our antiquated and inequitable tax system and without eliminating necessary services. The campaign was an ideal opportunity to debate the tough tradeoffs of raising revenue versus eliminating services — it is mathematically impossible to maintain services without increasing revenue. As it is, these important decisions will be made in the heat of the legislative session with minimal public input. Consumer OnLine will strive to keep you informed of the progress of this issue as the session unfolds.

While it's too early to do a competent assessment of how consumers will be affected by the electoral returns, I raise the following observation: This is the first time since 1992 that the same party in Texas and Washington, D.C. has controlled both executive and legislative branches. In 1992, the Democrats held the presidency, controlled both houses of Congress. In Texas, Ann Richards was Governor, the Lt. Governor and Speaker of the Texas House were Democrats and Democrats held majorities in both houses of the Texas Legislature. Republicans are in the same position today. The $64,000 question is: What difference will it make?

Historically, the Texas Legislature has been dominated more by individual personalities than by parties. The Lt. Governor and the Speaker regularly appoint committee chairs from the opposing party and vote frequently following regional and business affiliations rather than party platforms. I suspect this will be quite different and that party affiliation will play a far more dominant role.

There is a certain irony in the fact that insurance reform will be a priority issue this session, given the Republican position of smaller, more limited government and pro-deregulation. Although in all fairness, I must note that the small government anti regulatory theme has held sway in Texas without regard to party domination of the process. The point, however, is that the insurance debate is fundamentally about the government's responsibility to protect consumers from predatory and/or irresponsible market practices. The crisis in homeowners insurance, and to a lesser extent in medical malpractice liability insurance, is a direct result of the government abdicating its role of referee. The insurance industry deregulated itself by shifting policyholders from regulated lines to unregulated lines. In the absence of oversight, service declined and rates went up quite rapidly.

The same underlying problem is present in electric, telecommunications, and accounting - in each area the cop being absent from the beat has either caused or will cause market meltdown. While we can be certain something will happen to address the insurance crisis, we can only hope policymakers will discern the eerie trend in the health of these markets and their impact on consumer well-being.

We'll be back with you next month with a more enlightened view of what's in store for consumers during the 78th legislative session starting January 7th.