Senator Eliot Shapleigh - El Paso, Texas

"Insuring Greed"

(Updated March 2009)

In "Don't Mess with Texas' Children," I described Grover Norquist’s three-pronged attack on basic American values: tax cuts for the very wealthy; budget cuts that hurt hard-working American families; and starving government to the point where it is doomed to fail.  

Why is Norquist important? Grover's philosophy has now had its way with Texas for more than two decades. At the state level, four senators and 34 House members have signed on to Grover's pledge. At the federal level, 19 Texas Congressmen and both U.S. senators have committed to the drown. And every day, Grover's disciples, including Rick Perry, put Texas deeper into Grover's tub by trying to privatize schools with vouchers, sell off highways with Cintra and park the lottery with Phil Gramm.

Norquist’s philosophy is embodied by hostility toward responsible government, marked by outright contempt for the functions of government, and the belief that no regulation is the best regulation.  

Deregulation offers a prime example of the flaws in this philosophy.  Norquist's followers argue that government is always the problem and never the solution; therefore, any attempt to regulate government is wrong.  As Nobel Prize-winning economist Paul Krugman puts it, "If a problem can't be solved with deregulation and tax cuts, then they pretend it does not exist."

We only need to look at the current deregulation of the health care market, or the deregulation of home insurance to see that the opposite is true: markets work and are efficient only with prudent regulation and oversight.  As the recent meltdown has made clear, deregulation has mostly resulted in corruption, corporate excess, and hardship for the American people.  

Let's look at what has happened with homeowner's insurance.  In 2003, the Legislature passed comprehensive insurance reforms, S.B. 14, in the hopes of balancing the insurance marketplace in Texas and stabilizing homeowner insurance rates.  The industry assured lawmakers that lessening rate regulation would stimulate competition and lower premiums for Texans.   Governor Rick Perry had this to say when he signed the bill: “This comprehensive reform measure will stabilize the home and auto insurance market, rid the insurance industry of fraudulent practices and ensure Texans have access to fair rates offered in a competitive market.  For some Texans that will mean significant rate discounts."

Five years after S.B. 14, Texans still pay the nation's highest homeowner premiums, on average $1,372, almost twice the national average of $764, while profits for insurance companies continue to rise.  In fact while we pay only 3.5% less in premiums, we get half the coverage we did in 2003.  Deregulation also failed to deliver on another promise—more choices for consumers.  The fact is that the number of insurers grew only 3% since 2003.  

While insurance loss ratios have plummeted from 108% in 2002 to 36.5% today, insurance industry profits have risen approximately 25% since 2003.  

Deregulation—and the “magic” of the marketplace—was supposed to also make health care affordable for everyone, including working people, the sick, the old, and the infirm.  Instead, Texas has the highest rate of citizens without health care coverage, the highest share of children without health insurance in the nation, and the fifth-highest health care premiums in the nation. 

From 2001 to 2005, Texas families saw their health insurance premiums soar 86.8 percent—six times faster than their incomes increased. Only two other states experienced greater hikes in health insurance premiums.  Today 5.5 million Texans are uninsured up from 3.6 million in 1990.  And this scenario will get worse, with rates projected to increase another 7% in 2009.   

In the energy market, we've seen the same results.  

More recently, an unregulated peanut company in Planview, with no oversight from any Texas health agency, sold salmonella saturated products that resulted in the largest product recall in Texas history. Why? Because the single state health inspector who covered 700 companies in 52 counties in West and Panhandle Texas had not ever visited the plant. 

Before the Legislature eliminated most of the state's electric regulations six years ago, Texas was home to some of the cheapest power rates in the country.  The argument then was that rollicking competition would drive prices even lower.  Today, the cost of electricity is among the highest in the nation, with monthly bills pushing past $600.  On one particularly hot day in May this summer, wholesale prices rose to more than $4 a kilowatt hour—a staggering 40 times the national average.  

By the end of the summer, we could end up paying twice as much as last year.

At the Alcoa plant 60 miles north of Austin, during 2008, the company paid four times more than its standard electricity rate to keep operating—but laid off 250 people and halved output to make budgets balance.  “We have no choice but to idle production that is reliant on uncompetitive power,” said Alcoa’s president.

Put bluntly—during the Norquist era, government in Texas is failing. Deregulation has proven a model of government by and for corporate profits, not the public good.

During this session, lawmakers should stand up for Texans and rein in runaway insurance. We should think creatively and support projects such as the Finish Line Campaign, a public-private partnership that advocates for universal health coverage for all Texas kids through a combination of government and private market reforms.  

We should also eliminate the file-and-use system and restore regulatory oversight and accountability to the homeowner’s insurance market by requiring prior approval of proposed rates and standardized homeowner insurance policy forms.

On the streets, in towns across Texas, the lack of regulation of credit service organizations has pushed interest rates on payday loans to 1,000 percent per annum. We need to stop predatory lending, just as Oregon and South Carolina have done.

What can you do?  If you want a government that works for you, that puts the public good of its citizens before the private profit of corporations, get involved. Read the Sunset report on the Texas Department of Insurance.

Call your representatives in Austin and demand the facts.  Get online and find out how your Senator or State Representative voted on key bills; let them know how it has affected your livelihood and your pocketbook. 

Demand that your government work for you.

Eliot Shapleigh