OLDWICK, N.J.--(BUSINESS WIRE)-- U.S. life/health (L/H) financial impairments in 2009 totaled 12, a high for this decade and a fourfold increase from a decade low of three in 2006. Accident and health (A&H), group and ordinary life insurance were equally represented in the 2009 financially impaired companies (FIC), with the three business lines making up 92% of the year’s impairments. An A&H insurer also was added to 2008, bringing that year’s count to nine. Two FICs for 2010 have been identified, so far, and both are A&H insurers. A.M. Best believes that the current economic backdrop and operating environment are conducive to creating more FICs in 2010.

Although the L/H industry’s financial performance vastly improved in 2009, compared with the battering that balance sheets experienced in 2008 at the height of the global financial crisis, pressures on revenue growth and investment challenges remain. This mixed picture demonstrates that the life/health insurance industry has yet to fully shake off some of the lingering effects of the financial crisis.

* The 12 impairments in 2009 led to the annual financial impairment frequency (FIF) rising to 0.81%, up from 0.59% in 2008. The life/health industry’s annual FIF had been as low as 0.19% in 2006.

* Five FICs in 2009 were related to investment problems and another five to inadequate pricing/deficient loss reserves. Nonadmitted assets contributed to the impairment of two other insurers. A few of the FICs also faced operational challenges in recent years in specific business lines.
* Over the near term, A.M. Best expects an increase in the L/H FIF equal or above the historical average, as insurers currently face challenges from macroeconomic issues as well as industry-specific concerns.

The debate over health care reform has been mostly a theoretical affair, complex, abstract and full of predictions that contradict one another. Amid this ambiguity, one fact is unequivocal and unprecedented.

Under Section 1501 of the Patient Protection and Affordable Care Act, every American will be compelled to purchase health insurance, or else - the "or else" being a fine collected by the Internal Revenue Service should you fail to ante up.

"The mandate," as it's known, has its origins in the Commerce Clause of the Constitution, which grants Congress the authority to regulate interstate commerce. Yet it doesn't take an Elena Kagan-level legal scholar (or even a fan of "Boston Legal" reruns) to see that the mandate, rather than regulating commerce, is being used to regulate the absence of commerce.

Why is this distinction noteworthy? Well, at the risk of sounding alarmist, if Congress can compel the purchase of a product - health insurance - under its authority to regulate and stabilize the interstate market for health care, then, using the same legal theory, what transaction can't it compel?

Transportation and automobiles, for example, are interstate markets. And as we've seen with the $13 billion bailout of General Motors, stabilizing the automotive industry is certainly a congressional concern. Why not compel Americans earning, say, more than $35,000 a year to buy GM cars? Or, better still, in a kill-two-birds tactic, why not compel them to buy Chevy Volts, thus ensuring the stability of the auto industry and the interstate market for clean energy?

As the federal government's lawyers explained in a late May motion in the Virginia attorney general's case against Obamacare, "Foregoing health insurance ... is not the same as foregoing health care. When accidents or illnesses inevitably occur, the uninsured still receive medical assistance, even if they cannot pay."

Play out that logic: Those who get sick need care. People who need care drive up costs in the medical sector. Congress has the authority and the need to control medical costs. Thus, Congress can legally compel Americans to pay for health insurance.


If that's a valid reading of the law justifying a mandate, then why not compel Americans to buy 24-Hour Fitness memberships or Nike sneakers? After all, the absence of exercise lowers your fitness level. That increases the likelihood you'll need health care. Lather, rinse, repeat.

The government's theory makes a case broad enough to control virtually all financial transactions - or the lack thereof. If such a mandate doesn't offend you as a curtailing of liberty, then consider how likely it is to fail at its stated intention: bringing 45 million Americans who today don't have private health insurance or Medicaid into the risk pool, spreading out the risk across more payers and bringing down health insurance premiums.