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Public Policy Analysis & Opinion From KC to K Street The NAIC’s efforts to run with the big dogs in Washington By Kevin P. Hennosy
As the New Year began, super-lobbyist Jack Abramoff’s confessions of wrongdoing sent shockwaves out from Capitol Hill in all directions. Even the sleepiest state capitols felt the tremor of change vibrating through the old order that governed politics over the past decade. When Newt Gingrich and Tom Delay led Republicans into the Congressional leadership, changing the way Congress was run was only part of their agenda. Gingrich and Delay, along with conservative activist Grover Norquist, also worked to change the way lobbying was done on Capitol Hill. They worked with lobbying law firms, political consulting firms and trade association executives to place “their people” in key positions—and to purge Democrats from the same. The Gingrich-Delay effort became known as the “K Street Project,” named for the Washington Street where many lobbying firms have offices. Over the past decade, lobbying in Washington has become a very different activity. The K Street Project took parochialism and patronage to a whole new level of organization. The rumble and roar of scandal replaced the humming of a finely tuned political machine. Even the old maid of insurance regulation, the National Association of Insurance Commissioners (NAIC), might have been moved by the machine’s vibrations. The NAIC’s history of lobbying Congress seems to track the general changes in Congressional lobbying over a very long period of time. In recent years the lobbying framework has become capital intensive. Retaining representation at a healthy fee has become a necessity. Traditionally, the NAIC’s federal lobbying activities could best be described as “survival above prowess.” No reasonable observer can deny that the NAIC has proved highly influential in shaping congressional policies toward insurance. Dating back to the Theodore Roosevelt administration, the association had lingered around troublesome issues until Congress asked for help out of frustration. A report written in 1958 by former New York Superintendent of Insurance Robert E. Dineen noted that the NAIC’s lobbying usually reflected the will of one or another sector of the industry. Even the NAIC’s greatest lobbying success—the passage of the McCarran-Ferguson Act—reflected the viewpoints of independent agents and Midwestern mutual insurers at least as much as state regulators. At times, insurance interests have decried the NAIC’s lack of lobbying prowess. During this observer’s tenure on NAIC staff in late 1980s and early 1990s, a dust up occurred between the NAIC leadership and the federal lobbying staff of the then Independent Insurance Agents of America (IIAA). The problem arose when Capitol Hill staff and lobbyists for insurance interests reported to the NAIC that Big “I” representatives were saying disparaging things about the NAIC Washington staff. The complaints did not question anything the NAIC lobby did; rather they questioned whether the office did anything. The NAIC officers traveled to northern Virginia to meet Big “I” staff leadership, where the NAIC officers asked the Big “I” staff to cool it. The IIAA was not the only group complaining, but the group’s unparalleled influence demanded the NAIC leadership’s attention. For most of the association’s history, there is no mention of a lobbying arm for the NAIC. Usually a small working group of commissioners coordinated “federal issues.” The NAIC’s real lobbying strength used to be the memberships’ collective relationships back in their home states. As elected or appointed state officials, NAIC members tended to have political pull with local members of Congress. This pull arose from patronage, fundraising, and other party organization activities. A statewide official who was worth his or her salt could be helpful or harmful to a member of Congress in many ways. At the very least, an insurance commissioner could generally get phone calls answered or meetings scheduled when the member of Congress returned home. This ability to meet on home turf was always more effective than the “lobby day” visits to Capitol Hill offices. The difference between the two is like comparing Grassroots to Astroturf. The lobby day concept is a fake interaction that really only allows legislative liaisons to show off their knowledge of legislative office buildings. The “high-touch” political influence that NAIC could marshal for the first century of the group’s existence was the envy of commercial trade associations. Producer trade groups tended to prove highly successful in organizing local member relationships, but they could not muster the cache that a public official brought to a meeting. Company trade groups never mastered the tactic although several companies organized employees into “civic action programs.” By the 1980s, when trade associations were working hard to create grassroots networks, the NAIC tentatively established what the lawyer/lobbyist Clarke Clifford called, “a Washington presence.” First it engaged a Washington-based lawyer on a contract basis. Soon the association hired a former Federal Trade Commission lawyer as “Washington Counsel.” The Washington Counsel position grew in numbers to become the “Washington office.” Through the 1990s, a number of talented lawyers and/or former Hill staffers worked at the NAIC lobbying shop on North Capitol Street. In addition to the lobbying personnel, the NAIC placed other activities in Washington. The association essentially moved its health insurance operations to the Washington office during the Clinton Administration’s ill-fated campaign for health care reform. In addition, after the Washington Counsel wrote a particularly bad news release prior to a Medicare supplement insurance hearing, the NAIC hired several public relations representatives for the Washington office. For a time, the NAIC placed its financial analysis operations in the Washington office, which left some commissioners and industry representatives scratching their heads. The NAIC leadership bravely tried to explain that they were responding to congressional interest in insurer solvency. Yet, the fact was that the chief financial analyst that the certain regulators wanted to hire simply refused to move to Kansas City, Missouri. The result of the special arrangement was predictably negative. In fact, if NAIC accreditation examiners found a state insurance department with a similar two-office arrangement for solvency oversight, that state would have a very hard time earning accreditation. The financial analysis division in Washington did not communicate or integrate with other solvency-related personnel in Kansas City. Eventually, all solvency-related activities returned to the NAIC central office. The growth in the NAIC Washington office did not coincide with higher status in the eyes of industry trade groups. In the late 1990s, trade association representatives quietly worked to persuade enough commissioners to select a Washington-based law firm and outsource lobbying assignments to it. The NAIC senior staff and membership leaders successfully countered the proposal. At this time, former commissioners report that NAIC Executive Vice President Cathy Weatherford promised to spend more time in Washington to help beef up the association’s presence on The Hill. To make room for Cathy Weatherford, a long-tenured and highly respected employee was kicked out of her office. According to NAIC staff members, the office has remained furnished but deserted for years. In 2002, the NAIC quietly retained an outside consultant to build political coalitions and grassroots networks in support of insurance regulation. The consultant, William Fitts, had field experience from several Republican presidential campaigns. A former commissioner told Rough Notes that Fitts received more than $100,000 a year from the NAIC but the membership never saw any work product in return. The original plan called for Fitts to create a network of grassroots coalitions to support state regulation, which never happened; however, no one outside the NAIC’s top staff leadership can say whether this was because Fitts failed or he was not allowed to build the network. In 2003, former Congressman J.C. Watts entered the NAIC’s lobbying mix. At the urging of former South Carolina Insurance Commissioner and NAIC President Ernst Csiszar, the NAIC hired Watts to speak to its summer national meeting. Watts received $30,000 and two first-class airline tickets from the NAIC for his trouble. Observers commented on how the NAIC executive vice president, who once served as the Oklahoma insurance commissioner, and Watts, the former U.S. Representative from Oklahoma’s 4th District, hit it off. Ethics statutes precluded Watts from lobbying Congress until January 2004, but in time the NAIC retained J.C. Watts Companies to enhance the association’s Washington presence. Sources close to the decision estimate the contract at $250,000 per year. The J.C. Watts Companies Web site touts the political standing of the firm’s general counsel, Stefan Passantino, noting, “Some of his clients include former and current Speakers of the House of Representatives Newt Gingrich and Dennis Hastert.” In addition, the site points out, Passantino represents “some of the largest companies in the world in complex legal disputes including Zurich, CIGNA and ACE,” which might hold some conflict of interest concerns for the NAIC if anyone bothers to look. Beyond retaining the J.C. Watts Companies, Cathy Weatherford has remade the Washington office. In June 2005 the association announced that Brett Palmer would serve as the NAIC Washington office’s managing director. Palmer had served as a deputy chief of staff to Ohio Congressman Bob Ney and policy assistant to former Speaker of the House Newt Gingrich. Then in December 2005 came three new additions to the Washington office, only two of which were actually announced: Cheye Calvo, who was hired from outside to promote the interstate compact for regulation of life insurance, annuities and long term care insurance; and Brian Webb, an NAIC staffer since 2001, who has been manager for Health, Legislation, and Policy. Because the NAIC is a nonpartisan association with both Republican and Democratic members, the staff has traditionally worn a veil of strict nonpartisan identification— until now. The June and December releases broke with NAIC tradition by stressing the Republican partisan affiliations of the NAIC staff members’ former employers. This appears to satisfy the K Street Project’s tenets more than the nonpartisan nature of the NAIC. The third person added to the NAIC Washington Office was Holly Weatherford, who had worked in several areas of the NAIC staff offices and attended the University Of Missouri Kansas City Law School. Her move was not announced in the December 22, 2005, news release. Unlike most promotions or intra-staff transfers, this one was not announced to the staff or commissioners via e-mail. Weatherford is the daughter of NAIC Executive Vice President Cathy Weatherford. * |
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