Insurers-Leaving-AP-Photophoto courtesy of The Associated Press
Blue Cross & Blue Shield of Illinois, which already dominates Illinois’ health insurance market, stands to gain from UnitedHealth Group’s recent announcement that it will not participate in the state’s insurance exchange.
   As the deadline looms  when Illinois’ insurance exchange must be up and running under the Affordable Care Act, Illinois continues to see an exit of major health insurance providers.
   Although Illinois recently predicted as many as 16 carriers would be participating in its health insurance exchange, as of press time that number had dwindled to only six. On July 15, UnitedHealth Group - the second-largest insurance company in Illinois’ non-group market - had dropped out.  
   Steve Klingel, an employee benefits specialist with Cassens Insurance Agency in Edwardsville, says the reason for the exodus of major health providers is simple: the new healthcare law eliminates competition rather than fostering it.
   “This law (the Affordable Care Act) that they said was designed to increase competition is doing exactly the opposite, because no one wants to be the cheapest,” said Klingel. “If you wind up being the cheapest carrier, you’re going to get everybody’s bad health risks. That’s why you’re seeing these companies saying, ‘We’re not going to take part in these exchanges.’ That’s the opposite of what real competition in any marketplace should be. Competition should be providing the best product for the least amount of money. But the provisions of the ACA prevent this from occurring.”

   Thanks to an outcry from 2,500 community banks and trade associations across the nation, regulators - in a rare move - agreed to change the rules that will ultimately impact the type of residential mortgages banks are able to offer, their capital levels and how they weigh the risk of the assets on their books.
Rules-Change-AP-Photophoto courtesy of The Associated Press
President Obama listens as Richard Cordray, the Consumer Financial Protection Bureau’s new director, speaks of pending reforms in mortgage banking. An independent federal agency, the CFPB was created in 2011 in response to the financial meltdown and following passage of the Dodd-Frank Act.
   David Schroeder, vice president of federal governmental relations at the Community Bankers Association of Illinois, says it was highly unusual to see the feds - the Boards of the Federal Reserve System, the Federal Deposit Insurance Corp. and the Office of Comptroller of the Currency - react to public input in this way.  In addition, early last month, the three agencies granted a one-year reprieve on two key rules that would have otherwise taken effect Jan. 1, 2014.
   “I am delighted to say the regulators changed and we got an additional year on these two rules,” said Schroeder. “The banking industry put forth an unprecedented response. Basel III and the Standardized Approach NPR (Notice of Proposed Rulemaking) will not become effective for banks until Jan. 1, 2015.”
   Regulators changing the proposed rules regarding balloon mortgages was a sigh of relief for community banks, particularly those serving rural communities, whose residential mortgage loan product mainstay has long been the balloon note. This longstanding, stable lending product differs from a traditional residential mortgage in that it is not resold on the secondary market. The bank keeps the note on its books, issuing the debt for a shorter period such as five years on a 20-year adjustable term.

   Some property owners have been getting socked with huge increases in flood insurance premiums due to a federal law that was enacted in July 2012. The large rate increases have caused a backlash, and efforts are under way to amend the offending legislation, the Biggert-Waters Flood Insurance Reform Act of 2012.
   One of the ways that the new, high insurance rate is triggered is when a home is sold. Al Suguitan, president and chief operating officer of the Greater Gateway Association of Realtors, says it is causing some home sales to fall through when buyers discover what the new insurance rates will be.
   Since the National Flood Insurance Program began in 1968, flood insurance rates have been subsidized. The Biggert-Waters Act, signed into law by President Barack Obama on July 6, 2012, immediately eliminated subsidies for about 438,000 NFIP policies. Subsidies still exist on an estimated 715,000 policies across the nation, but those will eventually be phased out.
   With large-scale natural disasters like Hurricane Katrina in 2005, the Federal Emergency Management Agency has been saddled with mounting debt. In July,  the U.S.  Government Accounting Office issued a report on the NFIP. The GAO found that FEMA, which administers the program, collected $3.5 billion in premiums during 2012 and FEMA estimated that about 1.1 million of 5.5 million NFIP policies - some 20 percent - were sold at highly discounted rates that did not fully reflect the actual risk of flooding.
   Since 2000, the report further states, the NFIP has experienced several years with catastrophic losses - losses exceeding $1 billion - and has needed to borrow money from the U.S. Treasury to cover claims in some years. The losses resulting from Superstorm Sandy, which caused extensive damage in several states on the eastern coast of the U.S. in October 2012, also are expected to be catastrophic. As of May 2013, FEMA owed the Treasury $24 billion - up from $17.8 billion prior to Superstorm Sandy - and had not repaid any principal on its loans since 2010.