Monday, April 28, 2014

Guns & Insurance Companies

Over at Popehat, a fantastic legal blog, Ken White writes an interesting post criticizing the recently passed bill in Florida, SB 424. The text of that bill can be read here, but it effectively bans insurance companies from:

  • Refusing to issue or renew a policy based on lawful firearm ownership of the insured
  • Canceling or terminating a policy based on lawful firearm ownership of the insured
  • Charging an "unfairly discriminatory rate" based on lawful firearms ownership
  • Disclosing to a third party the lawful firearm ownership of the insured without first obtaining informed consent by the insured

Mr. White's objection says that this is a classic example of Republicans selectively compromising their avowed "Small Government" principles when it suits them.

  • Good: using the Second Amendment to limit the power of the government.
  • Bad: when leveraging the power of the government to regulate private industry in the name of the Second Amendment, they adopt the low tactics of statist "progressives"
As Mr. White says:

"...treating the Second Amendment as if it empowers the government to regulate private conduct, rather than just limiting the government — is incoherent and un-conservative."
The phenomenon of compromising small government principles is one I've criticized on this blog before. We see Republicans advocate statist force for the drug war, marriage, and a host of other issues in blatant contradiction with the principles of small government. So I think I'm pretty open to the argument but not sure I agree with his understanding of what this bill is doing.

Mr. White sees this bill as preventing an insurer from charging a higher premium for an insurance policy regardless of whether their risk assessment indicates a greater liability. If that were the case, I'd probably agree with the criticism, but I don't think that's the right reading of the bill. Further, I'd argue that insurance isn't pure private industry, but increasingly a function of the state (for better or worse is irrelevant). In that sense, this bill is restricting the government from leveraging the insurance market to further its own clear policy aims. Let me explain each in turn:

"Unfair Discrimination" has special meaning in Florida insurance regulation - specifically it's when you charge different rates to people of the "same actuarially supportable class". Basically this means that if two people have the same risk profile, you can't charge one person more because of their race, or because they may have sought psychological counselling, suffered abuse, been sexually abused as a kid, falsely imprisoned, etc. All of this is lined out in the regs that SB 424 seeks to modify.

SB 424 takes this criteria and says, hey - this too: exercising a constitutionally-protected right in and of itself isn't justification to cancel their policy, or refuse to issue it. By my reading, it doesn't prohibit an insurer from charging a reasonably higher premium if the actuarially supportable classes are different. It's basically saying the analysis needs to be more sophisticated for determining that actuarial class than just asking whether a potential customer exercises that constitutional right.

Now, one might argue that insurers shouldn't need to be any more sophisticated than they want to be. It's their money on the line. After all, we are talking about the folks who increase premiums based on the color of your car. Insurance isn't the science of causation but the art of correlation, one might say.

That sounds good, but insurance isn't an art, it's a science of speculation which can turn discriminatory awfully fast when nominally based on high-level correlations. Trends in imprisonment could price out entire groups of people from participating in the market, and when it comes to rights, produce a chilling effect that says, "the more rights you exercise, the more direct expense you'll bear." It certainly makes me think twice about buying a red car.

Imagining that the Republicans must be so absolutist as support a kind of Cruikshank or Barron v. Baltimore-type approach to private industry and disavow their duty to protect the rights of citizens from actors outside of the federal government is a non-starter. Laws can limit the power of non-state actors from infringing on rights and still be coherent and conservative. Come to think of it, this was exactly the Republican position in Cruikshank.

Finally, it's no coincidence this bill passes while the federal government is dramatically increasing its regulatory hold in the insurance market. It's not a stretch in this day of executive orders and discretionary enforcement to imagine the federal government using PPACA regs to collect data on and indirectly chill gun ownership. The Administration has stated and demonstrated its desire to reduce gun ownership and limit the breadth of the Second Amendment. I think the proper way to be reading SB 424 is that it shields the insurers, increasingly acting on behalf of the government, from being pawns in the Administration's game of end runs. You can call it paranoid, but I'd call it proactive. Certainly the imagined scenarios are not far-fetched anymore.

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