12/18/2003: 
Breaking News
Follow Up: Romney eyes fixes for auto insurance
from Boston.com
Governor Mitt Romney is developing proposals to overhaul the state's auto insurance system, aiming to curb what he calls the fraud and inefficiency that he says forces motorists to pay rates that will soon exceed $1,000 a year on average.
"Our auto insurance structure is a mess," Romney said this week in a wide-ranging interview in his State House office. "Fixing it is a priority of mine. It has been something I have been working on for six months."
Romney made his comments one day after his insurance commissioner announced that next year's average auto premium will break through the $1,000 barrier, among the highest rates in the nation. The rates, a 7 percent increase over the average premium at the beginning of the year, drew sharp criticism from Romney's potential Democratic gubernatorial rival, Attorney General Thomas F. Reilly, who also called for an overhaul of the state's rate-setting approach.
Either the influence of the athenaeum is growing, or Romney is trying to cut Reilly off at the knees.
See our earlier story.
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Romney eyes fixes for auto insuranceTalks of fraud, inefficiencies
By Frank Phillips and Scott S. Greenberger, Globe Staff, 12/18/2003
Governor Mitt Romney is developing proposals to overhaul the state's auto insurance system, aiming to curb what he calls the fraud and inefficiency that he says forces motorists to pay rates that will soon exceed $1,000 a year on average.
"Our auto insurance structure is a mess," Romney said this week in a wide-ranging interview in his State House office. "Fixing it is a priority of mine. It has been something I have been working on for six months."
Romney made his comments one day after his insurance commissioner announced that next year's average auto premium will break through the $1,000 barrier, among the highest rates in the nation. The rates, a 7 percent increase over the average premium at the beginning of the year, drew sharp criticism from Romney's potential Democratic gubernatorial rival, Attorney General Thomas F. Reilly, who also called for an overhaul of the state's rate-setting approach.
The governor would not offer specifics in describing his proposal, but administration and insurance industry sources said Romney is considering an effort to introduce competition to insurance rates. Massachusetts is the only state that sets auto insurance rates.
Romney said he understood he was tackling a "political charged" issue in trying to overhaul the state's arcane auto insurance industry. The state tried to implement a competitive system in 1977, but the experiment resulted in skyrocketing rates and was quickly abandoned.
"It is a very delicate area," Romney said. "There are strong special interests surrounding the industry, as you can imagine. The forces to maintain the status quo are enormous."
The governor said the current, heavily regulated system is imbued with inefficiency and fraud that are forcing the higher rates. "I would like to see our system reformed and restructured. It doesn't affect our budget but it affects people's pocketbooks," he said.
An industry spokesman, Peter T. Robertson of the National Association of Independent Insurers, praised the governor for pushing for change, noting that the industry and Beacon Hill leaders have been meeting and talking about overhauling the system for the past year.
"The whole auto insurance structure is so jury-rigged that it is on the verge of implosion," Robertson said. He said companies, agents, and trade association representatives have been meeting with Insurance Commissioner Julianne M. Bowler, Romney's consumer affairs director Beth Lindstrom, and his chief economic adviser Robert Pozen. He said Reilly has also been involved in the discussions.
After the rate increases, Reilly criticized the current system, saying that it discourages new insurers from coming to the state. He warned, though, that the state must act with caution, citing the 1977 deregulation effort. The move led rates in urban areas to skyrocket, as subsidies paid by suburban drivers were eliminated. Angry rate-payers prompted a quick retreat by Governor Michael S. Dukakis.
In his interview this week, Romney argued that his first-year attempts to restructure government brought significant changes to Beacon Hill and said he will continue to press for more overhauls and money-saving consolidations.
He said he wants to consolidate transportation agencies and authorities, streamline the state construction contracting system, reduce the number of courthouses around the state, and change the laws that govern state employee pensions.
"I think there's a lot more work to be done," Romney said. "I think we have just taken the first steps of reform. . . . We have to keep pushing a reform agenda next year."
Reviewing his first year in office, Romney took credit for blocking tax increases to deal with the state's fiscal deficit. He also cited the consolidation of health and human service agencies, the elimination of the Metropolitan District Commission, and an increase in the share that state workers pay for health insurance.
The governor, who campaigned on a platform to clean up waste and cronyism on Beacon Hill, appears to be entering a second year in office in good political shape, according to a University of Massachusetts poll taken earlier this month. The survey of 405 voters showed his favorable rating was 60 percent; his unfavorable rating, 37 percent. As for his job performance, 57 percent said he is doing a good or excellent job, 30 percent rated it as not so good, and 8 percent gave him a poor mark.
Looking ahead, Romney said his 2005 budget will seek to scale back some pension benefits, including the one that bases payments on a state employee's three-highest paid years. That particular rule allowed former University of Massachusetts president William M. Bulger, to draw $200,000 a year pension based on his $309,000 salary as president, a post he held for seven years. The governor has been sharply critical of Bulger's pension, citing it as an example of pension excesses.
Romney may seek to base pension benefits on the average pay the employee earned over the course of a career. Bulger's pay never exceeded $81,000 as a legislator.
The governor, who declined to provide further details of the changes he has in mind, acknowledged that his administration would not save the state much money in the short term. On another subject, Romney vowed to work with other governors to secure more federal dollars for state Medicaid programs.In June, the US Department of Health and Human Services raised the Medicaid reimbursement rate for each state by 2.95 percent, a change that has funneled $285 million extra dollars to Massachusetts over the last two fiscal years. The federal agency plans to return to the original rates on June 30, but Romney said he and other governors will push to have the higher rate extended or made permanent.
