Comments on the Economic Implications of the Exon Amendment to the Fair Insurance Practices Act

OCE-84-7: Published: Aug 27, 1984. Publicly Released: Sep 27, 1984.

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Pursuant to a congressional request, GAO commented on the economic implications of a proposed amendment to S. 372, the Fair Insurance Practices Act. As originally introduced, S. 372 would have required that sex-distinct premiums and benefits in existing and future insurance and pension contracts be equalized. While the amendment would continue to prohibit discrimination based on race, color, religion, or national origin, distinctions based on sex would be defined as discriminatory only in connection with employee benefit plans.

GAO found that, because the proposed amendment would eliminate changes to existing insurance contracts or accrued pension benefits, the estimated unfunded liabilities for the pension plans and insurance companies under the bill would be eliminated. The proposed amendment would prohibit sex discrimination under certain employee benefit plans not covered by the Civil Rights Act and other types of discrimination under individual insurance contracts. GAO noted that these changes would affect a small percentage of employees and insureds and that any redistributive or efficiency effects would be minimal. Finally, GAO had reported an estimated cost to the insurance companies of $1.3 billion to effect the changes required by the original bill. Since the proposed amendment would eliminate most of the requirements for changes to current practices, it would also eliminate virtually all of the reported administrative costs.

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