In My Opinion

Fred Grimm: A federal subsidy Gov. Scott likes

Here in Florida, we’re dead set against subsidized deficit-laden government-run insurance programs.

Except for that one.

No, no. Not Obama’s government-subsidized insurance program. Not the one supposed to underwrite insurance policies for the state’s 3.8 million citizens with no medical insurance. Hell, no. That stuff for poor people — that’s godless socialism. That’s un-American.

But when it comes to federal flood insurance, to hell with that free-market stuff. We want our damn subsidies back.

A new law designed to gradually wean flood insurance policy holders off their federal subsidies, and discourage development in flood-prone areas, comes with some daunting rate increases. Buyers interested in some 268,000 Florida homes in flood-prone areas will be saddled with higher, sometimes much higher, rates.

The new law has gummed up real estate sales in coastal areas, particularly the barrier islands and the Florida Keys. Suddenly, free market warriors like Gov. Rick Scott are howling for a return to government support. Scott may hate government deficits, but when it comes to the flood insurance program’s $24 billion worth of red ink — not so much.

Scott announced last week that Florida would be filing an amicus brief supporting the state of Mississippi’s attempt to waylay the rate increases in federal court. The governor, who has railed against Obamacare and government-subsidized health insurance, employed a different rationale for homeowners, going after the president for “failing to save Florida families from huge flood insurance rate hikes.

“This unfair rate hike could devastate Florida’s real estate market and homeowners,” Scott warned. “Ultimately, the buck stops with the president and that’s why we continue to ask him to get his agency — FEMA — to undo this unfair insurance rate hike on Florida families.”

The National Underwriter, an insurance industry journal, noted that Scott was indulging in revisionist history. “The Obama administration was not consulted before the provision mandating phasing in of actuarial rates for flood insurance was voted on in the Senate in June 2012.

“Imposition of actuarial rates was the price demanded by Sen. Tom Coburn.” Coburn, by the way, is a very conservative free-market Republican from dry, dusty Oklahoma. The bill passed the Senate by a vote of 74-19, and the House by 373-52. The undoing of flood insurance subsidies was clearly a bipartisan effort.

Then members of Congress began to hear from their stunned constituents, some facing ten-fold rate increases. They demanded that FEMA do something about their mistake. But FEMA Director Craig Fugate testified at a congressional hearing this summer that he and his lawyers believe the Biggert-Waters Flood Insurance Reform Act allows him no leeway. “I need help. I have not found a way to delay…without some additional legislative support. There is no provision for affordability in this law.”

Here’s a quick primer on what the law entails. Anyone who bought a home with a subsidized rate after July 6, 2012, loses the subsidy next time they renew their policy.

Subsidized owners who bought before that date face annual increases of 16 to 17 percent until they’re paying the actual market rate. Both business owners and owners of properties that have had a number of flood insurance claims are looking at a 25 percent a year bump. Even flood insurance policy holders already paying the full, unsubsidized rate are looking at six to seven percent increases under FEMA’s revived risk assessments.

Floridians are particularly incensed, given that we’ll be paying three times more than the next most-affected state, New Jersey. Just to add to our collective ire, a 2011 study by the University of Pennsylvania’s Wharton Center for Risk Management and Decision Process found that Florida property owners have paid $16 billion in premiums while collecting $3.7 billion in claims. It’s not our fault the program has gone broke.

Except that the new law requires an assessment of future risk. Florida, up against rising sea levels, with its most expensive properties snug up against the water, pretty well defines the term “flood risk.”

We’re sunk unless Congress fixes this mess and gives us back our subsidies. But the very nice thing about having our snazziest properties in flood vulnerable locations is that the owners tend to be rich and influential (forgive me for being redundant.) They’ve got the juice to undo these free-market reforms. And Congress seems inclined to roll back the rate increases. Or at least it did, up until the shutdown.

So the flood insurance fix pretty well hinges on the slight chance that Congress, in the fall of 2013, can get anything done. And can get around those Tea Party ideologues, those from the drier states, who remain opposed to the very notion of federal flood insurance, no matter how vital to America’s coastal economies. They’re dead set against helping us, come hell or high water.

Read more Fred Grimm stories from the Miami Herald

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