January 14, 2003 - The Sacramento Bee: Ethiopia RPCV John Garamendi faces challenges as California insurance commissioner

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Ethiopia RPCV John Garamendi faces challenges as California insurance commissioner

Read and comment on this story from the The Sacramento Bee on Ethiopia RPCV John Garamendi and the challenges he faces in his second term as California insurance commissioner at:

Industry in crisis to test Garamendi*

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Industry in crisis to test Garamendi

In a second go-around as insurance chief, he'll face many challenges.

By Gary Delsohn -- Bee Capitol Bureau

Published 2:15 a.m. PST Tuesday, January 14, 2003

If you have insurance or need to get some -- and if you care whether the California economy stinks or soars -- you probably want to keep an eye on John Garamendi over the next four years.

Last week, for the second time in his long political career, Garamendi -- a one-time University of California, Berkeley, football star and Peace Corps volunteer -- was sworn in as California insurance commissioner.

And he returns to the $140,000-a-year job at a time when insurers, regulators, consumer activists and just about everyone else in the arena agree on at least one thing: The industry -- and the people and businesses it affects -- is in deep crisis.

The costs of homeowner and renter policies have skyrocketed, people can't find coverage, and many who have it, find it canceled if they make a claim.

" 'Use it and lose it' is no joke," Garamendi, who turns 58 in two weeks, said in his inaugural speech. "It's real and it's wrong."

Workers' compensation costs to business have nearly doubled, causing many companies to say they can't compete unless they leave the state. Yet California workers injured on the job are in the lower third of how much they're paid compared with the rest of the country, according to Garamendi's office.

An estimated 20 percent of Californians still go without medical insurance, and those who have it seem to be paying more for less -- and more confusing -- coverage.

The big carriers' portfolios are being squeezed more and more by the depressed financial markets. Giant insurers such as UnumProvident, which covers about 2 million Californians with its disability policies, are getting unwanted publicity in places like CBS' "60 Minutes" and NBC's "Dateline" for allegedly cheating customers out of benefits once they're injured.

The company says the reports have been taken out of context, and Garamendi, even before taking office, promised an investigation.

"The entire sector of the economy called insurance is in serious disarray," Garamendi said during an interview last week in his office 17 floors above Capitol Mall.

"The entire industry's upside down. I don't see one sector of this industry that is in good shape. And therefore the people of this state, the businesses of the state, the economy, the society of this state is very disrupted by the problems that exist in the insurance sector."

Perhaps more than any other state officeholder -- even Gov. Gray Davis -- Garamendi, who was the state's first elected insurance commissioner when he held the job from 1991 to 1995 before leaving to run (unsuccessfully) for governor, is in a position to have a significant impact on the day-to-day lives of all Californians.

"Everything he does affects the wallet of every person in the state," said Harvey Rosenfeld, a Los Angeles consumer activist who has pushed a number of insurance reforms over the years. "He's directly accountable in that way."

For someone long known to have ambitions for higher political office -- Garamendi has sought his party's nomination for governor twice -- that can be either a blessing or a curse.

Consider the assessment of Ray Bourhis, a San Francisco lawyer who has made a career out of suing insurance companies and arguably knows as much as anyone about the 1,300-employee department Garamendi reassumed control of last week.

A court-appointed "special master" for the Department of Insurance since 1991, Bourhis' job has been to help make sure the agency doesn't revert to what the judge who appointed him said was then department policy -- virtually ignoring most consumer complaints.

"From a purely political point of view," Bourhis said in an interview last week, "if Garamendi wants to run for governor again, he understands the most important thing he can do is get himself a national reputation for being the toughest insurance commissioner in America. Someone who won't take any nonsense from the industry.

"If he does that, he can accomplish what really no one else on the statewide scene is in position to accomplish. He can stand out above and beyond any other elected officeholder in the state if he seizes the opportunity to do it, and I think he will."

Judging by some of his early encounters with department staff at offices around the state, Garamendi will have an enthusiastic work force to help him.

At one meeting with department lawyers in San Francisco last week, the room erupted into a chorus of "Happy Days Are Here Again" when Garamendi walked in.

It's easy to see why.

After Garamendi lost the Democratic primary for governor to Kathleen Brown and left the insurance job in 1995, eventually going to work on water, land and conservation issues for then-President Clinton, the department was plunged into scandal.

Chuck Quackenbush, his successor and once considered a rising star in state Republican politics, was forced to resign in 2000 for his role in funneling insurance settlement funds into three foundations that Quackenbush used to enhance his political image.

Davis appointed Harry C. Low, a highly regarded former judge from San Francisco to manage the department, but Low was never interested in running for the job and Garamendi campaigned hard to succeed him.

Garamendi's first term in office was dominated by bitter clashes with the insurance industry over implementation of Rosenfeld's Proposition 103, which created the elected commissioner's job and forced companies to roll back their rates and pay rebates to consumers.

Garamendi prevailed in court and during his term companies returned more than $800 million to consumers. That's the main reason Rosenfeld said Garamendi was "the best insurance commissioner in the country" during his first term.

Other activists, including Amy Bach of San Francisco, who runs a group called United Policyholders, are equally high on Garamendi. But she says not many states have aggressive insurance regulators willing to stand up to the industry.

"There's not that much competition for the distinction," she said. "But I don't envy him. He has a really hard job. He might have higher aspirations, or I'm not sure he would have taken it."

Bach, who used to work as an insurance analyst for state Sen. Martha Escutia, D-Whittier, called Garamendi "a pragmatist."

"He's going to try to walk the middle line as much as he can. He'll do some things the industry won't like and that we will like, but I have every reason to believe he will be pragmatic and cut some deals with the industry that consumer activists won't like.

"I kind of hate to say that, but that's his job. He's got to do what he can to keep the companies solvent and make sure they can do business in the state."

Garamendi, who brushes aside questions about his political future, knows he'll have detractors no matter what he does.

Among other things, he still gets criticized for his handling of the department's seizure, during his first term, of Executive Life Insurance Co., a move that policyholders said failed to protect their holdings.

He's drawn criticism, too, because he has included in transition talks at least one lawyer who represents big insurers that have run afoul of the department in the past.

Garamendi said the lawyer in question, Gary Hernandez, worked for him during his first term as commissioner but during recent meetings was never part of any discussions that might affect his clients.

"In order for me to do my job," Garamendi said, "I need to know what's going on in the industry and I need to know how people in the industry perceive the department. And Gary knows that. And we're very clear. There were some things he was not involved in during the transition because they would be a conflict."

At his inauguration, Garamendi identified four "critical insurance issues" that he plans to address immediately.

He has appointed two task forces to work on reforms to the state's workers' compensation system. He wants to find ways to expand health coverage. He vowed to investigate the "dysfunctional" home-insurance market, arguing that a shortage of homeowners coverage can cripple the state's housing industry. And he wants to push for tough new privacy legislation.

Jeanne Cain, Western region president for the American Insurance Association, listened to Garamendi's speech and -- so far, at least -- likes where he seems to be headed.

"He says he wants a healthy, vibrant insurance market," Cain said. "We agree. It's critical. He's committed to being prompt, efficient and fair in implementing regulations. That's what we want, too."

Insurers know they're not exactly on the public's best-liked list, and Cain said the most positive message in Garamendi's inaugural speech was his talk of how the industry's health and the overall state and national economy are inextricably linked.

"He is connecting the economy and the importance of insurance," she said. "Without insurance, you can't have business. They couldn't afford the risk. We just appreciate the fact that as a regulator he is publicly acknowledging that connection."

About the Writer

The Bee's Gary Delsohn can be reached at (916) 326-5545 or gdelsohn@sacbee.com.
More about John Garamendi

Read this story by John Garamendi about his service in Ethiopia from the World Wise Schools Web Site at:

May the Circle Be Unbroken

May the Circle Be Unbroken
By John Garamendi

At the customs area in the Asunción Airport, I wait anxiously for my luggage, loaded down with Christmas presents. At last, I pass through customs and greet my son, John, and his wife, Colleen, who are in Paraguay as Peace Corps Volunteers. We hug and kiss, even shed a few tears. I am proud of them and the commitment they've made. I'm glad to see them and eager to find out first-hand about their lives.

In a cab, we ride past fancy suburbs with high walls, past big houses, and European and American stores and auto dealerships to the old town, with its narrow streets, dirty gutters, and crumbling sidewalks. We enter the Shara Hotel, a Peace Corps crash house. Six bucks per person, a good price even if it doesn't include a working air-conditioner.

I remember my own days as a Peace Corps Volunteer thirty years ago in Ethiopia: cheap hotels in the old quarter of Addis Ababa; slow-moving ceiling fans stirring humid air; noisy patrons at the local bars across the street; narrow beds with thin mattresses that sagged like the backs of old donkeys carrying water in the village. Memories of Patti, my wife, a bright-eyed, eager woman lying next to me, unable to sleep as she analyzes the problems of our village and conjures up answers that dissolve in the swish, swish, swish of the fan blades overhead. But hope is miraculously restored the next morning. We awake eager to return to the village, to seize the day and get on with the towering task.

The next morning, John and Colleen show me Asunción, filling me in on its history, and I remember how Patti and I escorted my own parents through Addis Ababa when we were Volunteers. We, too, gave my parents a similar lecture.

To reach John and Colleen's village, I suggest we hire a car, but John shakes his head: "We'll take the bus, dad. They wouldn't understand if we came in a car."

Of course, in Ethiopia years ago, his mother and I did not have the luxury of renting a car either, nor would our villagers have understood if we arrived by Land Rover.

On the bus out of the capital, we travel through green, rolling country, passing the occasional small, tin-roofed house with a red dirt yard where children play football with deflated balls. When the bus stops, roadside vendors yell to catch our attention, holding up boxes of soda and candy.

At Caaquazu, three hours out of Asunción on the road to Brazil, we leave the bus again and unload our luggage. Colleen dashes to the supermercado while John negotiates with taxi drivers to take us the last sixteen kilometers to Sextilinnia, their village. At first, negotiations do not go well. The drivers protest. The road is impassable, they say. But my son's negotiating skills slowly overcome their reluctance and, finally, a driver agrees to give it a try.

Soon after leaving the paved streets of Caaquazu, we hit a deep sea of mud. Our driver swings past the pool, carving a new road across a field. We continue on, forging new tracks where necessary. We are halfway to Sextilinnia when the driver, his wheels churning hopelessly, surrenders: "No mas," he sighs.

Fortunately, there is a truck nearby belonging to people John and Colleen know -- John, in fact, is building a water system for the school in their village -- and they agree to drive us the rest of the way.

The village of Sextilinnia has only five houses. Corn and manioc plants grow in the rich soil that John tells me is fifty meters deep, thanks to run-off from the Andes. Years ago, in an attempt at land reform, the government gave the campesinos forested land, some tools, and a bit of hope. Now the forests are nearly gone, and the Ministry of Agriculture failed in an effort to cultivate citrus trees. The grind of poverty and subsistence farming goes on and on.

We unload the truck and carry the luggage into the house. "We can't let the neighbors know we have all this," John says. "They wouldn't understand such wealth."

After they open their presents, they take me on a tour of their village. Up the hill is the school where Colleen teaches health classes and John has undertaken a construction project. Beyond the hill we visit families. "This woman just had twins," Colleen explains, pointing to one house. "That was a month ago. I got her to the clinic in time to save the second child and the mother." She smiles sadly, remembering the event. "This is my work," she whispers.

And then my son continues, "Their father is my counterpart. He's a hoot. A strong leader. I took him into Asunción for counterpart day a few months ago, and he was so distracted he forgot to pay the school electric bill. That might cost him the PTA presidency," he explains, laughing.

We continue along the road, exchanging greetings with everyone who passes. Farmer after farmer. Family after family. We stop to talk with a strawberry farmer. "Too much rain, the crop is no good," he says as we sit under a barren citrus tree in his red earth patio. "But come see my latrine. I'm building it just like you said, away from the water well."

The two men stand on the mound of fresh earth and stare into the newly dug pit. Both voices speak with pride about the depth of the hole. We stay some time beneath the citrus tree. They talk of crops, children, the new school building, of health, of family, and of hope. The exchange is joyful, happy, boisterous, and good.

Later, back at the house, we sit on the porch, slapping ants that crawl up our legs and taking bets on when it will start to rain.

Eventually, it's time for bed and my son warns me, "Oh, if it rains really hard, you might want to move your bed over to that spot." He pointed across the room. "That's the only place in this room where it doesn't drip."

Shortly after midnight, a rooster is confused by the lightning and thunder and starts crowing. Down the hill another joins him. Soon roosters from the whole village are answering back.

At 5:45 a.m. the alarm rings. I knock on my son's door. Go back to sleep, he tells me. There will be no bus today. We'll have to walk to the main road.

When everyone is up, we shut down the house, load our packs, cover them with rubber rain gear and head off on the sixteen kilometer hike to Caaquazu and the bus to Asunción. It keeps raining and the mud gets deeper. There is no bus. No jeeps. Not even an ox-cart. The three of us trek on, keeping up our spirits by claiming to have the heaviest pack, to be the wettest. We stop at the house of another Peace Corps Volunteer, who offers us coffee and dry clothes. Like all Volunteers, thirty years ago and today, what we have, we share.

Back in the capital, we sit and talk most of the night. We reform the Peace Corps, straighten out the Department of Interior where I work, we restructure the White House, as well as the Paraguayan government. There is no problem we can't solve.

Thirty years ago, my wife and I talked the same talk. We had solutions to the problems of Ethiopia, the United States, and the world. Now I wonder: Did we do any good as Peace Corps Volunteers in Ethiopia? Will John and Colleen do any good in Paraguay?

The answer, I think, is in the smiles and laughter of those we left behind in our highland village and in our own lives, and what we made of each day's work. The answer is also the children that we raised. For us, a son who cares enough about solving the problems of the world to join the Peace Corps. The answer is the work that Colleen and John are doing today in Paraguay -- the same kind of work Patti and I did in Ethiopia thirty years ago.

There's a country-and-western song that says it best: May the circle be unbroken. That's the answer. May the circle of helping others go unbroken. In Paraguay, with my son and daughter-in-law, I realized I had come full circle. I had come home again to the Peace Corps.

John Garamendi (Ethiopia 1966-68) graduated from the University of California, Berkeley, where he was an All Pacific Coast Conference football player. After serving in the Peace Corps and earning an M.B.A. from Harvard University, he began a twenty-year legislative career in California. In 1995, he was appointed by President Clinton to serve as Deputy Secretary of the Interior.

More information on Peace Corps Volunteers who served in Ethiopia

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