A widely circulated draft of S. 40, the National Insurance Act, contained a provision for funding a proposed federal insurance regulator by siphoning off taxes currently collected to fund the existing state regulatory system.
A.M. Best’s BestWire is reporting that deep on page 220 of the 300-plus page draft of S. 40, was a subsection that declared states would be prohibited from assessing not just premium taxes, but any state taxes on federally chartered insurers unless they credited the companies’ state tax liability with amounts equal to the sum of all fees paid to the federal regulator.
In other words, BestWire reports, funding for the proposed federal insurance regulator would be siphoned from the taxes currently collected to fund the existing state regulatory system.
Throughout the debate on the OFC, its supporters have maintained that funds for the federal regulator would come solely from filing fees, user fees, examination fees and direct assessments on insurers and producers that choose to be federally regulated. When asked by reporters where the new subsection language came from, a staffer for S. 40’s prime sponsor Sen. John Sununu (R-N.H.) said the suggestion was “sent to us by some folks.” The staffer then added that the provision was stripped out of the final bill set to be introduced.
What It Means to Agents: Well, isn’t this interesting. The advocates of the OFC have always gone to great lengths to assure everyone that the funds for a new federal regulator and federal bureaucracy would come from the carriers opting for federal regulation, not from state premium taxes or other state revenues. So, what’s with this language that miraculously appeared in the draft version of S. 40 that circulated just before it was introduced? And just who are those “some folks” that sent the language to Sununu’s staff? Perhaps this section was something intended to he held back and attached at the 11th hour, when little could be done about it. Maybe Sununu’s staff attached it to the draft bill now by mistake, after receiving it from “some folks.”
It is disappointing – but not surprising – that this draft language that contradicted everything advocates said about not tapping state revenues suddenly appeared in S. 40. This should lead states to heighten their scrutiny of any statements made by this bill’s advocates.
Last year, PIA characterized Sununu’s proposal as “special interest legislation of the worst kind.”
We stand by that assessment.
OFC Draft Tosses a Bone to Premium Tax Conspiracy Theorists (BestWire 6/4/07)
June 11, 2007