As you participate in PIA Month by contacting your members of Congress, don’t forget to get in touch with your state Insurance Commissioner and your Governor, as well. State officials hold major sway with members of their state Congressional delegations. By raising our concerns regarding the Insurance Information Act with state officials, we improve the odds that our message will resonate with the members of Congress from those states.

One compelling argument to advance with state officials: federal regulation of insurance will ultimately lead to the states losing revenue from the insurance premium tax to the federal government. Advocates of the Optional Federal Charter approach say that the states’ premium tax would be safeguarded under their proposal. But last year, in an apparent slip-up, language that had already been drafted that would shift this revenue to Washington, D.C. for carriers opting for federal regulation under an OFC, was inadvertently included in a draft of the bill.

In 2007, the 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. The subsection 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. When asked at the time 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.” After press reports appeared, the section was hurriedly withdrawn.

Early Draft of OFC Bill Would Have Stripped Premium Taxes From States (PIA 6/11/07)

August 19, 2008