Industry Reacts To President Bushs State Of The Union Address
Annuity dividends should be treated the same as stock and mutual fund dividends under any proposal to eliminate the dividend tax, says the new president of the American Council of Life Insurers.
“A level playing field is essential,” former Oklahoma Governor Frank Keating says.
Keating spoke to National Underwriter following President Bushs State of the Union message last Tuesday.
Keating says life insurers do not oppose the presidents proposal to eliminate the tax on dividends. Indeed, he says, the president is on the right track in encouraging economic growth by eliminating the tax.
But he says ACLI will work to assure that annuity dividends are treated the same as dividends on other financial products, such as stocks and mutual funds.
This is particularly important for older Americans, Keating says, who need to preserve their savings throughout their retirement years.
In addition, Keating says, ACLI will use the debate over the tax on dividends to advocate its Lifetime Annuity Payout proposal. “When something is on the table, everything is on the table.”
Any discussion of retirement issues and the tax treatment of dividends is an appropriate time to discuss how life insurance products will be treated under the tax code, he says.
Under the LAP proposal, retirees who choose to receive their retirement savings in the form of an annuity would be taxed at the capital gains rate instead of the individual income rate.
In addition, long term care insurance and life insurance company tax issues should be part of the upcoming tax debates, Keating says.
Turning to another major issue that was not part of the presidents speech, optional federal chartering of insurance companies, Keating says that as a former governor, he generally believes having 50 “hot houses” of experimentation is usually the way to go.
But he says the life insurance industry is in competition with other financial services industries. If the securities industry can get much more prompt product approval, Keating says, it harms life insurers.
The real issue, he says, is fair and prompt decision-making.
Returning to the State of the Union speech, the presidents comments on health care reform are drawing starkly different reactions.
Donald Young, president of the Health Insurance Association of America, Washington, says the president laid out a clear vision for making health care more available and affordable.
In his speech, the president criticized a nationalized health care system and instead said the nation must work toward a system in which all Americans have a good insurance policy and choose their own doctors.
In addition, President Bush says, senior citizens and low-income Americans should receive the help they need.
Young praises the president for leading the effort to make insurance more affordable and using the energy of the free market to make these changes whenever feasible.
“We believe the presidents proposal to help uninsured Americans better afford health insurance offers a sound starting point for long overdue action on this problem and closely follows HIAAs own commitment to addressing the issue,” Young says.
The White House has not yet formally advanced any new proposals to expand health insurance coverage, but last year the president supported providing tax credits to individuals to purchase coverage and establishing association health plans for small businesses.
Under the AHP proposal, a small business could participate in a group plan sponsored by a recognized industry trade association.
AHPs would not be subject to state insurance regulation.
Regarding tax credits, Janet Trautwein, vice president of government affairs for the National Association of Health Underwriters, Arlington, Va., says they are an important part of the solution to the problem of the uninsured.
Tax credits, she says, will benefit many types of workers who have either lost their jobs or who are unable to afford the cost of health insurance.
But Ron Pollack, executive director of Families USA, Washington, criticizes the presidents speech as talk rather than action.
“The presidents laudable rhetoric about health coverage for everyone is unmatched by his lackluster efforts,” Pollack says.
Tax credits, he says, would do little to make health coverage affordable for low-wage individuals and families.
“His proposal is like throwing a 10-foot rope to a person in a 40-foot hole,” Pollack says.
As for AHPs, trade associations such as the U.S. Chamber of Commerce, Washington, are among the strongest supporters.
Bruce Josten, vice president of the Chamber, says AHPs would give small businesses the same bargaining clout, economies of scale and administrative efficiencies that Fortune 500 companies and labor union now enjoy.
AHPs, Josten adds, would come under strict federal standards to ensure solvency and safeguard against practices that attract only the most favorable risks.
But the Blue Cross/Blue Shield Association, Washington, says in a statement that exempting AHPs from state laws and regulations allows them to cherry-pick younger, healthier beneficiaries and circumvent important consumer safeguards.
AHPs, the association says, would be able to increase rates without limits and ignore state-mandated external review laws.
Reproduced from National Underwriter Edition, February 3, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.