Doing Nothing On Health Tax Issues Won't Cut It

Representatives from America’s Health Insurance Plans, Washington, and Principal Financial, Des Moines, Iowa, expressed support for the call to action.

Oxendine also said that the NAIC plans to set up meetings with Treasury to discuss another tax issue, the impact of suggestions from the President’s Advisory Panel on Tax Reform on life insurance. The concern as a regulator, he says, is that it could limit the availability of product. “As a regulator, I want the largest range of products that consumers can buy,” he said. This is his main concern and not whether treating life insurance as one of many savings vehicles would hurt insurers’ ability to make money. He said that that is the industry’s concern.

Care needs to be taken not to make false comparisons between insurance and investment products, according to Lisa Tate, senior counsel with the American Council of Life Insurers, Washington. The report does not take into account how an insurance contract’s investment component helps fund the insurance piece of the contract, she explained.

Indeed, in comments to the Panel submitted in July 2005, ACLI President Frank Keating urged it not to make “the purchase of life insurance prohibitively expensive by imposing tax at a time when the insured does not have the time to pay the tax. Neither should it increase the cost of insurance for older Americans by eliminating the benefit of premium “smoothing” provided by the current law treatment of inside buildup.”

And, in November 2005, the ACLI said that the panel’s efforts to increase savings is a good one, lifetime financial planning also should incorporate the use of life insurance to financial loss at death.

In addition to life and health issues, Steve Broadie, a representative with the Property Casualty Insurers Association of America, Des Plaines, Ill., raised an issue regarding a federal tax exemption for state workers compensation funds. He discussed an exemption in IRC 501(c)(27). The exemption is not an issue as long as there is clarity that it is for entities that are single state writers, accept “all comers,” and are a market of last resort. However, he said that “there are state funds that are using the exemption inappropriately to subsidize competition in the workers comp market.” He asked regulators to further investigate this issue.