PIA lobbies Congress

Hundreds of PIA members from around the nation participated in PIA National’s Federal Legislative Summit April 24-25, 2018, in Washington, D.C. PIA delegates visited the offices of their members of Congress to let them know firsthand how proposed legislation would affect their businesses.

PIANH was represented by PIANH President-elect Lyle Fulkerson, JD, and PIANH Director of Government and Industry Affairs Bradford J. Lachut, Esq.

The delegates discussed issues ranging from flood insurance to health care to state regulation of insurance.

Flood insurance

Flood insurance was the focus of many of the meetings as the National Flood Insurance Program is set to expire July 31, 2018. With the expiration date approaching fast, there was been a frustrating lack of action on this very important issue. Congress has passed several short-term reauthorizations of the NFIP since fall of 2017. Most recently, the program was reauthorized in March as part of a measure to fund the federal government. In addition, the House has passed a long-term reauthorization bill. Despite those actions, the most recent reauthorization decoupled NFIP reauthorization from some more urgent and notable spending measures. This may make it harder to pass the reauthorization before the July 31 expiration date. In addition, the Senate has failed to act on any long-term NFIP legislation up to this point.

PIA strongly supports a long-term reauthorization of the NFIP but has some serious reservations concerning several ideas attached to reauthorization. First and foremost, PIA representatives spoke against any cut to the compensation that Write-Your-Own companies receive for administrating the NFIP for the Federal Emergency Management Agency. PIA is concerned that any cut in WYO compensation will lead directly to a cut to producer compensation. PIA members reminded elected officials of the important role producers play in administering the NFIP. Without producers to sell and service policies, the number of flood policies sold would decrease, having an adverse impact on the NFIP debt, which even after $16 billion in debt was relieved late last year, currently sits at about $25 billion. Further, if commissions are cut and producers are forced out of the flood insurance market, consumers will be left to purchase a complicated insurance product without the guidance of insurance experts. The PIA delegation stressed that any attempt to cut producer commissions would be penny wise and pound foolish.

PIA delegates also voiced their support for “The Flood Insurance Market Parity and Modernization Act,” a bill that would make it easier for consumers to purchase flood insurance sold by private carriers. The bill clarifies the definition of private flood insurance to mean a policy that provides flood insurance coverage issued by an insurance company that is licensed and approved by the state insurance regulator. The bill ensures that private flood insurance can be used to satisfy the NFIP’s continuous coverage requirement, an essential aspect to ensure policyholders are not penalized for moving from one policy to another. This legislation is crucial in increasing the number of private flood products in the market.

State regulation of insurance

While flood insurance was the main topic in many of the meetings, it certainly was not the only one. Preserving the state-based insurance regulatory system was of paramount importance to FLS attendees. For more than 150 years, state-based regulation has created and promoted a competitive and diverse market for insurance consumers successfully. Furthermore, the Government Accountability Office found that this system actually assisted in the mitigation of the effects of the 2007-08 financial crisis on the insurance industry, demonstrating that this system is beneficial to all involved. PIA delegates stressed the importance of keeping insurance regulation at the state level and they asked specially for the repeal of the Federal Insurance Office.

The FIO was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. The FIO has the authority to monitor the insurance sector. It also acts as an advisory member of the Financial Stability Oversight Council and offers advice and opinions on important insurance matters. PIA National opposed the creation of the FIO from the beginning and the association fought initial efforts to grant the office with broader authority in the enabling legislation. The result was an explicit prohibition on the FIO from action as a regulator of the insurance industry. While it has adhered to the limitations imposed on it, the office has expressed a desire to expand its authority and has advocated for national standards.

PIA delegates asked elected officials to support legislation, including the Federal Insurance Office Abolishment Act of 2017, that would repeal the FIO and to ensure that insurance regulation stays where it belongs, in the hands of the states.

Health insurance

Of course, it wouldn’t be a trip to D.C. if PIA representatives didn’t discuss health insurance. Many producers have stopped selling health insurance due to the drastic cut in commissions since the passage of the Patient Protection and Affordable Care Act. These commission cuts have been caused in part by provisions of the PPACA, which imposed restrictions on the amount insurers can spend on administrative costs, which include producer commissions. PIA advocated for the removal of producer commissions from the administrative costs calculation to encourage producers back into the health marketplace.

PIA delegates also advocated for the repeal of the “Cadillac Tax,” an excise tax on high-cost, employer-sponsored health plans. These “Cadillac plans” cost in excess of $10,200 for individual plans and $27,500 for family. Beginning in 2022, employers that offer these plans will be required to pay a 40 percent tax for each employee, in a plan that exceeds the statutory threshold.

As business owners, producers could be affected by the tax because as many as 26 percent of employers and employees would be affected by the Cadillac Tax in the first year and the numbers increase to 40 percent in the next 10 years. The Cadillac Tax creates uncertainty for producers who sell health insurance products. Employers already are cutting benefits to avoid the tax in the future. Because employers are taking proactive steps to avoid the tax, many producers will no longer be able to sell premium plans to their clients.