Looming Flood Insurance Expiration Puts Congress Back On The Hot Seat

Washington

Ensuring that the National Flood Insurance Program remains in force–at least through a short-term reauthorization–is the priority for property and casualty industry lobbyists as Congress returns next week for what is expected to be a brief but turbulent session.

"The Sept. 30 expiration looms for the NFIP, and it is definitely something Congress must address upon its return–especially if, God forbid, we have another natural disaster," said Leigh Ann Pusey, president and chief executive officer of the American Insurance Association.

Charles Symington, senior vice president for government affairs at the Independent Insurance Agents and Brokers of America, emphasized that "job number-one when we get back into session, from the IIABA perspective, is extension of the NFIP."

"Our agents and their customers across the country are very frustrated with the continued expirations of the program, and it is absolutely essential that Congress act before Sept. 30," Mr. Symington said.

He noted plans to put the extension into the Homeland Security appropriations bill, but it is still unclear whether Congress will seek a short-term extension or push that forward into the next Congress.

The most likely scenario is yet another temporary extension, leaving the NFIP's fate in limbo even though everyone would prefer a long-term reauthorization, he said.

"At the very least, the program needs to be extended well into next year, to allow a new Congress to focus on the issue as well as needed reforms for the program," according to Mr. Symington.

Matt Brady, a representative for the National Association of Mutual Insurance Companies, suggested that "any number" of proposals may also find their way onto the agenda, from "Beach House Bailout" legislation to a bill allowing the government to sell windstorm insurance.

"These proposals, rightly, have little support in Congress right now but could come into play if a major storm were to hit the U.S. and members of Congress see a need to react," Mr. Brady said.

OTHER ISSUES

In addition, the industry is also focusing on reducing the impact or eliminating a provision in the health care reform law–a stringent tax-reporting mandate scheduled to go into effect in 2012 that is particularly irksome to small businesses.

Certainty on the estate tax, which expired last year, and extension of the tax cuts enacted in 2001 are also priorities.

Besides Congress, the industry is also keeping a close eye on regulatory initiatives that must be imposed to implement the health care and financial services reform laws already approved.

The IIABA also has its eye on tax issues. Indeed, Mr. Symington said the impending expiration of the 2001 tax cuts put through by former President George W. Bush will have a "horrible impact on small businesses."

He said the majority of independent agents are organized as Sub-Chapter S corporations or sole proprietorships, thus the lapse of these tax cuts will "negatively impact many of our small-business owners in a very difficult economy." He added that IIABA believes "raising taxes on small business is the wrong prescription to get the economy back on its feet."

Agents are also actively involved in the so-called "1099 issue"–a provision added to the health care reform law as a means of raising $18 billion in revenue over 10 years.

It mandates that all businesses, tax-exempt organizations, as well as federal, state and local government entities will be required to issue Form 1099 to vendors from whom they purchase goods totaling $600 or more during a calendar year beginning in 2012. In a recent letter to congressional leadership, the IIABA said that it and many others in the small-business community "oppose this mandate."

The letter cites "the massive amount of resources that will be poured into new record-keeping, accounting and unnecessary compliance procedures," according to IIABA President and CEO Robert Rusbuldt.

"The mountain of paperwork required to comply with this provision will cost the federal government time and money, divert resources, and prevent investment in job growth and business expansion at a delicate point in the American economy," he said.

The Senate is expected to take up amendments to the provision as early as Sept. 13. An amendment to H.R. 5297–the small-business lending bill, sponsored by Sen. Mike Johanns, R-Neb.–would repeal the provision.

Senate Majority Leader Harry Reid, D-Nev., and Sen. Max Baucus, D-Mont., then introduced an alternative to the Johanns' amendment on behalf of Democrats, sponsored by Sen. Bill Nelson, D-Fla., that would modify rather than repeal the provision.

The Democratic substitute exempts credit cards from the information reporting requirement, lifts the threshold for 1099 reporting from $600 to $5,000, and exempts firms "employing not more than 25 employees at any time during the taxable year" from the reporting requirements.

It also would authorize the Treasury to exempt "non-troublesome" transactions (such as meals, airplane tickets and hotel rooms) from the reporting requirements.

Regulatory initiatives are also a key area of concern here in Washington. Health regulators will be dealing this month with several rules mandated by the health care reform law, including a request by health insurance agents that their commissions not be treated as part of company premium revenue for purposes of establishing medical loss ratios under the law.

The National Association of Insurance Commissioners and the U.S. Department of Health and Human Services are targeting Sept. 23 as the deadline for finalizing a provision of the health care reform law that limits administrative costs to a maximum of 20 percent–and in some cases, 25 percent–of total premiums. Whether agent commissions figure into that calculation is a critical compensation consideration.

HHS plans to update a new consumer web portal–www.healthcare.gov–by Oct. 1. The industry wants the update to include language regarding the importance of professional assistance provided by insurance agents. Industry lobbyists are also looking for more clarity on how HHS will define an "essential benefit" when it enforces annual and lifetime-limit regulations.

Meanwhile, the AIA is focusing on regulatory initiatives to implement the Dodd-Frank financial services reform bill.

"In addition to several
insurance-related appointments–such as the head of the new Federal Insurance Office and the independent expert on the Financial Stability Council–we're working
closely with Treasury to insure that regulations are drafted to reflect
the unique nature of insurance and its distinctions from banking," according to Ms. Pusey of AIA.

She said her group also remains concerned with the Gulf of Mexico oil spill and legislation backed up in the Senate designed to compensate victims of the 9/11 catastrophe. "But, given the political
environment, it seems the likelihood of Congress addressing these issues between now and November is slim," she noted.

Ms. Pusey said politics is also a focus for the industry. "It is pretty clear that the upcoming elections will result in significant changes in Congress," she pointed out. "I think it will be key to
watch the issues that ultimately drive the voters' actions and how policymakers respond."

She added that "I certainly hope the message that government has gotten too big and costs too much will guide the direction of the next Congress."

It is unclear when Congress will adjourn to allow members to campaign for re-election. The House has decided to leave Oct. 8, while the Senate has not yet decided on a date because of the huge backlog of appropriations and other bills that remains. Some lobbyists say Congress might have to remain in session until at least Oct. 14.