Schafer: Insurers aren't in the collection business

  • Article by: LEE SCHAFER , Star Tribune
  • Updated: May 9, 2013 - 11:20 PM

From the files of why the business community gets aggravated by the legislature comes a proposed $5 surcharge that insurance companies will be asked to collect on auto and homeowner’s insurance policies.

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mkuldaMay. 10, 1312:00 AM

Funding pensions properly is a really good idea, but imposing an insurance surcharge to bail out the funds is a really bad idea. Pension funding comes from four sources: part of the insurance gross premiums tax, contributions from workers, contributions from employers (municipalities) and investment gains. (In cities of the first class, there’s even an extra surcharge on fire portion of policies that also goes toward an extra funding source for those cities). If the workers would agree to contribute even just a few percentage points more over time, then insurance buyers wouldn’t need to be asked for this bailout. But why use your own money, when you can get somebody else’s money for free, right? These surcharges are very unpopular with policyholders who many times ask who’s bailing out their pensions? Nobody, so why should they be forced to bail somebody else out? These pension funds also have a long history of notoriously bad investments, payment overpromises and allowing questionable practices like NOT penalizing workers for retiring early (like Social Security does) and allowing workers to include overtime pay as a way to ‘spike’ their eventual pension calculation. These practices make it much harder for the normal funding sources to keep up with obligations. So while Mr. Rice tries to blame a shortfall on less insurance premium income, the truth is the excessive payouts are the real cause and begs the question: if insurance buyers had no say in causing the shortfall problem, why are they being asked to clean up the mess? Not everybody is going to pay the surcharge. Not people who drive without insurance (even though it’s illegal…it’s almost never enforced) and not renters, condo owners or townhouse dwellers. Only single family homeowners. How is that fair? Finally and most importantly, this is not the only insurance surcharge. And almost all the other surcharges get money taken from their intended purpose. The Auto Theft Prevention Surcharge gets HALF of its raised money permanently diverted into the General Fund. And in the last few years, millions of dollars from the Fire Safety Surcharge and the Insurance Fraud Prevention Surcharge have transferred to the General Fund. Once the surcharge is in place, there will be enormous pressure first to raise the $5 fee to something much higher and then to begin to use some of the money on something else. How is that fair? There’s too much unfairness to allow this to pass. Hopefully policyholders will take action and call their legislators (particularly those who sit on the Tax Conference Committee) to say no to the $5 surcharge.

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eman2001May. 10, 1310:21 AM

Pathetic government overreach. Taxing with a thousand small cuts, rather than just raising income or property taxes that are somewhat transparent.

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handsomepeteMay. 10, 1312:12 PM

The Democratic Party's modus operandi is to burden others--businesses in particular--by forcing them to be a cog in their wealth redistribution and welfare state agenda. Obama and the Democrats made private businesses an extension of the welfare state by forcing them to give free health insurance to workers, no matter how lowly or unskilled the worker may be. Democrats have been chomping at the bit for over 10 years for online retailers--many operated by small mom-and-pop businesses--to be responsible for collecting sales taxes and knowing the proper tax for thousands of different taxing jurisdictions. Sales tax is due on purchases whether or not the online retailer collects it; it just makes it more convenient for Democrats to burden private business with tax collection instead of enforcing it themselves. And then now we have this "insurance policy surcharge" forcing private insurance companies to become tax collection agents so that money can be used to "shore up" extravagant pension plans for police and firefighters. Instead of making the people who live in the respective communities pay for the benefits they "promised" to public employee retirees (many of whom are unionized and unions use the dues to help get Democrats elected), Democrats have now decided to make private business an extension of the Minnesota tax collection agency. This trend will continue.

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jpcooperMay. 12, 13 9:42 AM

Lee you forget to tell the readers that this over reach bailout also will benefit the Duluth Teachers Pension Fund, that Private Union managed pension fund for Teachers of the Duluth School District. Does this proposed legislation also help out the General Mills Pension Fund? How about the 3M Pension fund? Hoe about the D196 Teachers Pension fund? Maybe when those pension funds have their hands out we can add a surcharge on Health Insurance policies to bail them out!

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