INDIANAPOLIS (April 7, 2006)-The National Association of Mutual Insurance Companies (NAMIC) has opposed a California bill that would require insurers, and ultimately their consumers, to pay for the political campaigns of candidates seeking the office of state insurance commissioner.
Public testimony was taken on April 5 in California' Senate Banking, Finance and Insurance Committee on SB 1459, that would amend the state Political Reform Act of 1974. The proposal would create a state fund into which assessments from insurers would be deposited. Candidates for insurance commissioner could draw from the fund to finance their campaigns. The legislation is based on the premise that company contributions made directly to candidates for commissioner interfere with effective regulation of the state insurance industry.
NAMIC filed a Letter of Opposition to the bill and through its state advocacy partner, the Personal Insurance Federation of California (PIFC), provided testimony in opposition to the proposed legislation.
NAMIC's western state affairs manager Christian J. Rataj said that the insurance industry asserted that SB 1459 is unconstitutional because:
1) it would create a hidden tax;
2) the bill infringes upon insurers' and their policyholders' constitutional right to freedom of speech, by compelling them to financially contribute to the campaign of a candidate they may not want to support; and
3) the proposed legislation would violate the letter and spirit of Article 13A (Tax Limitation) of the California Constitution, by allowing the state to impose a new tax without satisfying the "two-thirds vote of both houses of the legislature" requirement of Article 13A."
According to PIFC's Senior Legislative Advocate Michael Paiva, "the exaction specified in the bill is a tax and runs afoul of both the California Constitution and the California Revenue and Tax Code. The California Constitution, in Article XIII, Section 28 (f) and the Revenue and Tax Code, in Section 12204 contains an identical provision noting that the gross premium tax applied to insurers is "in lieu of all other taxes and licenses…."
As stated by Rataj in NAMIC's Letter of Opposition, "[e]ven though SB 1459 refers to the money to be collected from insurers for campaign financing as a "fee", it is clear that this economic imposition is really a "hidden tax". Unlike most "fees" which are charged in exchange for the dissemination of a benefit or privilege, the exaction in the proposed legislation will not provide any direct or indirect benefit or privilege to insurance companies and/or their policyholders. Since the monies collected as a result of SB 1459 would not be used for the administration of the CDI, to regulate the insurance industry or improve the insurance market for consumers, this "fee" is nothing more than a "tax" in the guise of a "fee".
NAMIC and other members of the insurance industry also challenged the constitutionality of the bill on the grounds that the bill infringes upon insurers' and their policyholders' First Amendment Freedom of Speech Rights.
"By forcing insurance carriers and, ultimately, their policyholders to contribute, by way of a mandatory tax, to the campaign of candidates for the office of Insurance Commissioner, the state is requiring insurance carriers and their policyholders to engage in a form of political speech that may be inconsistent with the insurer's and/or its policyholders' political beliefs," stated Rataj.
In NAMIC's Letter of Opposition, Rataj opined, "[t]he mere act of contributing financial resources to either a candidate or an election campaign has a communicative element to it, and symbolically connects the contributor to the political ideology of the candidates or the election campaign. Consequently, SB 1459 would, in effect, infringe upon an insurer's and its policyholders' concomitant First Amendment freedom not to be involved in the political speech associated with an election campaign for Insurance Commissioner. As the Supreme Court held in Wooley v. Maynard, 430 U.S. 705, 714 (1977), "[f]reedom of thought and expression includes both the right to speak freely and the right to refrain from speaking at all."
The sponsor of SB 1459 placed it on "hold" so that it could be considered in light of AB 583, a comprehensive campaign finance measure which would require public financing of all statewide elected official campaigns.
For further information, contact
Christian J. Rataj
(970) 204-6695 Tel
(317) 879-8408 Fax
Posted: Monday, April 10, 2006 12:00:00 AM. Modified: Monday, April 10, 2006 3:44:06 PM.
317.875.5250 - Indianapolis | 202.628.1558 - Washington, D.C.