Presidential Reform's Impact on the Insurance Industry
By Allan Autry, CPA, Senior Manager, Johnson Lambert LLP

As President Trump begins his term in the White House, many in the insurance industry are speculating about the impact his policies will have on their businesses since he advocated for significant reform.  These reforms could dramatically change the regulatory environment.

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The Affordable Care Act is one of the most notable reform items on the new administration’s agenda. The question marks surrounding its potential replacement means continued uncertainty for the health insurance industry. A recent outline from the House aligns with the President’s goals of removing many of the current law’s mandates. The proposal expands reliance on HSAs and health care credits while cutting funding to Medicaid and instead giving states greater control. Proposed legislation is slated to be released in mid-March.

During his campaign, President Trump released a plan for major tax reform for both businesses and individuals. The plan proposes simplifying business tax by getting rid of the graduated brackets and moving to a flat 15% rate. It also eliminates the Alternative Minimum Tax and reduces many of the complex corporate tax breaks presently available. Companies with foreign activity may be required to pay a one-time 10% repatriation tax to encourage greater domestic investment. The House drafted tax reform plan also contains a border adjustment tax, and it is unclear what impact this will have on the financial services sector. 

Although the President’s tax plan does not specifically address the insurance industry, tax reform proposals from the House have included insurance specific provisions. Rep. Dave Camp released a draft in 2014 with several provisions for adjusting P&C tax computation. The plan would modify the calculation of discounting and proration, eliminate surplus recordkeeping, and introduce a border adjustment tax. Life insurance companies would also face modifications to the NOL carryforward rules, computation of reserves, and the elimination of small life insurance company advantages. Sen. Mark Warner and Rep. Richard E. Neal recently re-introduced legislation that would raise taxes on foreign-based companies who provide reinsurance to US affiliates by deferring or denying a deduction for certain reinsurance premiums paid by a U.S. insurer to an international affiliate. 

Until specific laws are passed by Congress, it is difficult to know what exact changes will be made in the tax structure. However, companies can be fairly certain that changes are coming, and must stay diligent in order to adapt to the changing tax landscape.

Pictured: Allan Autry

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