Archive for Saturday, March 31, 2001

Privacy bill could be tied to premium tax

March 31, 2001

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— Key lawmakers said Friday that they will try to close what they consider to be a loophole that has provided millions of dollars in tax breaks for insurance companies.

But Kansas Insurance Commissioner Kathleen Sebelius' office said that while Sebelius supports that effort, she is not happy with the way the Senate is handling it.

Senators are holding up consideration of a bill that would protect the privacy of medical and financial records in hopes of amending it with a bill changing the insurance premium tax.

Sebelius said the privacy bill is much-needed in Kansas, and its chances of passage could be jeopardized by attaching it to another measure.

"I think the privacy bill has broad-based support. I don't know about the premium tax proposal," she said.

Sebelius has worked on reducing the tax breaks for insurance companies in previous years, but the Legislature has rejected those efforts.

The privacy bill would allow Sebelius to adopt rules that would prohibit insurance companies from selling financial and medical information of their policyholders.

"If we do not act, Kansans' individual medical records can be sold or shared without their consent," she said.

But Sen. Sandy Praeger, R-Lawrence, said the state also needs to change the tax law affecting insurance companies because a 1997 change allowed insurance companies to receive a much larger tax break than was anticipated.

She said the privacy bill could be used as a vehicle to also change that tax law.

When the Legislature changed the insurance premium tax law in 1997, it was estimated that the tax breaks would reduce premium tax receipts by about $3.7 million in fiscal year 1999, which was the first full year the tax changes would have been felt, and $7.1 million in fiscal year 2000.

But the loss in tax revenue was much greater $20 million the first year, and $27 million the second year.

Praeger, chairwoman of the Senate committee that deals with health and insurance matters, said she understands Sebelius' concern over the privacy bill, but said she would make sure it was not jeopardized by the effort to change the insurance tax.

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