In the past couple of months, the above question has been asked by more than one caller to the Free Legal Service program that I run for the Independent Insurance Agents of Georgia. Some insurance companies have stopped paying commissions on health insurance policies, while others have drastically reduced the amount of commissions paid. These changes have been made, at least in part, in response to the provision in the Affordable Care Act that requires an insurance company to spend at least 80% (for individual and small groups) or 85% (for large groups) of the premiums they collect on claims payments and “health care quality improvement.” If they don’t meet those targets, the company has to issue rebates to its insureds.
The problem for insurance agents is that commissions have been deemed to be included in the 20% and 15% of premiums collected that can be spent on administrative expenses. This problem was the subject of a breakfast briefing at last week’s IIABA Legislative Conference given by South Carolina Senator Tim Scott. Senator Scott urged those in attendance to speak to their elected representatives about two bipartisan bills currently pending in Congress that would specifically exempt commissions paid to agents from the above limitations on administrative expenses. Unfortunately, those bills like many other bipartisan efforts have been caught up in the general gridlock that now exists.
In the meantime, Georgia agents have called me to find out if they can charge a fee to the insured for assisting them with obtaining a health insurance policy. The short answer is Yes, if certain conditions are met, but there is a large exception to that answer. With respect to personal lines health insurance, an agent must have a life, accident, and sickness counselor’s license and cannot also receive a commission from the insurance company. Thus, the policy in question must be one that either can only be issued without the payment of a commission or the issuance of which without the payment of a commission has been approved by the Insurance Commissioner in a rate filing, rating plan, or rating system. If certain disclosure and consent requirements are met, an agent can receive both a fee from the insured and a commission from the insurance company for the placement of a group health insurance policy. (Click here for an article I have written on this subject.)
The Georgia Insurance Commissioner’s Office is trying to make it easier for agents to get the necessary counselor’s license. It has proposed a regulation that will create a new type of counselor’s license to be known as a Limited Health Counselor License, because it covers only accident and sickness insurance. This license will take the place of the Limited Group Health Counselor license and will cover counseling services provided in connection with the purchase of both individual and group health insurance policies. Any agent who has held an accident and sickness license for five or more years or who has any of the following designations will not have to take an examination to get this new counselor license: CIC, CLU, FLMI, REBC or RHU.
The large exception to my above Yes answer concerns individual health insurance policies obtained through the insurance marketplace exchanges created under the Affordable Care Act. Although they are not crystal clear, the regulations that govern the operation of those exchanges prohibit charging the potential insured for assisting them in obtaining a policy on the exchange. Those regulations specifically prohibit Navigators from charging a fee to the potential insured for providing help with the marketplace exchange and state that any “non-navigators” who give such assistance are subject to the same prohibition. The regulations contemplate that any compensation received by agents and brokers for such services will be paid in the form of a commission by the insurance company that issues the policy obtained through the marketplace exchange.
Apparently, the people who wrote the above regulations were not the same as those who decided that commissions paid to agents are administrative expenses. Not the first time that one government hand did not know or consider what the other was doing.