Insurance, Administration

Rule R590-207

Health Agent Commissions for Small Employer Groups

Notice of Proposed Rule

(Amendment)

DAR File No.: 34892
Filed: 06/01/2011 11:23:20 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The rule is being amended to clarify the acceptable and unacceptable commission structures.

Summary of the rule or change:

Amendments made to the rule include: changing terminology, "agent" to "producer;" disallowing insurers to structure producer commissions in a way that would restrict the sale of health insurance to small employer groups; placing the table of commission structure examples into a section entitled "Commission Structure Examples;" and renaming the "Compliance Date" section (R590-207-8) to "Enforcement Date" providing 45 days after the effective date of the rule before it will be enforced.

State statutory or constitutional authorization for this rule:

• Section 31A-30-104
• Section 31A-2-201

Anticipated cost or savings to:

the state budget:

The changes to this rule will have no fiscal impact on the work load or revenues of the department or state budget. Insurers will not be required to file forms or rates with the department as a result of these changes.

local governments:

This rule will have no fiscal impact on local governments since it deals solely with the relationship between the department and its licensees and in this case deals with the commission structure for producers selling insurance to small employer groups.

small businesses:

The changes to this rule clarify that small employer insurers are prohibited from structuring their producer commissions in a way that reduces a producer's incentive to insure the smallest employer groups and those with the greatest health risk. Insurers are already complying with the requirements of this rule.

persons other than small businesses, businesses, or local governmental entities:

The rule prohibits insurers (large businesses) from changing the commission structure for their producers in a way that reduces their incentive to insure the smallest employer groups or those with health risks. Insurers are already complying with the requirements of this rule.

Compliance costs for affected persons:

The changes to this rule prohibits insurers (large businesses) from altering their producer commissions in a way that reduces their incentive to insure small employer groups based on their size or health risks. Insurers are already complying with the requirements of this rule.

Comments by the department head on the fiscal impact the rule may have on businesses:

There should be no fiscal impact on any entity. The changes merely clarify existing requirements.

Neal T. Gooch, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
450 N MAIN ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/15/2011

This rule may become effective on:

07/22/2011

Authorized by:

Jilene Whitby, Information Specialist

R590. Insurance, Administration.

R590-207. Health [Agent]Producer Commissions for Small Employer Groups.

R590-207-1. Authority.

This rule is issued and based upon the authority granted the commissioner under Subsections 31A-2-201(3)(a) and 31A-30-104([6]7).

 

R590-207-2. Purpose.

The purpose of this rule is to establish guidelines relating to commission structure for [small group health] insurance [agent]producers in the small employer group market that affect access to health insurance coverage for small employer groups.

 

R590-207-3. Applicability.

This rule applies to all licensed [insurers]carriers doing health insurance business under Title 31A, Chapter 30, the Individual and Small Employer Health Insurance Act.

 

R590-207-4. Definitions.

The definitions in Sections 31A-1-301 and 31A-30-103 apply to this rule.

 

R590-207-5. Commission Schedule [Policy]Structure.

(1) A health insurance carrier shall not structure [agent]producer commission [rates]schedule in a way that, directly or indirectly, create s a restriction, hindrance, or barrier to access to coverage for the smallest size groups or groups with the greatest health risks[identified in the commission schedule].

(2) The commission in the commission schedule for the smallest size group s or the groups with the greatest health risks[in the commission schedule] may not be designed to avoid, directly or indirectly, the requirements of guaranteed issue or renewal in the marketing of health insurance to small business owners.

(3) An insurer shall not design a commission structure that lessens the incentive to insure a small employer group that is smallest in size or with the greatest health risks.

(4) An insurer is not required to base commissions on a percentage. An insurer is permitted to pay no commissions on all business or to pay a dollar amount based on factors other than risk characteristics.

[

TABLE

  

ACCEPTABLE EXAMPLES:

     A commission structure that is in compliance would be:

an employer group size 2-5 would receive a 10% commission, an

employer group size 6-25 would receive a 9% commission, and an

employer group size 26-50 would receive a 7% commission.

     Another example of an acceptable commission schedule

would be: for employer group size 2-5 the commission would be

$20/Per Member Per Month(PMPM), for employer group size 6-25

the commission would be $18/PMPM, and for employer group size

26-50 the commission would be $16/PMPM.



Case Size in Lives            Rate Up               Comm. Rate

       2-24                   < 22                      12%

       2-24                 22% to <44%                 8%

       2-24                 44% to <65%                 8%

       2-24                 65% to 85%                  7%

      25-50                                             8%





UNACCEPTABLE EXAMPLE:



Case Size in Lives          First Year                Renewal

    Up to 3                      3%                      3%

      4-14                       8%                      8%

     15-29                       7%                      7%

     30-50                       6%                      6%



Case Size in Lives            Rate Up                Comm. Rate

      2-24                   < 22%                      12%

      2-24                 22% to <44%                  10%

      2-24                 44% to <65%                   8%

      2-24                 65% to 85%                    6%

     25-50                                               8%

]

R590-207-6. Commission Structure Examples.

(1) Examples of commission structures that are in compliance would be:

(a)(i) a 10% commission for employer group size 2-5;

(ii) a 9% commission for group size 6-25; and

(iii) a 7% commission for group size 26-50; or

(b)(i) $20/ Per Member Per Month (PMPM) for employer group size 2-5;

(ii) $18/PMPM for group size 6-25; and

(c) $16/PMPM for group size 26-50.

(2) An example of a commission structure that is not in compliance would be:

(i) 3% commission for employer group size 2-5;

(ii) 8% commission for group size 6-25; and

(iii) 7% commission for group size 26-50.

 

R590-207-7. Penalties.

Any carrier with a commission structure [that is not in compliance with this rule after the effective date of this rule will be considered in violation of this rule and will]found to be in violation of this rule shall be subject to the penalties provided for in Section 31A-2-308.

 

R590-207-[7]8. [Compliance]Enforcement Date.

[This rule is in effect on the date stated in the Notice of Effective Date form relating to this rule that the department files with the Division of Administrative Rules (the "effective date"). The effective date will follow a period of 30 days during which interested parties will have time to prepare to be in compliance with this rule. It will also be the date on which the department will begin enforcing this rule. The Notice of Effective Date is published in the Utah State Bulletin, a publication of the Division of Administrative Rules. The Utah State Bulletin is found at the website, http://www.rules.state.ut.us/. In addition, the effective date may be found at the department's website, http://www.insurance.utah.gov by clicking on INDUSTRY RESOURCES and then RULES and scrolling down to the appropriate reference to the rule]The commissioner will begin enforcing the amendments to this rule 45 days from the rule's effective date.

 

R590-207-[8]9. Severability.

If any provision or clause of this rule or its application to any person or circumstance is for any reason held to be invalid, the remainder of the rule and the application of these provisions shall not be affected.

 

KEY: insurance law

Date of Enactment or Last Substantive Amendment: [September 30, 2001]2011

Notice of Continuation: September 1, 2006

Authorizing, and Implemented or Interpreted Law: 31A-2-201; 31A-2-202