New York State Caps Health Commissions at 4%

The new policy applies to individual and small-group products

(Photo: Thinkstock) (Photo: Thinkstock)

New York state regulators have acted to protect the health coverage market there against a potential threat to stability: the possibility that insurers might use high commissions to get more than their fair share of the state's individual and small-group major medical business.

In 2018, the state will limit individual and small-group health insurance producer commissions and fees to 4% of the premiums.

(Related: Benefits Firms Wrestle With Storms)

Troy Oechsner, the state's deputy superintendent for health, told health insurers, managed care companies and other coverage providers about the 2018 producer compensation cap in a memo issued Monday.

New York already caps health maintenance organization plans' commissions at 4%, Oechsner writes in the memo.

"Because New York’s health insurance market is best served by fair competition among all issuers, commissions and other fees should not be structured to give issuers an unfair market advantage," Oechsner writes.

Regulators have decided to impose a 4% cap on the producer compensation paid by all coverage providers, including insurance companies, to ensure a level playing field and market stability, Oechsner writes.

Agents and brokers in other states have been complaining in the past two years about carrier moves to reduce or eliminate producer compensation, not welcoming efforts by carriers to use high commissions to increase individual or small-group major medical sales.

James Schutzer, the legislative committee co-chair at the New York State Association of Health Underwriters, who is a benefits consultant at J.D. Moschitto & Associates Inc. in White Plains, N.Y., said he was not aware of any carriers in the state paying more than 4% for individual or small-group major medical business.

Michael Capaldo, NYSAHU's media chair, who is the owner of Michael Capaldo Employee Benefits in Coram, N.Y., said he has heard of one carrier that offers a small-group commission bonus that can push the total commission rate over 5%.

Capaldo and Schutzer said the new 4% commission cap announcement came as a surprise.

"We're not really sure what prompted this," Schutzer said.

"I've not heard any discussion of this being an issue," Capaldo said.

Producers should not be thinking about the issuers' commission rates when helping clients choose coverage, Capaldo added.

"We're supposed to be looking at it from the perspective of what's in the best interest of the client," he said.

Representatives from the New York Department of Financial Services were not immediately available to comment.

--- Read 3 Opportunities in the Health Gap Market on ThinkAdvisor.

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