Insurance regulators in Kentucky are opposing carrier efforts to cool major medical insurance sales by changing agent and broker compensation structures.
Sharon Clark, the Kentucky insurance commissioner, says in a new advisory opinion that the Kentucky department believes insurers include agent commission payments in the filings they submit when they develop their individual major medical rates.
“Failure to pay commissions in accordance with the rate filing will be considered a violation of the Insurance Code,” Clark says in the opinion.
Clark has addressed the opinion to all health insurers authorized to offer health benefit plans in Kentucky.
The department notes in a disclaimer at the top of the opinion that the opinion is not legally binding on either the department or the reader.
The insurance agent editors of InsureBlog, who drew industry observers’ attention to the opinion in an article posted last week, noted that the opinion affects only carriers and agents in Kentucky for now but could influence regulators in other jurisdictions.
At the beginning of the year, Humana Inc. (NYSE:HUM) sent agents and brokers an alert warning them that it would stop paying commissions on sales of silver and gold individual major medical plans with an initial effective date on or after March 2, 2016, and cut commission rates on sales of bronze and catastrophic plans. Humana then warned at the end of the week, in a notice about its earnings forecast for 2016, that it believes it will have to record a premium deficiency reserve for 2016 individual major medical policies that comply with the Patient Protection and Affordable Care Act (PPACA).
Humana is still studying the mix of consumers enrolled in the 2016 exchange plans to determine how big the deficiency reserve should be, the company said.
In the past 18 months, Assurant Inc. (NYSE:AIG), UnitedHealth Group Inc. (NYSE:UNH), a number of struggling Consumer Oriented and Operated Plan (CO-OP) carriers and other carriers notified agents and brokers of producer compensation changes shortly before announcing their own moves to suspend active marketing of individual major medical products or to discontinue major medical product sales.
Carriers have argued that, in some cases, the current market rules give them only limited mechanisms for warding off new major medical business that they expect to be unprofitable.
B. Ronnell Nolan, the Louisiana agent who runs Health Agents for America Inc. (HAFA), forwarded a copy of the Humana producer comp change notice to HAFA members with the comment, “Something has got to change!”