Agency Unveils Individual Health Producer Comp Disclosure Program

A federal agency is setting up a big new compensation disclosure and reporting program for individual health insurance agents and brokers.

The Centers for Medicare & Medicaid Services (CMS), an arm of the U.S. Department of Health and Human Services, says producers may have to start giving customers compensation descriptions, along with commission schedules, as early as Dec. 27.

CMS has drafted producer comp disclosure regulations to implement part of the No Surprises Act. The provision creating the act was part of the Consolidated Appropriations Act, 2021. Then-President Donald Trump signed the act into law Dec. 27.

The No Surprises Act

The best-known parts of the No Surprises Act will affect the medical bills of patients who go to the hospital for emergency care, or who go to hospitals in their health plan provider networks for ordinary care and end up getting care from out-of-network providers.

Other parts will require hospitals to disclose their prices and set rules for billing for air ambulance services.

A health insurance broker comp transparency section, described in Section 202 of Division BB of CAA 2021, requires compensation disclosures for all commercial health insurance intermediaries, including group health brokers, health benefits consultants and benefit plan administrators.

In the new regulations, CMS has focused on setting rules for the commercial individual health insurance market and the short-term health insurance market.

The rules do not appear to apply to producers who sell other types of health insurance products, such as student health insurance, hospital indemnity insurance or dental insurance. HHS notes that the U.S. Department of Labor already collects intermediary compensation data from group health coverage plans through the plans’ annual Form 5500 reports.

CMS lists Adam Wheeler as the official in charge of the individual health agent and broker comp disclosure program.

Comments on the draft comp disclosure regulations are due Oct. 18.

The Proposed Comp Disclosure Requirements

In the draft regulations packet and a paperwork development notice, officials say they expect to create sets of requirements for:

• The disclosures that agents and brokers will have to give customers before the customers sign up for coverage.
• Similar disclosures that insurers have to send to consumers after the consumers enroll in coverage.
• Annual compensation reports that insurers will have to HHS through an online system.

The list of data elements in the comp disclosures includes direct comp and indirect comp.

Direct comp includes:

Monetary amounts, including sales and base commissions, paid by an issuer that are attributable directly to the policy, certificate, or contract of insurance and that are paid to an agent or broker for the sale, placement, or renewal of individual health insurance coverage or short-term, limited-duration insurance.

Indirect comp includes:

Payments by an issuer attributable indirectly to a policy, certificate, or contract of insurance to agents, brokers, and other persons for items other than sales and base commissions (for example, service fees, consulting fees, finders’ fees, profitability and persistency bonuses, awards, prizes, volume-based incentives, and non-monetary forms of compensation).

The comp descriptions must distinguish between compensation for enrollments and compensation for renewals.

The annual summary reports will have to include the actual amounts paid, recipients’ National Producer Numbers or federal tax ID numbers, and information about payments made to general agencies and marketing organizations as well as amounts paid to retail agents and brokers.

CMS notes that it might end up asking for information about matters such as producer appointment arrangement duration and the number of plans the agent producer sold.

Officials note in the preamble, or official introduction, to the new draft regulations that they do not expect agents and brokers to sell much coverage between Dec. 27 and Jan. 31 and may let producers wait until 2022 to begin giving their customers comp disclosures.

The Size of the Reporting Program

Impact assessments in the draft regulation packet and the paperwork creation packet show how CMS sees the health insurance market.

CMS expects the issuer requirements to apply to 1,298 issuers in the ordinary individual market and to 26 issuers in the short-term health insurance market. The issuers could end up sending out about 1.1 million compensation disclosure forms, officials estimate.

The agency expects the producer requirements to apply to 55,541 agents and brokers.

Each of those producers has an average of about two appointments, officials estimate.

Officials are predicting that the average producer will have to prepare one compensation disclosure packet per year and give prospects just 20 comp disclosure packets per year.

The Impact

If the program takes effect and works as CMS expects, it may become one of the biggest national compensation disclosure programs.

Because the disclosure program would be so big, it could end up shaping the rules for other new and existing sales representative compensation disclosure programs.

For typical individual health insurance producers, the comp disclosure rules could create an opportunity for agents and brokers to point out that their current commissions already tend to be very low, and that they are selling individual health insurance mainly because of their belief in the importance of helping people get covered.

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