Summary of Meeting with Commissioner on Anti-Rebating and Producer Compensation
JLC Chairman Jonathan Anders and Counsel Bryson Popham met on Friday, November 19th, with Insurance Commissioner Sammis, Associate Commissioner Nancy Grodin, Principal Counsel Van Dorsey and Don Thompson. The primary purpose of the meeting was to discuss the MIA’s enforcement position on anti-rebate laws. It will be no surprise to JLC members that the broader context of the discussion included future changes in producer compensation. The best evidence of these changes is the recent reductions made by CareFirst, which were attributed to the new MLR requirements under the federal health care reform law.
In accordance with the JLC position adopted at our July 28th meeting, we stated that our general objective was to achieve maximum flexibility in producer compensation, recognizing that the future for brokers will almost certainly include an increased use of fees as well as combinations of fees and traditional compensation formulas from insurers (e.g., commissions or PEPM payments). We also told Commissioner Sammis that our JLC had agreed to a requirement that producers who wish to charge fees must first obtain an insurance adviser’s license under Maryland law.
The conversation then turned to the services provided by brokers today. We pointed out, and Commissioner Sammis acknowledged, that producers provide a wide variety of services, some of which are not related to the insurance transaction. The discussion then turned to whether the provision of these services constitutes a rebate that violates the insurance statute, if no separate charge is made for the service. This issue was not resolved; however, it led to a discussion of providing such services as “loss leaders,” a common practice in business generally. We also discussed the approach taken by the New York Insurance Department, which has issued “guidance and clarification” to producers that provides examples of services that are permitted under the anti-rebating laws and other examples of services that may violate such laws because they are “too attenuated to the provision of insurance.” The Maryland Insurance Administration has considered an approach similar to New York, and will be providing us with language on this subject for our further consideration and comment.
Commissioner Sammis observed that any expansion of producer compensation should include a frame work of disclosure to the consumer. This might include a general disclosure form for all employer-based insurance, with an addendum or a more detailed form required for services and fees in addition to the commissions payable under the policy. The Commissioner also expressed her opinion that, if this approach is taken, it should be limited to employer-based health insurance only, and not apply to individual health insurance or other lines of insurance.
Finally, Commissioner Sammis believes that this is an issue that should be resolved sooner rather than later. If legislative changes are needed, they should be considered in the 2011 legislative session. We will continue our dialogue with the MIA on this subject and it will be discussed at the JLC meeting that precedes the 2011 Maryland General Assembly.
Next Steps Legislatively
Now that we have formed HIBBC and we are moving toward the 2011 legislative session quickly, you should know that our next steps will be to send a joint letter from our Associations to every elected official who will take office in Annapolis next January. The letter will generally describe our concerns and request their support.
Immediately thereafter, we will begin contacting the producers who have registered on our HIBBC website and indicated their willingness to contact individual legislators with our message. Our goal is to have many of these initial contacts made before the legislative session begins, so that legislators will arrive in Annapolis knowing what we want. We will be providing assistance to these producers, including the results of our economic impact study by Anirban Basu.
During the Session, we hope to have producers come to Annapolis in small groups to meet with both individual legislators and Legislative Delegations. These Delegations are groups of legislators divided by geographic region (e.g., Southern Maryland) or by individual County (e.g., Baltimore County).
Changes are occurring every day and the JLC must recognize that Maryland will be a more difficult environment than some other states, where federal health care reform is not embraced by state government but rather viewed with skepticism. Our Governor and legislators are inclined to move ahead with a broad interpretation of the powers granted under the new law. It will be up to us to demonstrate to legislators that actions have consequences (e.g., less revenue means fewer jobs), to educate legislators on our value (and to enlist our business clients for that purpose), and to clearly and firmly request legislative support for our Principles and our legislative positions.