The omnibus government funding legislation signed into law by President Donald Trump in the final days of 2020 included new health insurance agent compensation disclosure requirements that will take effect in late December. Earlier today, the Department of Health and Human Services (HHS) published a proposed regulation that, once finalized, will implement the individual market disclosure obligations that fall within its regulatory purview. 

The statute enacted late last year established distinct health insurance compensation disclosure mandates for both group health plans and the individual market. The group health plan requirements, which are discussed in more detail in a Big "I" summary developed several months ago, apply directly to insurance producers and consultants and will be administered by the Department of Labor (DOL). The Big “I" and certain other major producer groups have met with DOL officials and recently submitted a joint comment letter to the federal regulators, but no regulatory guidance from the Department has been issued so far. 

The proposed regulation published earlier today by HHS addresses a separate set of individual market disclosure requirements. These mandates apply to health insurance issuers that offer individual coverage or short-term, limited duration insurance. They would require a company to disclose the direct and indirect compensation provided by the issuer to a producer for enrolling individuals in such coverage. 

The rule proposed by HHS would require these disclosures to be made to all potential or new policyholders prior to plan selection and to be included in any documentation confirming the initial enrollment. The disclosures must include specific commission levels, explain the qualifying thresholds for the payment of bonuses or other indirect compensation, and provide additional documentation identifying direct or indirect compensation not otherwise addressed. In addition to offering these disclosures in connection with initial enrollments, issuers would also be required to provide them again as part of any plan renewal notice.

The proposed regulation also includes an annual reporting requirement for health insurers. It would require a company to report to HHS the total amount of direct and indirect compensation paid in the preceding year to an agent and broker for enrolling individuals in health coverage or short-term, limited duration insurance. 

Of particular interest to agents and brokers, the background and commentary issued with the proposed rule notes the following: 

“HHS expects that issuers subject to the requirements of this section would integrate this new disclosure requirement into their existing compliance operations. An issuer's obligation could be satisfied by the agent or broker making the required disclosure on the issuer's behalf. For example, issuers may provide agents or brokers who have an appointment arrangement with the issuer printed versions of the commission schedule and other documentation disclosing direct and indirect compensation, if applicable, to attach to enrollment materials or may provide a link to an online version of the document. This would equip agents and brokers with the information necessary to ensure that consumers would be aware of any compensation being paid by the issuer to the agent or broker prior to enrolling."

These requirements apply to contracts executed on or after December 27 between an agent or broker and a health insurance issuer. Comments concerning the proposed regulation are due to HHS in 30 days. 

Wyatt Stewart is Big “I" assistant vice president of federal government affairs. Wes Bissett is Big “I" government affairs senior counsel.