IIABCal Successful in Getting Commission Language Removed from Health Exchange Bill

AB 1083 passed the Senate Insurance Committee with a vote of 5-2.  This vote culminates months of effort by IBA West to modify the bill’s language to ensure it did not inadvertently include any provisions that would be detrimental to insurance agents and brokers. 

The bill, authored by Assemblyman Bill Monning, is one of the main Exchange bills moving through the Legislature to implement the federal Patient Protection and Affordable Care Act.  Before the vote this week, Assemblyman Monning agreed to remove two problematic provisions from the bill.

Background. There were two provisions that caused some concern from IBA West and other insurance agent groups.  The first provision proposed to extend to solicitors and agents the same prohibition that currently apply to carriers which prevents health care providers from entering into arrangements for compensation with agents for the sale of health insurance that vary based on health status, claims experience, industry, occupation, or geographic location. 

The second provision of concern proposed to require healthcare providers to file with their regulators (Insurance Commissioner and the Department of Managed Health Care) any and all compensation agreements with agents so that the regulators may monitor for compliance.

For the last several months IBA West, as well as other trade associations representing insurance professionals, has worked with the author’s staff and sponsors on the language in the bill concerning the products and compensation agreements. 

IBA West pointed out that California law already prohibits insurers or health plans from entering into any agreement that results in compensation being varied due to health status, claims experience, industry, occupation or geographic location.  On the filing of compensation agreements, IBA West argued that these requirements are unnecessary, as the regulators already have the authority to require insurers and health plans to conform to law.

However, the main concern of IBA West and other trade associations was the language of the bill that would provide the implied authority for regulators to standardize, or otherwise regulate, commissions, which has never been debated in any policy committee in the Legislature and is a topic that is substantially beyond the purview of the bill.

Lastly, there was a real concern that requiring every compensation agreement to be filed with the regulators would interfere with the practice of insurance agents and their customers negotiating compensation and service agreements that result in the employer obtaining the best deal for price and services for group health insurance.

IBA West is the only insurance trade association in California representing property and casualty producers that maintains a full time legislative advocate in Sacramento and a full time regulatory counsel  to monitor and address legislative and regulatory issue critical to insurance producers and the property and casualty insurance business in California.