CDI Plans No Broker-Agent Fee Increases This Year or Next


The California Department of Insurance (CDI) anticipates no license or fee increases for insurance broker-agents at least through the 2013-14 fiscal year, which ends June 30, 2014, CDI officials announced at a meeting with IBA West and other industry representatives to discuss the overall fiscal condition and budget of the agency.

The CDI operates on a current annual budget of approximately $224 million.  Of that total, over $71 million is spent in the direct regulation of insurers and insurance producers; almost $51 million is spent in various consumer protection activities; almost $100 million is spent fighting fraud; and the remaining $2 million goes to general fund tax collection and audits.  The proposed 2012-13 budget contemplates similar allocations, with an overall increase of less than $1 million to $225 million.

Unlike most state agencies, the CDI receives almost no money from the state's General Fund; the Department is instead funded through a series of dedicated fees and assessments.  Of the total current fiscal year's revenues of almost $203 million, 45 percent (over $91 million) comes from fraud assessments that are added to every premium, including in workers' compensation, automobile, and disability and health insurance policies.  Another 27 percent (over $56 million) comes from producer and insurer licensing fees; 12 percent (almost $24 million) from provisions in Prop. 103 that permit recoupment of expenses; and 10 percent (over $20 million) in examination fees.

Although the Department plans to increase a general fraud assessment, and also increase a policy approval form filing fee, the license fees for new and renewal licenses for insurance brokers and agents will not be increased this year or next, CDI officials said.

One concern shared by Department officials and the industry is the expansion of legislative mandates.  For example, CDI is required by law to fund the Health Insurance Counseling and Advocacy Program (HICAP) within the California Department of Aging (DOA).  The DOA has total authority and oversight over that program, and is essentially given a 'blank check," which CDI must pay, to underwrite its activities.  In the current budget year, CDI ws required to transfer $4.9 million to DOA.

A new, potentially far more costly mandate was enacted last year by Assembly Bill 922--which requires both CDI and the Department of Managed Health Care (DMHC) to underwrite all expenses of the Office of the Patient Advocate, which is being transferred (along with overall regulation of DMHC) to the California Health and Human Services Agency.  The Office of Patient Advocate is responsible for, among other things, developing educational and informational guides for consumers, compiling an annual publication of a quality of care report card, and rendering advice and assistance to enrollees.  DMHC regulates HMOs and CDI regulates PPOs.  The amount of the Patient Advocate assessment will be allocated between the two agencies, based on the number of covered lives.  It is not known how much CDI will be forced to remit to cover that mandate--which some observers contend is effectively an illegal tax.