2004 Legislation
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SENATE BILL NO. 1342 – Health benefit plans, compensatn

SENATE BILL NO. 1342

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Bill Status



S1342.......................................by COMMERCE AND HUMAN RESOURCES
HEALTH BENEFIT PLANS - Amends existing law to prohibit carriers that offer
health benefit plans under the Small Employer Health Insurance Availability
Act or the Individual Health Insurance Availability Act from providing
compensation in the form of a flat fee; to require compensation to be in
the form of a commission; to limit the commission; and to define "carrier."
                                                                        
02/16    Senate intro - 1st rdg - to printing
02/17    Rpt prt - to Com/HuRes

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-seventh Legislature                 Second Regular Session - 2004
                                                                        
                                                                        
                                       IN THE SENATE
                                                                        
                                    SENATE BILL NO. 1342
                                                                        
                         BY COMMERCE AND HUMAN RESOURCES COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO INSURANCE; AMENDING SECTION 41-1030, IDAHO CODE, TO PROHIBIT  CAR-
  3        RIERS  THAT  OFFER  HEALTH  BENEFIT  PLANS UNDER THE SMALL EMPLOYER HEALTH
  4        INSURANCE AVAILABILITY ACT OR THE INDIVIDUAL HEALTH INSURANCE AVAILABILITY
  5        ACT FROM PROVIDING COMPENSATION IN THE FORM OF A FLAT FEE, TO REQUIRE COM-
  6        PENSATION TO BE IN THE FORM OF A COMMISSION, TO LIMIT THE  COMMISSION  AND
  7        TO DEFINE "CARRIER."
                                                                        
  8    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
  9        SECTION  1.  That  Section 41-1030, Idaho Code, be, and the same is hereby
 10    amended to read as follows:
                                                                        
 11        41-1030.  PRODUCER COMPENSATION. (1) For purposes of this section:
 12        (a)  "Consumer" means an insured, a prospective  insured  or  an  employer
 13        group.
 14        (b)  "Retail  producer"  means a producer who solicits, negotiates with or
 15        sells an insurance contract directly to a consumer.
 16        (c)  "Wholesale producer" means a producer  who  solicits,  negotiates  or
 17        sells  an insurance contract directly with a retail producer, but not with
 18        a consumer.
 19        (2)  Notwithstanding any other provision of  title  41,  Idaho  Code,  and
 20    except as provided in this subsection (2)(c) of this section, retail producers
 21    and wholesale producers may charge a fee or be compensated by a combination of
 22    fees and commissions.
 23        (a)  Before  charging a fee to a consumer, a retail producer shall provide
 24        to the consumer a written statement that describes the services the retail
 25        producer will perform and the  fees  the  retail  producer  will  receive.
 26        Acceptance  by the consumer of a fee arrangement shall be evidenced by the
 27        consumer signing and dating the fee statement.
 28        (b)  Before charging a fee to a  retail  producer,  a  wholesale  producer
 29        shall  provide  to  the retail producer a written statement that describes
 30        the services the wholesale producer will perform and the fees  the  whole-
 31        sale  producer  will receive. Information regarding the amount of the fees
 32        charged by the wholesale producer shall be disclosed  in  writing  on  the
 33        face of the policy as a separately itemized charge.
 34        (c)  Carriers  offering health benefit plans pursuant to chapter 47 or 52,
 35        title 41, Idaho Code, shall be prohibited from providing  compensation  in
 36        the  form of a flat fee. The payment of any compensation to a producer for
 37        such plans shall be in the form of a commission not to exceed ten  percent
 38        (10%) of the premium paid. As used in this subsection (2)(c), "carrier" is
 39        as defined in section 41-4703 or 41-5203, Idaho Code, as applicable.

Statement of Purpose / Fiscal Impact


                         STATEMENT OF PURPOSE
  
                                RS 14013
  
  
The purpose of this legislation is to limit the amount of commission paid by a
health insurance company and to prohibit the use of fees instead of commission
on health insurance products.
  
Recently, one of the large insurers changed their commission structure to a fee-
based system. A fee-based system pays the producer a set fee regardless of the
age, health condition, or premium of the insured. The unintended consequence of
such a system will be to:
  
1.    It will create a disincentive for agents to service clients with heavy
      claim loads.
2.    It will cause adverse selection from one carrier to another, causing
      the older, less healthy clients to go to the non-fee-based company
      and the younger, healthier clients to go to the fee-based company.
3.    It will cause adverse selection between small group and individual
      products. Causing the young and healthy to gravitate towards
      individual products. Further, it would disincent agents from
      encouraging employers from assisting in the coverage of spouse
      and children.
             
This bill only affects individual and small group products. It does not affect 
large group (over 50) and self-funded plans.
  
  
  
                             FISCAL IMPACT
  
  None.
  

  
Contact:   Senator Dean Cameron
                                                              S 1342