Print Friendly SENATE BILL NO. 1342 – Health benefit plans, compensatn
SENATE BILL NO. 1342
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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
]]]] 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
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
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
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
This bill only affects individual and small group products. It does not affect
large group (over 50) and self-funded plans.
Contact: Senator Dean Cameron