NE LB632: Prohibit employers and associations from precluding certain contracts relating to health benefit plans

You may or may not have seen or even heard of LB632, a bill proposed in the Nebraska Unicameral by Senator Jim Scheer and co-sponsored by Senator Mark Kolterman.  But that’s okay because OCI has been watching it closely on your behalf.

So what is it? Here’s the statement of intent from Senator Scheer:

The intent of this bill is to allow an employer or association to enter into a contract, agreement, or arrangement with an agent or broker for compensation to be paid to the agent or broker for the sale of a health benefit plan. The compensation could be collected by and directly passed through to the agent or broker by the carrier and would not be considered premium.

 While on the surface it may seem that allowing agents to contract directly with the employer for commissions is a good thing, we feel there are some concerns with the way the bill is currently drafted.

On February 9th, OCI CEO Chuck Olson testified in front of the Banking, Commerce, and Insurance Committee on behalf of our company and the brokers we represent. His intent was to highlight a few things to consider as this bill is debated. A summary of the statement Chuck gave to the committee is below:

 

I am here on behalf of OCI, a general agency located in Omaha representing numerous carriers to professional agents and brokers across the state of Nebraska. We have 1,000+ agents contracted through our company and located across the state of Nebraska. We are in opposition to this bill, as written, for the following reasons:

1. This bill, as written, potentially opens the door for rebating as commissions are open to negotiation. A basic tenant of insurance is the prevention of rebating. The confusion to the general public and the trust they place in insurance is greatly diminished when insurance products are “discounted”. This bill would have a tendency to promote this practice on smaller groups (under 100 lives).

2. This bill would tend to favor very large agencies at the expense of the smaller hometown agent. Many of our agents are in small communities across this state and depend on the commissions paid by carriers to run their operations. Economies of scale by larger national and regional agencies could lead to many of these smaller operations being squeezed out of the market.  Due to the fact that a lot of these very large agencies are not domiciled in Nebraska, it also means dollars leaving our local economies.

3. This bill may lead to agents being left out of the insurance distribution as carriers release rates that do not include compensation to the agent. At first glance, this may seem to favor the final consumer, but in reality the final consumer is much better served when assisted by a professional agent who is fairly compensated. This has recently been evidenced by enrollment under ACA according to CMS and other entities.

4. Current law already provides for this type of compensation model once an individual has obtained a consultant’s license.

5. Those businesses that use the SHOP exchange would lose a portion of their tax credit amount, as the broker fees would fall outside premium.

6. We recommend amending the bill to apply only to those groups over 100 lives.

 

We’d love the opportunity to talk to you in more detail about this proposed bill and how it could impact your business. We would also appreciate your feedback as we continue to monitor this and give feedback to our elected officials.

This bill has been passed out of committee and is awaiting debate on the unicameral floor. 

Click HERE to contact your state senator and tell them how this bill would negatively impact you and your clients.