Regulatory Requirements for Agents in “No Surprises”

Medical insurance claim form with stethoscope and surgical face mask. There are also other pieces of paperwork on the desk, including a patient form.

The No Surprises Act, which was passed as part of the Consolidated Appropriations Act (CAA) of 2021, was designed to reduce the effect and frequency of surprise medical bills on health insurance policyholders, and it requires issuers of individual health insurance coverage or short-term, limited-duration insurance (STLDI) to inform policyholders about any direct or indirect agent or broker compensation associated with enrolling them in those coverages. It also requires insurers to report agent/broker compensation information to the Department of Health and Human Services (HHS).

As part of the implementation of last year’s continuing resolution, this past September, HHS joined with several other federal agencies in issuing a Notice of Proposed Rulemaking (NPRM) to provide additional details around the requirements set forth in No Surprises. If finalized as-is, the rule would require issuers offering individual health insurance coverage or STLDI to disclose to policyholders the commission rates and compensation structure for other direct and indirect compensation provided by the issuer to an agent/broker associated with enrolling these policyholders. It seems like “indirect compensation” is meant to account for non-commission income generated by fees, bonuses, etc., and HHS provided proposed definitions of this and a few other terms in the NPRM, in which “direct and indirect compensation” is defined quite broadly, as any form of consideration exchanged between the insurer and the agent/broker, no matter how it’s exchanged.

The disclosure would need to be made before the policyholder finalizes their plan selection and would require the disclosure to be included on documentation confirming the person’s enrollment. The NPRM would also require issuers to report to HHS annually on the actual amount of direct and indirect compensation paid by the issuer to the agent/broker for the preceding year. Generally, these disclosure and reporting requirements are supposed to apply to contracts executed after Dec. 27, 2021.

HHS has said that, barring issuance of a final rule before Dec. 27, it plans to adopt a policy of “relaxed enforcement” between Dec. 27 and Jan. 1, but that presumed we would see a final rule promulgated by Jan. 1, 2022, which now seems unlikely. More recently, HHS personnel have recommended that agents, brokers, and insurers implement new procedures to meet the disclosure requirements as if the rule is already in force, so that they aren’t scrambling to do so once it is finalized. Affected agents and brokers should proceed with the expectation that the final rule will substantially resemble the NPRM, though, because the No Surprises Act text underlying the rule is itself quite prescriptive.

HHS has said that they expect agents and brokers to disclose the information to policyholders on behalf of issuers. It has also provided a detailed breakdown of HHS’s estimate of anticipated costs to agents and brokers of compliance with the rule, if/when it becomes final.

We will provide additional updates on the agent/broker disclosure requirements of the No Surprises Act as they become available.