Insurance Commissioner Jim Donelon issued a cease and desist order today to United HealthCare Services, Inc. and/or UnitedHealthcare Insurance Company, its subsidiaries and affiliates (collectively hereafter referred to as “United”) for their intention to implement the removal of producer commissions from upcoming renewals of certain group health insurance products.
“In reviewing this situation I found it necessary to order the company to stop all efforts to implement such policy and to revise all applicable schedules of commissions and relevant rate and form filings to appropriately reflect the full commission payment required by law,” Commissioner Donelon stated. “This action is meant to both protect Louisiana’s health insurance producers who are due compensation and preserve our authority in making sure insurers writing in Louisiana are in compliance with our laws.”
The Louisiana Department of Insurance (LDI) was contacted in May by numerous producers who indicated that they had been notified of United’s intention to implement a zero-dollar schedule of commissions applicable to all policies sold to groups of greater than 100 insureds with an effective date on or after September 1, 2019. Accompanying this notification was an inducement to work with United and affected insureds to negotiate a “replacement” agency fee to be paid by the insured to the producer and an offer by United to facilitate this payment.
Commissioner Donelon found this intention by United to be contrary to certain provisions of the Louisiana Insurance Code including LA. R.S. 22:855 and 22:1568, which provide:
- An insurer that maintains a schedule of commission providing for a zero-dollar commission violates both its obligation to remunerate producers for selling its products and the statutory requirement to maintain one or more schedules of payable commission.
A schedule of commission with zero-dollar or minimal commission payment provides strong evidence that the insurer is impermissibly attempting to reclassify what is properly and mandatorily a commission as another form of payment. This behavior is a clear violation of R.S. 22:855(A)(1)’s requirement that the commission be included in the premium and may additionally violate the insurer’s obligation to pay tax on its annual premiums under R.S. 22:842, the prohibition on the payment of commissions to a non-licensed entity under R.S. 22:1557, the requirement that all payable commissions be reflected on the schedule of commission maintained pursuant to R.S. 22:1568 and that commissions be uniformly applied to all producers.
Simply reclassifying what is properly a commission to a fee does not actually convert the commission into another vehicle or relieve the insurer of its obligation to reflect the commission in its schedule or include it in its premium rate.
The cease and desist order may be viewed here.