DEPARTMENT OF REGULATORY AGENCIES
Division of Insurance
3 CCR 702-1
ADMINISTRATIVE PROCEDURES
Amended Regulation 1-2-17
COMPENSATION DISCLOSURES FOR HEALTH INSURANCE PRODUCERS
Section 1 Authority
Section 2 Scope and Purpose
Section 3 Applicability
Section 4 Definitions
Section 5 Disclosing Compensation
Section 6 Fees Allowed for the Sale or Renewal of an Individual Health Benefit Plan
Section 7 Severability
Section 8 Enforcement
Section 9 Effective Date
Section 10 History
Appendix A Required Disclosure for Fees Charged for the Sale of an Individual Health Benefit Plan
Appendix B Required Disclosure for Fees Charged for Assisting with the Renewal of an Individual
Health Benefit Plan
Section 1 Authority
This regulation is promulgated and adopted by the Commissioner of Insurance under the authority of §§
10-1-109, 10-16-133(5)(c), and 10-22-112(3)(b), C.R.S.
Section 2 Scope and Purpose
The purpose of this regulation is to establish that insurance producers who sell health care insurance shall disclose to the person purchasing the policy that the insurance producer will receive a commission; establish the required disclosure of the standard compensation schedule of the producer to the consumer; and to establish the conditions and notice that must be provided to a consumer if a producer intends to charge a fee for the sale or for providing assistance with renewal of an individual health benefit plan. This regulation replaces Colorado Insurance Emergency Regulation 18-E-03 that became effective on August 8, 2018, in its entirety.
Section 3 Applicability
The requirements and provisions of this regulation apply to all producers who sell health care insurance. This regulation does not apply to sales under Medicare Advantage (also known as Medicare Part C), Medicare Part D Prescription Drug Benefit programs, Medicare Supplement insurance, travel insurance, disability income insurance, credit insurance or long-term care insurance.
Section 4 Definitions
A. “Additional compensation” means, for the purposes of this regulation, compensation received when the producer provides additional services on behalf of an insurer. For example, the producer may perform some underwriting or administrative services, such as policy issuance, for which additional compensation beyond standard compensation or contingent compensation is appropriate. These services are not originally contemplated in an insurer’s standard or contingent compensation payments.
B. “Carrier” shall have the same meaning as found at § 10-16-102(8), C.R.S.
C. “Contingent compensation” means, for the purposes of this regulation, the incentive commission for insurance producers to meet pre-established goals for profitability, retention and/or growth standards across all of the policies they place with an insurer for a specific year.
D. “Exchange” shall have the same meaning as found at § 10-16-102(26), C.R.S.
E. “Health benefit plan” shall have the same meaning as found at § 10-16-102(32), C.R.S.
F. “Health care insurance” shall have the same meaning as “health coverage plan”, as defined in § 10-16-2(34), C.R.S., but, for the purposes of this regulation, does not include long-term care insurance.
G. “Insurance producer” or “producer”, shall have the same meaning as found at § 10-2-103(6), C.R.S., with the exception that for the purposes of this regulation it does not include § 10-2-103(6)(b), C.R.S.
H. “Insurer” shall have the same meaning as found at § 10-2-103(6.5), C.R.S., and, for the purposes of this regulation, shall include entities subject to Parts 3 and 4 of Article 16 of Title 10.
I. “Sale” means, for the purposes of this regulation, the exchange of a contract of insurance for money or its equivalent.
J. “Standard compensation” means, for the purposes of this regulation, the set amount or percentage commission the insurer pays the insurance producer for selling its insurance policy. Standard compensation does not include renewal commissions.
Section 5 Disclosing Compensation
A. All producers who sell health care insurance shall disclose his or her standard compensation that may be received. The standard compensation may be disclosed as a percentage or fixed amount, depending on how the commission is paid.
B. All compensation shall be disclosed by the health producer prior to finalizing the sale of health care insurance.
C. The producer disclosure requirements apply to both sales of new policies and policy renewals. The producer shall maintain written certification that he or she has provided the required disclosure to a policyholder. This may be in the form of Certificate of Mailing or Hand Delivery signed by the producer or a copy of an email to the policyholder. The Colorado Division of Insurance will not provide or approve forms used by producers for this disclosure. The written certification of delivery or copy of the email to the policyholder must be retained by the producer pursuant to Colorado Insurance Regulation 1-1-7 for the current calendar year and two (2) prior years.
D. In some instances, a producer may sell a product for an insurer but will not be compensated by that insurer. The compensation may come from the insurer’s parent or other affiliate, or from a third party. The source of the producer’s standard compensation must be disclosed.
E. Any contingent or additional compensation that may be received by the producer shall be disclosed.
Section 6 Fees Allowed for the Sale or Renewal of an Individual Health Benefit Plan
A. An insurance producer may charge a fee for the sale or for assisting with the renewal of an individual health benefit plan if both of the following conditions are met:
1. The insurance producer does not receive commission from the carrier for the individual health benefit plan being sold or renewed; and
2. The insurance producer provides the notice found in Appendix A or Appendix B of this regulation, as appropriate, prior to the sale of an individual health benefit plan or prior to assisting the individual with the review of his or her current individual health benefit plan eligible for guaranteed renewal.
B. An insurance producer shall refund all fees received for the sale or assisting with the renewal of a particular carrier’s individual health benefit plans if the insurance producer receives contingent compensation from the carrier for the plans sold prior to reaching the contingent compensation threshold.
C. The fee the insurance producer charges for the sale or for assisting with the renewal of an individual health benefit plan shall be the same for both on-exchange and off-exchange individual health benefit plans.
D. An insurance producer shall not charge a fee to assist in enrolling an individual in Medicaid.
E. An insurance producer shall not charge a fee to assist in enrolling an individual in the Children’s Basic Health Plan.
F. An insurance producer charging a fee for the sale or for assisting with the renewal of an individual health benefit plan is soliciting or negotiating an application for insurance on behalf of the carrier offering the individual health benefit plan and the insurance producer represents the carrier, not the consumer, in any dispute between the carrier and the consumer.
Section 7 Severability
If any provision of this regulation or the application thereof to any person or circumstances is for any reason held to be invalid, the remainder of the regulation shall not be affected thereby.
Section 8 Enforcement
Noncompliance with this regulation may result, after proper notice and hearing, in the imposition of any of the sanctions made available in the Colorado statutes pertaining to the business of insurance, or other laws, which include the imposition of civil penalties, issuance of cease and desist orders, and/or suspensions or revocations of licenses, subject to the requirements of due process.
Section 9 Effective Date
This regulation shall become effective on December 1, 2018.
Section 10 History
Emergency Regulation 08-E-7, effective January 1, 2009.
Original Regulation 1-2-17, effective March 2, 2009.
Emergency regulation 18-E-03 effective August 8, 2018.
Amended regulation 1-2-17, effective December 1, 2018.
Regulation 1-2-17 3 of 5 Effective December 1, 2018
APPENDIX A
Required Disclosure for Fees Charged for the Sale of an Individual Health Benefit Plan
[PRODUCER LETTERHEAD ALLOWED]
INSURANCE PRODUCER FEE DISCLOSURE FOR THE SALE OF AN
INDIVIDUAL HEALTH BENEFIT PLAN
[The following text must be in 12 point font.]
I [PRODUCER NAME] hereby disclose to [NAME OF CLIENT] on [DATE] that I am not receiving any compensation for the individual health benefit plan you have selected.
I certify, through this notice, that I do not receive commission for the sale of this individual health benefit plan from the carrier offering this individual health benefit plan. I also certify that I will charge the same fee for the sale of an on-exchange individual health benefit plan as an off-exchange individual health benefit plan.
If I am paid commission for the sale of this individual health benefit plan in the future, I agree to refund the full amount of the fee that you have paid.
I will not charge a fee for assisting in enrollment in Medicaid or the Children’s Basic Health Plan.
The fee that I will charge you for the sale of an individual health benefit plan will be:
[DOLLAR AMOUNT].
[NAME OF PRODUCER] [NAME OF CLIENT]
[PRODUCER SIGNATURE AND DATE] [CLIENT SIGNATURE AND DATE]
APPENDIX B
Required Disclosure for Fees Charged for Assisting with the Renewal of an Individual Health Benefit Plan
[PRODUCER LETTERHEAD ALLOWED]
INSURANCE PRODUCER FEE DISCLOSURE FOR ASSISTING WITH
THE RENEWAL OF AN INDIVIDUAL HEALTH BENEFIT PLAN
[The following text must be in 12 point font.]
I [PRODUCER NAME] hereby disclose to [NAME OF CLIENT] on [DATE] that I am not receiving any compensation for reviewing and discussing other plan options with you in an effort to provide a recommendation for an individual health benefit plan that best suits your needs.
Subject to the penalties set forth in § 10-2-801, C.R.S., I certify, through this notice, that I do not receive commission for the renewal of this individual health benefit plan from the carrier offering this individual health benefit plan. I also certify that I will charge the same fee for assisting with the renewal of an on-exchange individual health benefit plan as an off-exchange individual health benefit plan.
If I am paid commission for the renewal of this individual health benefit plan in the future, I agree to refund the full amount of the fee that you have paid.
I will not charge a fee for assisting in enrollment in Medicaid or the Children’s Basic Health Plan.
The fee that I will charge you for reviewing and discussing other plan options with you and assisting you in the renewal of your current individual health benefit plan will be:
[DOLLAR AMOUNT].
[NAME OF PRODUCER] [NAME OF CLIENT]
[PRODUCER SIGNATURE AND DATE] [CLIENT SIGNATURE AND DATE]
Regulation 1-2-17 1 of 5 Effective December 1, 2018