Is the Carrier Bound by the Agent Agreement? Or Only the Agent?

[Sherota1]

Do contracts matter?

UnitedHealthcare euthanizes agent commissions for 2016

When an agent signs a contract and gets appointed with an insurance company who is bound by the contract? I know the technical answer to that question but from the things I’m seeing and hearing in the industry lately it looks like only we the are bound by what’s written in the contract. California had to pass a law AB-1163 effective January 1st to protect agents from companies that make material changes to their contracts with little or no notice. If the written contract has any meaning then why the need for this law? Does this mean that the carriers are exempt from the contract in all other states? Is the 30 day notice that's written in most contracts meaningless? Obviously yes.

This is what the law states:

AB 1163 (Rodriguez) - Health Care Service Plans and Health Insurers: Notice of Contract Changes to Agents & Brokers CAHU Posiiton: Support & SPONSOR Prohibits a material change made by a plan or insurer to the terms and conditions of a contract with a solicitor, agent or broker from becoming effective until the plan or insurer has provided at least 45 days of written or electronic notice indicating the change to the contract. Defines "material" as a provision in a contract affecting commissions, bonuses, and incentives paid to the solicitor, agent or broker, right of survivorship, indemnification of the solicitor, agent or broker by the health plan or errors and omissions coverage requirements for the solicitor, agent or broker. Exempts from the notice requirement a change to the contract that is mutually agreed upon by the plan or insurer and the solicitor, agent or broker, or a change required by state or federal law. Author's statement. According to the author, AB 1163 was introduced in response to the recent action of a health insurance carrier that made material changes to their agreement with licensed health insurance agents with only 48 hours of notice before the substantive changes took effect. This action, combined with other recent actions that changed agent agreements since the advent of the Affordable Care Act, have made licensed agents aware of agent vulnerability to health plan and carrier actions as they seek to add or shed market share. AB 1163 levels the playing field and provides for a fair and reasonable notice to licensed agents when their contract is materially changed.

The major complaint by CMS and HHS is that instead of doing the right thing for our clients we direct them to the plans that will give us the highest commission. For the most part I find that not to be true.
To be ethical and for my own peace of mind my ACA participation for the year has ended for all carriers as of yesterday. Today everyone is being directed to the Marketplace where they can have a fair chance according to CMS of getting unbiased information on all of the plans available to them.

I feel good and am enjoying my weekend.

 

[RayNY]

Looks like contracts still don't matter.

They are just required to give 45 days notice before they bend you over, no more 2-day surprises.

Ever see those horror movies where the killer lets the victim run for their life for a bit before the inevitable? That's basically what's going on.

 

[Sherota1]

What many newbies do not realize is that they do not work for the insurance company. They are not employees. They are independent contractors who are given an opportunity to make money with an entity who hold all of the cards in their hand. Their weapon of choice is the contract that we sign and the words “We reserve the right to amend this agreement at any time by giving the proper notice.” Once they give you the proper notice they can change the agreement to say “they can change the agreement at any time without notice”, which is what many of the companies have done.

To naively believe the promises that the company will always be there for you is not practical. The truth is they will keep you as long as it’s profitable for them but if they can find a better way to be profitable, the contract gives them an easy way to write you out of the picture or will make hanging on not worth it so you will self deport. Problem solved.

The only bad part is that some companies put up barriers that state that you cannot replace the business or direct the client to another company. If your client decides to stay with them you will lose all of that part of your business. They will continue to profit. Convenient legal theft by design.

So the states can write laws requiring the companies to give more notice before making changes to agent compensation but it really will not solve the problem. They will just send out a notice a few months ahead of time stating that they can amend the agreement anytime without notice. If the agent signs it they are on the hook. There are no protections. It’s the nature of the business. Your only ally is yourself and your own common sense.

Overall there are benefits to being in this business you just need to be aware of the pitfalls and prepare for them ahead of time or you will be disappointed.