The Office of General Counsel issued the following opinion on August 1, 2003, representing the position of the New York State Insurance Department.
RE: Licensing of Medicare+Choice Sales Representatives
May a health maintenance organization ("HMO") that operates under a certificate of authority issued pursuant to Article 44 of the N.Y. Public Health Law, pay its medicare+choice sales representatives, who are not licensed as insurance agents and who are regularly salaried employees of the HMO, a one-time payment for each new member they enroll into the medicare+choice program?
No, the HMO may not pay its medicare+choice sales representatives a one-time payment for each new member they enroll into the medicare+choice program pursuant to N.Y. Ins. Law §§ 2101(a)(1) and (2), and 2114(a)(3) (McKinney 2000 and Supp. 2003).
An HMO operates under a certificate of authority issued pursuant to Article 44 of the N.Y. Public Health Law. The HMOs sales representatives are employed to enroll individuals into the medicare+choice program pursuant to its contract with the Center for Medicare and Medicaid Services ("CMS"), which administers the medicare program and is the federal sub-agency of the Department of Health and Human Services.
The HMO agrees (via contracts with CMS and enrollees) that it will provide a specified level of comprehensive benefits through its participating provider network to medicare eligible members who are enrolled in Medicare Part B. The HMO maintains enrollment data and pays claims on an at-risk basis. It is reimbursed by CMS for services provided to the enrollees based upon a schedule of allowances that is commonly referred to as the RBRVS.
The medicare+choice program was added to the medicare plan by Congress in 1997, allowing beneficiaries to receive their medical services through privately managed health care programs, such as HMOs.
The federal statutes and regulations that implemented this plan contain certain preemptions of state law: a general preemption provision, and a specific preemption provision. The specific preemption provision is not applicable to the particular issues addressed herein. The general preemption provisions are contained in 42 U.S.C.S. § 1395w-26(b)(3)(A) and 42 C.F.R. § 422.402(a), which state:
42 U.S.C.S. § 1395w-26(b)(3)(A):
(3) Relation to State Laws
(A) In general. The standards established under this subsection shall supersede any State law or regulation (including standards described in subparagraph(B)) with respect to Medicare + Choice plans which are offered by Medicare + Choice organizations under this part [42 U.S.C.S. §§ 1395w-21, et seq.] to the extent that such law or regulation is inconsistent with such standards.
42 C.F.R. § 422.402(a):
- General preemption. Except as provided in paragraph (b) of this section, the rules, contract requirements, and standards established under this part supersede any State laws, regulations, contract requirements, or other standards that would otherwise apply to M+C organizations and their M+C plans only to the extent that such State laws are inconsistent with the standards established under this part. This preemption of State laws and other standards applies only to coverage pursuant to an M+C contract, and does not extend to benefits outside of such contract or to individuals who are not M+C enrollees of an organization with an M+C contract.
No federal laws or regulations regarding agent-licensing requirements were found. Thus, there are no federal laws or regulations that are inconsistent with New York State agent licensing requirements. Therefore, the agent licensing requirements contained in N.Y. Ins. Law §§ 2101(a)(1) and (2), and 2114(a)(3) (McKinney 2000 and Supp. 2003) apply.
N.Y. Ins. Law § 2101 (a)(1) and (2) state:
(a) In this article, "insurance agent" means any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to article forty-four of the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or procurement or making of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker, except that such term shall not include:
(1) any regular salaried officer or employee of a licensed insurer, fraternal benefit society or health maintenance organization or of a licensed insurance agent, who does not solicit or accept from the public, outside of an office of such insurer, health maintenance organization or agent, applications or orders for any such contract, if such officer or employee does not receive a commission or other compensation for his services which commission or other compensation is directly dependent upon the amount of business done;
(2) any regular salaried officer or employee of any insurer or health maintenance organization, who devotes substantially all of his services to activities other than the solicitation of insurance business and health maintenance organization contracts from the insuring public, and who receives for the solicitation of such insurance and health maintenance organization contracts no commission or other compensation directly dependent upon the amount of business obtained[.]
In the present situation, the HMO pays its regular salaried employees additional compensation, in the form of a one-time payment, for each new member enrolled into the medicare+choice program. Thus, such employees constitute "insurance agents" as that term is defined in N.Y. Ins. Law § 2101(a)(1) and (2).
N.Y. Ins. Law § 2102(a)(1) (McKinney 2000) states:
No person, firm, association or corporation shall act as an insurance agent, insurance broker, reinsurance intermediary or insurance adjuster in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of this chapter.
N.Y. Ins. Law § 2114 (a)(3) states:
(3) No insurer, fraternal benefit society or health maintenance organization doing business in this state and no agent or other representative thereof shall pay any commission or other compensation to any person, firm, association or corporation for services in soliciting or procuring in this state any new contract of accident or health insurance or any new health maintenance organization contract, except to a licensed accident and health insurance agent of such insurer, such society or health maintenance organization, or to a licensed insurance broker of this state, and except to a person described in paragraph two or three of subsection (a) of section two thousand one hundred one of this article.
An "insurance agent" must be licensed, pursuant to N.Y. Ins. Law § 2102(a)(1), in order for a health maintenance organization to pay it commission or other compensation for soliciting or procuring an HMO contract. The HMOs medicare+choice sales representatives are not licensed as insurance agents in New York. Hence, the HMO may not pay its medicare+choice sales representatives a one-time payment for each new member they enroll into the medicare+choice program.
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.