In the state of Texas, the Department of Insurance recently sent out a bulletin warning health insurance agents and third-party administrators (TPAs) about the dangers of “assisting a company engaging in the unauthorized business of insurance.” While the bulletin was specific to Texas agents, it’s a message that brokers across the country should take to heart.
The letter, dated August 12, 2019, explains that “New types of health insurance or insurance like products are being marketed to…consumers by unlicensed and unauthorized companies.” Specifically, the letter says, “companies may claim to be a health care sharing ministry or other innovative business without complying with the requirements” that would exempt them from state regulations.
The danger for insurance agents is that they could be held responsible if they sell products from a company engaging in the unauthorized business of insurance:
A person who in any manner assists directly or indirectly in the procurement of the unauthorized insurance contract could be held strictly liable to the insured for the full amount of a claim or loss under the terms of the contract if the unauthorized insurer fails to pay the claim or loss.
The letter states that the Department of Insurance “may bring an action against an agent or TPA who assists the company whether the agent or TPA knew the product was unauthorized or not,” and, in addition to losing his or her license and being personally liable for the claim or loss, an agent who markets unauthorized insurance products could be “subject to civil penalties of up to $10,000 for each act of violation and for each day of violation.”
So how does an agent know if a company is selling an unauthorized insurance product? Here are some of the possible warning signs according to the Department of Insurance bulletin:
- Commissions significantly higher than similar licensed products;
- Declarations that the product is not insurance;
- Risk-bearing, risk-shifting, or risk-pooling;
- Offers of unlimited, free, or low-cost medical services included with a flat monthly fee, such as telemedicine or preventative care;
- Offers a network of providers similar to preferred provider organizations or health maintenance organizations; or
- Products that function, look, and sound like traditional health insurance.
To verify a company’s license, you can check the National Association of Insurance Commissioners website.