OGC Opinion No. 08-04-14
The Office of General Counsel issued the following opinion on April 8, 2008, representing the position of the New York State Insurance Department.
RE: Agent Licensing of Marketing Representatives
Question Presented:
Must a marketing representative of a health maintenance organization (“HMO”), who enrolls institutionalized individuals into a Medicare Advantage Special Needs plan be licensed as an insurance agent if the marketing representative is paid a flat salary, and not a commission or fee that is dependent upon the number of individuals enrolled?
Conclusion:
Yes. If the marketing representative solicits, accepts applications for enrollment, or enrolls the institutionalized individuals into the Medicare Advantage Special Needs plan from outside the HMO’s office, the marketing representative must be licensed as an insurance agent, even if he is compensated on a salary, rather than commission, basis.
Facts:
A consultant for an entity that was described as an HMO provides Medicare Advantage Special Needs plan benefits to institutionalized individuals. The entity had planned to serve beneficiaries in New York by January 2008. The consultant questioned the conclusion of an unspecified opinion from the Department’s Office of General Counsel (“OGC”) that she believed stands for the proposition that only representatives who are paid on a commission, rather than salary, basis must be licensed as insurance agents.
Analysis:
A Medicare Advantage Special Needs plan is a federally legislated and regulated health care plan. 42 U.S.C.S. § 1395w-28(b)(6) defines such plan as a Medicare Advantage plan that exclusively serves special needs individuals. The definition of a “special needs individual” encompasses an institutionalized individual. See 42 U.S.C.S. § 1395w-28(b)(6)(B).
Pursuant to 42 U.S.C.S. § 1395w-21(a)(2)(A)(ii), a specialized Medicare Advantage plan for special needs individuals may take the form of a coordinated care plan. Coordinated care plans include, but are not limited to, HMO plans (with or without point of service options), plans offered by provider-sponsored organizations, and regional or local preferred provider organizational plans. See 42 U.S.C.S. § 1395w-21(a)(2)(A)(i).
Although the entity herein is providing Medicare Advantage Special Needs plan benefits to institutionalized individuals, it appears that the entity is not an HMO operating under a certificate of authority issued pursuant to New York Public Health Law Article 44. Pursuant to 42 U.S.C.S. § 1395w-25(a), a Medicare Advantage organization must be licensed under state law as a risk-bearing entity eligible to offer health insurance or health benefits coverage in each state in which it offers a Medicare Advantage plan.1 Until such time as the entity is appropriately certified in New York as required under Article 44 of the Public Health Law, it may not lawfully conduct activities of an HMO in New York.
With respect to the consultant’s question as to whether the OGC opinion referenced stands for the proposition that only representatives who are paid on a commission, rather than salary, basis must be licensed as insurance agents, OGC presumes the consultant adverts to an OGC Opinion dated January 6, 2005. The Department there concluded that Medicare Advantage sales representatives must be licensed as insurance agents in order to accept commission for enrolling new members into a Medicare Advantage plan.
An insurance agent is defined by N.Y. Ins. Law § 2101(a) (McKinney 2006) in relevant part as follows:
(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 sale 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;
Pursuant to Insurance Law § 2102(a)(1), an insurance agent must be licensed:
No person, firm, association or corporation shall act as an insurance producer2 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.
Hence, a regularly salaried employee of an HMO who conducts all of his work from inside the HMO’s office is not required to be licensed as an insurance agent. However, where an HMO’s employee or marketing representative solicits, accepts applications for enrollment, or enrolls institutionalized individuals into a Medicare Advantage Special Needs plan from outside the HMO’s office, such employee or representative must be licensed as an insurance agent, regardless of the form of compensation received.
The entity was advised to submit a written statement to the Insurance Department confirming that it is not conducting an HMO business in New York and that if the entity is in fact conducting an HMO business in New York, it must (1) cease to do so immediately; (2) confirm as much in writing; and (3) refrain from doing such business until such time as it is appropriately licensed pursuant to Article 44 of the Public Health Law.
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.
1 Although 42 U.S.C.S. § 1395w-25(a) makes reference to a Medicare + Choice organization, § 201 of Act Dec. 8, 2003, P.L. 108-173 (42 U.S.C.S. § 1395w-21 note) provides that “any reference to ‘Medicare + Choice’ is deemed a reference to ‘Medicare Advantage’ and ‘MA’.”
2 Insurance Law § 2101(k) states: “In this article, ‘insurance producer’ means an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the laws of this state to sell, solicit or negotiate insurance.”