US NAIC Fall 2022 National Meeting Highlights: NAIC Adopts Request to Open Model Law #880 to Address the Improper Marketing of Health Insurance

On December 15, 2022, during the National Association of Insurance Commissioners (“NAIC”) Fall 2022 National Meeting, the Market Regulation and Consumer Affairs (D) Committee (“Committee”) approved the reopening of NAIC Model Law #880, the “Unfair Trade Practices Act” (“Model #880”), in connection with the NAIC’s ongoing efforts to combat unfair and deceptive acts or practices in the marketing and selling of health insurance products.

The Committee’s decision to reopen Model #880 was based on the work of the NAIC’s Antifraud (D) Task Force (“Task Force”) and Improper Marketing of Health Insurance (D) Working Group (“Working Group”). The Task Force and Working Group were charged with reviewing existing NAIC models and guidelines to develop the most effective path forward to protect consumers from harmful health insurance marketing practices, a problem that, according to the Committee, has been increasing considerably.

Proposed Amendments

Over the past year, the Task Force and Working Group reviewed and considered recommendations for the reopening of various NAIC models but settled on Model #880 and proposed amended language to Model #880 to address the problems posed to consumers by unscrupulous “Health Insurance Lead Generators.” The proposed language to Model #880 adds a defintion of a Health Insurance Lead Generator, which is defined as any entity that engages in any of the following activities:

1. Publicizes the availability of what is, or what purports to be, a health insurance product or service that the entity is not licensed to sell directly to consumers;
2. Identifies consumers who may want to learn more about a health insurance product; or
3. Sells or transmits consumer information to insurers or producers for follow-up contact and sales activity.

The proposed language applies the prohibitions against unfair and deceptive acts or practices in the insurance business to Health Insurance Lead Generators and requires them to maintain books and records, including marketing and complaint records, for at least two years. Any failure of a Health Insurance Lead Generator to abide by the strictures of the prohibitions on unfair and deceptive acts or practices, or any failure to maintain adequate books and records for the stated period, subjects the Health Insurance Lead Generator to various penalties. These penalties include cease and desist orders as well as monetary penalties of:

• $1,000 for each violation, with an aggregate cap of $100,000; or
• Up to $25,000 for each violation committed in conscious disregard for the prohibitions against unfair and deceptive acts or practices, with an aggregate cap of $250,000.

The revisions as currently proposed and described above are subject to review and revision through the normal NAIC processes for addressing model law review requests. Over the coming year, the Committee, the Task Force, and the Working Group are expected to work deliberatively to develop Model #880 to achieve the maximum consumer protection. 

Related Federal Activity

The Committee’s decision to reopen Model #880 comes on the heels of recent rulemaking by the Centers for Medicare & Medicaid Services’ (“CMS”), which became effective on June 28, 2022 (the “Rule”), which CMS has stated is intended to protect consumers against “confusing and potentially misleading activities” by third-party marketing organizations in connection with the marketing and sale of Medicare Advantage (“MA”) and Medicare Part D plans (“Plans”). In relevant part, the Rule:

• defines third-party marketing organizations (TPMOs) as any “organizations and individuals, including independent agents and brokers, who are compensated to perform lead generation, marketing, sales, and enrollment related functions as a part of the chain of enrollment (the steps taken by a beneficiary from becoming aware of an MA plan or plans to making an enrollment decision)”;
• requires TPMOs to make a standard disclosure regarding Plan offerings in a particular service area; and
• obligates Plan sponsors to ensure that TPMOs (1) adhere to the same requirements regarding the marketing and sale of Plans that apply directly to the Plan sponsors themselves, (2) disclose their subcontracted relationships, and (3) inform consumers that their information will be provided to a licensed agent for future contact.

Only a Starting Point

While it is important to note that, at this time, the Committee has merely adopted the request to open Model #880 for revision, we expect that the recent NAIC activity discussed herein and the promulgation by CMS of the Rule are only a starting point for potential regulatory scrutiny of the activities of parties that market and generate leads for health insurance products.    

To view additional updates from the US NAIC Fall 2022 National Meeting, visit our meeting highlights page.