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Federal Register / Vol. 86, No. 177 / Thursday, September 16, 2021 / Proposed Rules indirect compensation as payments by an issuer attributable indirectly to a policy, certificate, or contract of insurance to agents, brokers, and other persons for items other than sales and base commission. Examples of indirect compensation include service fees, consulting fees, finders fees, profitability and persistency bonuses, awards, prizes, volume-based incentives, and non-monetary forms of compensation. HHS proposes in new proposed 45 CFR 148.410b2 to define a commission schedule as an itemized list or table that provides the commission levels that are paid by an issuer for the sale, placement, or renewal of individual health insurance coverage or short-term, limited-duration insurance. These definitions are based on the most common and essential terms HHS has observed in various examples of issuer commission schedules in the individual market.
HHS proposes to define policyholder in new proposed 45 CFR 148.410b5 for purposes of this section as the individual who purchases individual health insurance coverage or short-term, limited-duration insurance and is responsible for the payment of premiums.
b. Disclosure Requirements To ensure transparency of agent and broker compensation when purchasing individual health insurance coverage or short-term, limited-duration insurance, and to implement sections 2746b1
and 2 of the PHS Act, HHS proposes in new proposed 45 CFR 148.410c to codify the requirement that health insurance issuers offering individual health insurance coverage or short-term, limited-duration insurance must disclose to a potential or existing policyholder the amount of direct and indirect compensation provided to an agent or broker associated with enrolling the policyholder in the individual health insurance coverage or short-term, limited-duration insurance.
This disclosure would be required to include the commission schedule used to determine the compensation owed to an agent or broker as part of the appointment contract between the agent or broker and the health insurance issuer offering individual health insurance coverage or short-term, limited-duration insurance, as well as the structure for compensation not captured on the commission schedule.
Consistent with the requirements in section 2746b of the PHS Act, HHS
proposes in new proposed 45 CFR
148.410c2 that for new, initial enrollments, this disclosure would be required to be made prior to when
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potential policyholders finalize plan selection and also to be included on any documentation confirming the initial enrollment, including enrollment documentation required in applicable state or Federal law or an initial enrollment package. Section 2746b2
of the PHS Act requires health insurance issuers offering individual health insurance coverage or short-term, limited-duration insurance to include the disclosure on any documentation confirming the individuals enrollment.
HHS recognizes that the term any documentation could be read broadly to refer to any documentation that a health insurance issuer provides during a plan year that serves as confirmation that the individual is enrolled in the coverage. However, HHS is of the view that requiring such a broad reading of the statutory requirement would be burdensome to issuers, without producing a commensurate benefit to individuals who receive the disclosure.
Therefore, HHS proposes to interpret the statutory language more narrowly.
Specifically, with respect to initial enrollments, HHS proposes, in 45 CFR
148.410c2, to require disclosure on any documentation confirming initial enrollment, including enrollment documentation required in applicable state or Federal law or an initial enrollment package.24 In addition, consistent with the provisions in section 2746d of the PHS Act that recognize the need to account for the different processes for plan renewals, HHS
proposes in new proposed 45 CFR
148.410c3 that for renewals of enrollment in a plan, an issuer must provide the required disclosure to the policyholder with the renewal notice required in 45 CFR 147.106f or 148.122i, if applicable. HHS proposes this because plan renewals in the individual market generally do not have a moment when a consumer finalizes plan selection, as many of these renewals occur automatically, and because these renewal notices can also be considered to confirm enrollment in the plan for the upcoming plan year.
Therefore, issuers would be required to provide the required disclosure as part of an initial enrollment package or renewal notice, but would not be required to provide the required disclosure on other documents that could be considered to confirm 24 For example, pursuant to 45 CFR
147.200a1iv, a health insurance issuer offering individual health insurance coverage must provide a summary of benefits and coverage to an individual covered under the policy upon application, by the first day of coverage if there are changes, upon renewal, reissuance, or reenrollment, and upon request.

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enrollment, such as explanations of benefits.
In the absence of any documentation required by applicable state or Federal law to confirm initial enrollment, or the requirement for a notice of renewal of coverage with respect to short-term, limited-duration insurance, HHS
proposes, as a default in new proposed 45 CFR 148.410c4, that issuers would be required to provide the disclosure with the invoice for the first premium payment for the initial coverage term and for each renewal period. HHS
invites comment on whether there are other forms of documentation confirming enrollment for either individual health insurance coverage or short-term, limited-duration insurance on which disclosure of compensation information should be required and whether requiring delivery of the disclosure at another time, such as between the final plan selection and issuance of the invoice for the first premium payment, may be more appropriate.
HHS proposes to codify in new proposed 45 CFR 148.410c5
minimum requirements for disclosure of direct and indirect compensation information. HHS proposes that, at a minimum, a health insurance issuer offering individual health insurance coverage or short-term, limited-duration insurance could satisfy the disclosure requirement using the commission schedules or other documents that detail the applicable commission levels and indirect compensation, such as bonuses. When used to satisfy this new disclosure requirement, these documents must clearly specify commissions paid by an issuer to an agent or broker for the applicable plans for which the agent or broker has an appointment arrangement with the issuer, distinguish between commission payments for new enrollments and such payments for renewed enrollments if the issuer differentiates compensation for those two types of enrollment, and explain the qualifying thresholds for the payment of indirect compensation to an agent or broker. Requiring that the disclosure must include a commission schedule would ensure a consistent and readily available document for all policyholders to use to understand the compensation that their insurance agent or broker would receive and make informed purchasing decisions. If an issuer of individual health insurance coverage or short-term, limited-duration insurance also offers direct or indirect compensation that is not captured by the commission schedule, the issuer must supplement the disclosure of the information on the commission
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