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Volume 2, No. 7 - September 2013

Compliance Corner

This section has been created to assist you in keeping your insurance business in compliance. The items are intended as reminders only and are not necessarily the exact text of the Florida Statutes or Florida Administrative Code. The legal cites have been provided for your further reference.

Change in Laws Regarding Sales of Annuities

Senate Bill 166 was passed during the 2013 Florida Legislature and becomes effective on October 1, 2013. It substantially revised Florida consumer protection laws relating to sales of annuities by incorporating the 2010 National Association of Insurance Commissioners (NAIC) model regulation on annuity protections. The bill expanded the scope of the consumer protection laws to generally include all consumers purchasing annuities. Previously, the law only applied the protections to consumers aged 65 and older. The bill also retained law limiting the surrender charges and deferred sales charges that may be imposed upon senior consumers.

The following are primary consumer protections contained in the revised law:

Suitability of Annuities - The revised law requires an insurer or insurance agent recommending the purchase or exchange of an annuity that results in an insurance transaction to have reasonable grounds for believing the recommendation is suitable for the consumer, based on the consumer's suitability information. The revised law imposes additional duties on insurers and insurance agents when a transaction involves the exchange or replacement of an annuity. Before recommending products, insurance agents must obtain specified personal and financial information from the consumer relevant to the suitability of the recommendation on a form promulgated by the Department (DFS-H1-1980).

Documentation of Sales Transaction - The revised law requires agents and agent representatives to record recommendations made to a consumer. If the consumer refuses to provide suitability information, the agent or representative must obtain a signed statement from the consumer documenting the refusal. If the consumer enters into an annuity transaction that is not based on the recommendation of the insurer or insurance agent, the agent or representative must obtain a signed statement from the consumer acknowledging that the annuity transaction is not recommended. The insurer or agent must provide the consumer specified information on a Department form (DFS-H1-1981) concerning differences between the annuity being recommended for purchase and the existing annuity that would be surrendered or replaced. Under previous law, this only applied to transactions involving a senior consumer.

Prohibitions on Agents - The revised law prohibits agents from dissuading or attempting to dissuade a consumer from truthfully responding to the insurer's request for suitability information, filing a complaint, or cooperating with the investigation of a complaint.

Unconditional Refund Period - The revised law expands to 21 from 14 days the unconditional refund period for all purchasers of fixed and variable annuities.

Limit on Surrender Charges - The revised law retains the prohibition against surrender charges or deferred sales charges in annuity contracts issued to a senior consumer exceeding 10 percent of the amount withdrawn. The charge must be reduced so that no surrender or deferred sales charge exists after the end of the 10th policy year or 10 years after the premium is paid, whichever is later.

Penalties - Authorizes the imposition of corrective action, appropriate penalties, and sanctions on insurers, agents, managing general agencies, or insurance agencies that violate the requirements of s. 627.4554, F.S. An insurance agent must pay restitution to a consumer whose money the agent misappropriates, converts, or unlawfully withholds.

[See Chapter 2013-163, Laws of Florida; Sections 626.99 and 627.4554, Florida Statutes]

Information on Navigators and Registering

The 2013 Florida Legislature passed legislation regarding the registering and regulation of the "Navigator" position created by federal health care reform. The legislation:

  • Requires individuals acting as a "navigator" under the PPACA to be registered with the Florida Department of Financial Services (DFS). Under the PPACA, beginning on October 1, 2013, individuals and small businesses will be able to purchase private health insurance through the Federally-facilitated Marketplace (FFM).
  • To be registered as a navigator, an individual must submit the online application, provide official certification that he or she has successfully completed all required training by the federal government and has been certified by them as a Marketplace Navigator, submit fingerprints for a criminal background check, and pay all fees. Certain crimes would either permanently bar an individual from registration or disqualify an applicant for specified periods.
  • A navigator is prohibited from:
    • Soliciting, negotiating, or selling health insurance;
    • Recommending the purchase of a particular health plan or represent that one health plan is preferable over any other;
    • Recommending or assisting with the cancellation of insurance coverage purchased outside the Exchange;
    • Receiving compensation or anything of value from an insurer, health plan, business, or consumer in connection with performing activities as a navigator, other than from the Exchange or an entity or individual who has received a navigator grant under the PPACA.
  • Specifies grounds for suspension or revocation of registration and authorizes DFS to impose an administrative fine in lieu of, or in addition to suspension or revocation. Any person who acts as a navigator without registration is subject to an administrative penalty not to exceed $1,500.

Navigators will be required to adhere to strict security and privacy standards - including how to safeguard a consumer's personal information. They'll be required to complete 20-30 hours of training to be certified by the federal government, will take additional federal training throughout the year, and will renew their federal certification yearly. All types of enrollment assisters - including in-person assisters, Certified Application Counselors, and agents and brokers - are required to complete specific training and are subject to federal criminal penalties for violations of privacy or fraud statutes, on top of any relevant state law penalties.

The Department of Health and Human Services (HHS) announced on August 15 the entities that were awarded Navigator grants. The following entities were awarded grants in Florida:

  • University of South Florida, College of Public Health
  • Epilepsy Foundation of Florida
  • Advanced Patient Advocacy, LLC
  • Legal Aid Society of Palm Beach County, Inc.
  • Pinellas County Board of County Commissioners
  • National Hispanic Council on Aging
  • Mental Health America

Individuals interested in becoming Navigators should contact these entities for potential employment opportunities. Navigators are not hired directly by the federal government or the Marketplace.

NOTE: If you are a Florida-licensed health agent and are interested in soliciting and selling policies on the Federally-facilitated Marketplace, you are not required to become registered as a navigator. However, you must get trained and registered with the federal government. Please see our information regarding the training and registering specific to agents/brokers under the In The Know section of this month's issue.

Selling Marketplace Plans To Medicare Beneficiaries is Illegal

Starting January 1, 2014, most Americans will be required to have health insurance or pay a penalty and those without insurance will be able to buy it from the Federally-facilitated Marketplace opening October 1, 2013. Also, beginning October 15, 2013 and ending December 7, 2013, the enrollment period is open for Medicare beneficiaries to buy prescription drug coverage or the Medicare Advantage medical policies that are an alternative to traditional Medicare.

Agents should be cautious not to sell Medicare beneficiaries a plan on the Federally-facilitated Marketplace according to the federal government's Medicare & the Marketplace website and their frequently asked questions flyer. Federal administration officials have warned that selling marketplace coverage to people who have Medicare is illegal. There can be serious consequences for anyone who violates the federal law, such as fines of up $25,000 or up to five years imprisonment or both.

The law prohibiting the sale of private health insurance to Medicare beneficiaries was originally intended as a safeguard to prevent Medicare beneficiaries from buying coverage they didn’t need because it duplicated what they already had. Despite the ban, there is nothing in the health law preventing people with Medicare from buying marketplace coverage.