Colorado Requires Health Insurance Agents to Disclose Commissions

Colorado House Bill 1385 which requires agents selling health insurance, dental and short-term medical to disclose commission went into effect January 1 2009. 

Commissions must be disclosed in the form of the commission percentage earned (15%, 20%, 25%) and must be kept by the agent on file for five years. At this time the carriers will have the proper form. 

Also at this time none of the forms are available as part of the online E-signature process. We can only hope that within a short time all individual carriers in Colorado implement an online system since everyone does not have access to a fax. 

Although likely designed with good intent, this new law can do nothing except confuse the general public. Commissions are built into the rates and do not change. It doesn’t matter if a client chooses an agent or signs up directly with the carrier. Does the general public know this? Absolutely not. 

However, this will give many people the illusion that they are being quoted “higher rates” when working through an agent. If a client signs up directly the form does not have to be signed since no commission is generated. 

This also puts agents who have worked hard to earn a higher commission percentage at a disadvantage. Yes, an agent selling at a higher level can explain that the rates stay the same however the client comparing rates from two agents – one earning 15% and the other earning 20% could tend to go with the agent earning less. 

This is also misleading to clients who will falsely assume this is pure profit. Agents have expenses that most people will not take into consideration. However, it is what it is so all Colorado agent are advised to comply and make sure it’s explained to clients that commissions are built into the rate.