June 4, 2015 by Tony Novak
Yesterday, June 3, 2015, the Louisiana Department of Insurance issued Advisory Letter 2015-01 which revokes Bulletin Number 2010-05 related to the offering of value-added services to purchasers of insurance. The core of the issue is whether offering insurance customers services for free or at less than cost violated the rebating law as an inducement to purchase life and health insurance. The new rule says “no”; such practices are permitted.
The new legal opinion confirms the long time position of my firm Freedom Benefits that does not sell insurance directly but is paid to provide fee support services to insurance consumers through its OnlineAdviser and OnlineNavigator activities. OnlineAdviser provides free advice and services related to financial planning and OnlineNavigator provides free advice and services related to the Affordable Care Act. Both are marketed through private health insurance exchanges that pay a commission on the insurance that they sell through links and phone calls generated by web sites managed by Freedom Benefits. Among the web sites are COBRAplan.com that offers support on health insurance continuation issues and TonyNovak.com, a web site that offers the services of a Certified Public Accountant at less than market price.
Most recently, Novak has offered low cost services to small business employers who find themselves in violation of Internal Revenue Code section 4980D related to the offering or payment for insurance that does not meet the requirements of employer-provided group health insurance. While the tax penalties can be severe, Novak offers a consultation that typically leads to a solution for a flat fee of $100 that is less than market value or cost. The service is not limited to businesses that purchased insurance through the private insurance exchange. In total, Freedom Benefits manages about a dozen similar web-based services.
While the new Advisory Letter is effective only in Louisiana, we believe that it reflects the current trend in thinking in the evolution of online insurance marketing and related services across most or all other states.
Freedom Benefits believes that value-added service bundling is the most exciting path for the future of online insurance marketing and seeks partners who share this enthusiasm.