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Jon Tomashoff Warns Agents Against Charging “Sham Fees” for Health Care Products

by John Hansen

Jon Tomashoff, Senior Staff Counsel for the California Department of Insurance, spoke to the issue of California agents charging fees for the sale of health care products. He spoke in a panel discussion at the CAHU Capitol Summit 2016 alongside a lawyer and an insurance agent (Don Cooper, President of Triflex). The lawyer, Steve Young, held up a copy of the California Insurance Code and said (while referring to Tomashoff), “He wrote the book.”

Can an agent fee be applied to the sale of health care products?

In the panel discussion, Tomashoff held back while the agent and lawyer went first. Not surprising, the health insurance agent was the most optimistic about the possibility of charging fees for health care products. Steve Young explained the legal history of the designations “broker” and “agent” relationship.

Young argued that agents could charge fees for selling health care products if the services rendered were above and beyond the typical services of an agent. Cooper seemed to think that agents typically go above and beyond what’s typical, so he seemed hopeful that in many instances agents could legally charge fees.

Jon Tomashoff Clarifies Specific Conditions for the Charging of Fees

However, Tomashoff was not so optimistic including fees in the sale of health care products. He said, “There may be potential to charge fees if an agent provides a broad range of services and only one issue is insurance placement.” His emphasis was the on the word “broad”.

A broad assortment of services related to health care products might include some of the following:

  • Health insurance
  • Disability
  • Life insurance
  • 401K
  • Supplemental Health Insurance
  • Human Resources
  • Payroll
  • Business insurance
  • Critical illness insurance

Tomashoff gave the example of a consulting firm that advises clients on a wide range of issues and offers an extensive assortment of health care products and services. Tomashoff said that if an agent is only providing California health insurance and one other HR consultation, then a fee would not be permissible.

No “Sham Fees”

Tomashoff alluded to the fact that the Department of Insurance would prosecute for “sham fees” charged in the selling of health care products. Everyone in the room understood that this was not an empty threat. Jon Tomashoff has not only co-written dozens of Insurance Code sections, but he has also prosecuted hundreds of enforcement actions against producers, insurers and unlicensed entities.