INSURANCE AND THE FEDERAL AGENCIES

BACK IN MAY, THE CENTERS for Medicare and Medicaid Services (CMS), which makes changes to the “Medicare Program: Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs,” also known as the Medicare Marketing Rule, finalized a version of the rule that could discourage licensed agents and brokers from representing Medicare Advantage and Part D Plans.

The final rule seeks to discourage dishonest marketing behaviors by requiring third-party marketing organizations (TPMOs) to record all enrollment conversations. However, such entities were already required to record all enrollment conversations, even before this rule’s promulgation. This revision to the rule broadens the definition of TPMO to include agents and brokers, who will be newly subject to the recording requirement and will impose an unnecessary burden on responsible agents and brokers.

In October, the Department of Labor (DOL) issued a Notice of Proposed Rulemaking (NPRM) concerning the Employee or Independent Contractor Classification Under the Fair Labor Standards Act (FLSA). The NPRM proposed a revised method by which to determine whether workers are independent contractors (ICs) or employees for purposes of applying the FLSA. The revised language would broaden the applicability of the FLSA’s federal minimum wage and overtime rules. The FLSA requires regulated entities to provide the federal minimum wage and overtime pay to employees but not to ICs. According to the DOL, the proposed rule is intended to rein in companies that rely too much on ICs to avoid paying for workers’ compensation and overtime in accordance with applicable wage and hour laws.

The NPRM sought to restore the economic realities test. It defined independent contractors as workers who are, effectively, in business for themselves. The independent insurance agents who are members of PIA pride themselves on their business ownership and expertise; like other ICs, they are not economically dependent on any single regulated entity for their work. Independent insurance agents appreciate the freedom and flexibility that comes with their IC categorization and value it over the perceived benefits associated with employee status.

Regulated entities have been subjected to endless business disruption since the IC rule was first considered for revision during the Obama administration several years ago. Since then, the IC rule has been revised and unrevised. Revising the IC rule again now will compound the business disruption for regulated entities, foisting an unnecessarily burdensome new regulatory regime on them during an already challenging period of unprecedented inflation in the American economy.

Finally, in early January, the Federal Trade Commission (FTC) issued an NPRM that would ban employers from entering into noncompete agreements with their employees. A noncompete agreement or clause is a contract or contract term, typically between an employer and an employee, that prevents the employee from working for a competitor or starting a competing business, usually within a certain geographic area and for a given time once the worker’s employment with the current employer ends. Noncompete clauses/agreements are designed to protect employers from employees who would steal their ideas, business practices, and/or intellectual property for use in their own businesses or to share with a competitor of their employer, likely to enhance their own opportunities for professional advancement.

The proposed rule is extremely broad; it would apply to employees and independent contractors, whether paid or unpaid. If adopted as proposed, the rule would prohibit the future use of noncompete agreements between employers and employees, would require employers to rescind any noncompete agreements currently in use, and would require employers to inform employees that any noncompete agreements they had previously signed are no longer effective.

The NPRM will solicit comments from members of the public until early March. Once the comment period closes, the FTC will review the feedback it receives, and it may make changes to the proposal based on the comments and its continued analysis of the issue. Should the proposal be finalized in substantially similar form, we can expect to see litigation over the legality of the ban as well as the FTC’s power to issue it.

PIA will continue to offer updates on these and other regulatory developments as they become available. For the most updated information, please check out our advocacy blog at www.piaadvocacy.com

Lauren G. Pachman, Esq. is Counsel and Director of Regulatory Affairs of PIA National.

By Jon Gentile