4. Makes other changes to the proposed rule as a result of the federal legislation.
7. Comparison of similar rules in adjacent states:
Iowa: Iowa makes available to its Medicare beneficiaries Medigap policies A through J as required by the Medicare reform provisions under OBRA 1990 and the prior NAIC Model Regulation. Iowa will have to amend its regulations to create new Medigap plans K and L, and to eliminate prescription drug coverage under its standard H, I and J Medigap policies for those who enroll in Medicare Part D. It also will have to amend its regulations to include the prohibitions and other changes under MMA.
Illinois: Illinois makes available to its Medicare beneficiaries Medigap policies A through J as required by the Medicare reform provisions under OBRA 1990, and the prior NAIC Model Regulation. Illinois will have to amend its regulations to create new Medigap plans K and L, and to eliminate prescription drug coverage under its standard H, I and J Medigap policies for those who enroll in Medicare Part D. It also will have to amend its regulations to include the prohibitions and other changes under MMA.
Minnesota: Minnesota, like Wisconsin, received a waiver from the federal standardization regulations. Minnesota makes available to its Medicare beneficiaries two standardized policies (basic and extended basic), both of which may include optional riders to cover prescription drugs. Minnesota will have to amend its Medicare supplement regulations to create two cost-sharing (high deductible) plans, and eliminate the optional riders that cover prescription drugs. It also will have to amend its regulations to include the prohibitions and other changes under MMA.
Michigan: Michigan makes available to its Medicare beneficiaries Medigap policies A through J as required by the Medicare reform provisions under OBRA 1990, and the prior NAIC Model Regulation. Michigan will have to amend its regulations to create new Medigap plans K and L, and to eliminate prescription drug coverage under its standard H, I and J Medigap policies for those who enroll in Medicare Part D. It also will have to amend its regulations to include the prohibitions and other changes under MMA.
8. Factual data and analytical methodologies: The Medicare Prescription Drugs, Improvement and Modernization Act (MMA) of 2003 required that the NAIC amend the NAIC Model Regulation to Implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act.
The NAIC Senior Issues Task Force drafted amendments to the NAIC Model Regulation that were adopted by the NAIC on September 8, 2004. Prior to adoption, the amendments to the NAIC Model Regulation were subject to review and comment by state insurance departments, insurance companies, insurance trade groups, consumer advocates, and the CMS.
The CMS is the federal agency responsible for administering the Medicare program. CMS data indicates that Medicare currently covers 40 million Americans, 806,000 of whom are Wisconsin residents. An estimated 27 percent of Medicare beneficiaries are covered by Medigap policies.
Information collected by the OCI indicates that 40 insurance companies offer basic Medicare supplement, Medicare replacement and Medicare select (Medigap) policies to Wisconsin consumers eligible for Medicare due to age or disability. In addition, there are 25 insurance companies that have Medigap policyholders although the companies no longer market Medigap coverage in Wisconsin. At year end 2003, there were 308,875 Wisconsin Medicare beneficiaries with Medigap policies. The majority of these Wisconsin Medicare beneficiaries have Medigap policies that will be affected by the Medigap reforms under the MMA.
A 2000 report by CMS, Office of Research, Development, and Information, based on 1999 Medicare data indicates that Medicare paid 53% of the health care expenses of persons 65 or over, and private health insurance, including Medicare supplement policies paid 12% of these health care expenses. The report indicated that overall annual medical expenses per Medicare beneficiaries equaled $9,573. The involuntary withdrawal from the Medigap market by insurance companies due to Wisconsin's failure to amend its Medicare supplement rule will significantly affect payment of medical expenses to Wisconsin hospitals and providers.
9. Any analysis and supporting documentation that OCI used in support of OCI's determination of the rule's effect on small businesses under s. 227.114:
OCI reviewed financial statements and other reports filed by life, accident and health insurers and determined that none qualify as small businesses.
Wisconsin currently has 40 insurance companies offering basic Medicare supplement, Medicare replacement and Medicare select insurance plans. None of these insurers meet the definition of a small business.
10. Fiscal impact on the private sector: The proposed rule will not significantly impact the private sector. Insurers offering Medigap policies (basic Medicare supplement, Medicare replacement, and Medicare select policies) will incur costs associated with developing new Medigap policies and marketing materials, mailing riders and explanatory materials to existing policyholders and reprogramming claim processing systems. However, these costs are offset by the insurers' ability to continue offering Medigap policies to Wisconsin consumers.
The MMA prohibits insurance companies and insurance agents from marketing in Wisconsin current Medigap policies after December 31, 2005. Failure to amend s. Ins 3.39
, Wis. Adm. Code, will mean that Wisconsin Medicare beneficiaries will not have access to coverage that supplements Medicare benefits.
11. Effect on small business: This rule does not have a significant impact on regulated small businesses as defined in s. 227.114 (1), Wis. Stat. OCI maintains a database of all licensed insurers in Wisconsin. Included with that information required to be submitted to OCI, the database includes information submitted by the companies related to premium revenue and employment. In an examination of this database, OCI identified that 40 insurance companies offer basic Medicare supplement, Medicare replacement and Medicare select (Medigap) policies to Wisconsin consumers eligible for Medicare due to age or disability and none of those companies qualify by definition as a small business. In addition, there are 25 insurance companies that have Medigap policyholders although the companies no longer market Medigap coverage in Wisconsin, again, none of these 25 companies qualify by definition as a small business.
There will be no state or local government fiscal effect.
Initial Regulatory Flexibility Analysis
This rule does not impose any additional requirements on small businesses.
The OCI small business coordinator is Eileen Mallow and may be reached by phone at (608) 266-7843 or at email address: Eileen.Mallow@oci.state.wi.us
Copy of Rule and Contact Person
A copy of the full text of the proposed rule changes, analysis and fiscal estimate may be obtained from the WEB sites at: http://oci.wi.gov/ocirules.htm
or by contacting Inger Williams, OCI Services Section; at:
Phone: (608) 264-8110
Address: 125 South Webster St – 2nd Floor
Madison WI 53702
Mail: PO Box 7873, Madison WI 53707-7873
Notice of Hearing
Regulation and Licensing
NOTICE IS HEREBY GIVEN that pursuant to authority vested in the Department of Regulation and Licensing in ss. 227.11 (2)
, 452.10 (4)
, 452.12 (3)
, Stats., and interpreting ss. 452.12 (3)
, Stats., the Department of Regulation and Licensing will hold a public hearing at the time and place indicated below to consider an order to repeal ss. RL 17.02 (1)
, and (4)
; to amend ss. RL 17.04
, 17.08 (1)
and 17.12 (1)
; and to create ss. RL 17.02 (4g)
, 17.08 (1m)
, relating to supervision by real estate brokers.
Hearing Date, Time and Location
Date: December 2, 2004
Time: 10:30 a.m.
Location: 1400 East Washington Avenue
Appearances at the Hearing
Interested persons are invited to present information at the hearing. Persons appearing may make an oral presentation but are urged to submit facts, opinions and argument in writing as well. Facts, opinions and argument may also be submitted in writing without a personal appearance by mail addressed to the Department of Regulation and Licensing, Office of Administrative Rules, P.O. Box 8935, Madison, Wisconsin 53708. Written comments must be received by December 13, 2004, to be included in the record of rule-making proceedings. Analysis prepared by the Department of Regulation and Licensing.
Explanation of agency authority:
Section 3608 dp, contained in 2001 Wisconsin Act 16
, repealed former Wis. Stats. § 452.12 (3) (b), Stats., which provided that if a broker maintained any branch office in this state, each branch office must be under the direct-full time supervision of a broker. The broker maintaining the branch office was responsible for the acts and conduct of all brokers, salesperson and time-share salesperson employed at the branch office. Section 3608 dm, contained in 2001 Wisconsin Act 16
, amended former Wis. Stats. § 452.12 (3)
to provide that each broker shall supervise and is responsible for the acts of any broker, salesperson or time-share salesperson employed by the broker. The proposed amendments to Chapter RL 17
remove rules relating to the supervision of principal offices (s. RL 17.09
), supervision of branch offices (s. RL 17.10
), and supervision outside of principal or branch office (s. RL 17.11
), and replace these sections with a defined “supervising broker" who is responsible for the supervision of licensed employees under s. RL 17.08
. The scope of supervision contained in s. RL 17.08
is amended to provide for the reasonable review of documents. Additional sections are added to s. RL 17.08
describing the manner and effect of a delegation of supervision duties to a supervising broker.
Plain language analysis:
SECTIONS 1 and 2 repeal definitions which are no longer applicable.
SECTION 3 creates definitions of “reasonable review" and “supervising broker."
SECTION 4 changes the spelling of “employe" to “employee."
SECTION 5 amends the scope of a broker-employer's duty to supervise employees.
SECTION 6 creates s. RL 17.08 (1m)
to require that documents or records related to a transaction shall be reviewed by the supervising broker prior to the closing of a transaction.
SECTION 7 creates s. RL 17.08 (3)
to require that a broker-employer that is a business entity shall delegate the duty to supervise licensed employees to a supervising broker. Section RL 17.08 (4)
is created to provide that a broker-employer who is not a business entity will be deemed to be the supervising broker in the absence of a delegation of the duty to supervise licensed employees to another supervising broker. And s. RL 17.08 (5)
is created to set forth the requirements of a broker-employer's delegation of the duty to supervise licensed employees to a supervising broker.
SECTION 8 repeals sections related to the supervision of principal and branch offices and the supervision of licensed employees outside of principal or branch offices.
SECTION 9 changes the spelling of “employe" to “employee."
Comparison with adjacent states:
Minnesota Rules Chapter 2805
2805.1000 RESPONSIBILITIES OF BROKERS.
Subpart 1. Supervision of personnel. Brokers shall adequately supervise the activities of their salespersons and employees. Supervision includes the ongoing monitoring of listing agreements, purchase agreements, other real estate-related documents which are prepared or drafted by the broker's salespersons or employees or which are otherwise received by the broker's office, and the review of all trust account books and records. If an individual broker maintains more than one place of business, each place of business shall be under the broker's direction and supervision. If a partnership or corporate broker maintains more than one place of business, each place of business shall be under the direction and supervision of an individual broker licensed to act on behalf of the partnership or corporation. The primary broker shall maintain records specifying the name of each broker responsible for the direction and supervision of each place of business. If an individual broker, who may be the primary broker, is responsible for supervising more than one place of business, the primary broker shall, upon written request of the commissioner, file a written statement specifying the procedures which have been established to assure that all salespersons and employees are adequately supervised. Designation of another broker to supervise a place of business does not relieve the primary broker of the ultimate responsibility for the actions of licensees.
Illinois Administrative Code
Title 68, Section 1450.125 Managing Broker Responsibilities
a) The sponsoring broker shall inform OBRE in writing of the name and certificate number of all managing brokers employed by the sponsoring broker and the office or branch offices each managing broker is responsible for managing. Each managing broker shall have an active license as a broker.
b) The sponsoring broker shall be responsible for issuing sponsor cards. However, the sponsoring broker may delegate that responsibility to one or more managing brokers.
c) Upon written request within 15 days after the loss of a managing broker, OBRE shall issue a written authorization to allow the continuing operation of a licensed office or branch office, provided that the sponsoring broker or representative under a duly executed power of attorney assumes responsibility, in writing, for the operation of the office and agrees to personally supervise the operations. No authorization shall be valid for more than 60 days unless extended by OBRE for good cause and upon written request by the sponsoring broker. Good cause includes circumstances as sales under contract pending closing, loss of livelihood for sales associates, and undue hardship caused to sellers.
d) When a managing broker receives a renewal application from OBRE for a licensee supervised by the managing broker or employed by the sponsoring broker of the manager, he shall notify the licensee of the receipt, personally within 7 days or by certified or registered mail or other signature restricted delivery service within 10 days. The notice shall also inform the licensee that any unprocessed renewal form will be returned to OBRE by the manager broker. When a managing broker receives a renewal application from OBRE for a licensee not supervised by the managing broker or employed by the sponsoring broker of the managing broker, the renewal form shall immediately be returned to OBRE.
e) All managing brokers shall notify OBRE on business letterhead of any change of business address of the offices they manage within 24 hours of any change. Change of address is required for all offices and branch offices. A license returned to OBRE for the reason described in this subsection shall remain in good standing until the new licenses are issued and in the possession of the licensee.
f) OBRE will honor the Order of a court of competent jurisdiction appointing a legal representative for the sole purpose of closing out the affairs of a deceased broker or a broker who has been adjudicated disabled, who was a sole proprietor, until the real estate brokerage is closed but not to actively engage in the brokerage business as defined in Section 1-10 of the Act.
Section 1450.130 Supervision
a) A managing broker shall exercise reasonable supervision over the activities of licensees and unlicensed assistants working in those offices managed by the managing broker. This would include:
1) the implementation of office policies and procedures established by the sponsoring broker;
2) training of licensees or unlicensed assistants;
3) assisting licensees as necessary in real estate transactions;
4) supervising those special (escrow) accounts over which the sponsoring broker has delegated responsibility to the managing broker in order to ensure compliance with the special (escrow) account provisions of the Act and this Part;
5) supervising all advertising of any service for which a license is required;
6) familiarizing sponsored licensees with the requirements of federal and state laws relating to the practice of real estate; and
7) compliance with this Part for licensees and offices under his/her supervision.
b) The sponsoring broker shall remain ultimately responsible for compliance with this Part. The sponsoring broker shall name a managing broker for every office.
Iowa Administrative Code-IAC Real Estate Commission [193E]
193E—7.10(543B) Agency-designated broker responsibilities. The following conditions and circumstances, together with the education and experience of licensed and unlicensed employees and independent contractors, shall be considered when determining whether or not the designated broker has met the supervisory responsibilities as set forth by Iowa Code section 543B.62, subsection (3), paragraph “b."
7.10(1) When making a determination, the commission may consider, but is not limited to consideration of, the following:
a. Availability of the designated broker/designee to assist and advise regarding brokerage related activities;
b. General knowledge of brokerage-related staff activities;
c. Availability of quality training programs and materials to licensed and unlicensed employees and independent contractors;
d. Supervisory policies and practices in the review of competitive market analysis, listing contracts, sales contracts and other contracts or information prepared for clients and customers;
e. Frequency and content of staff meetings;
f. Written company policy manuals for licensed and unlicensed employees and independent contractors;
g. Ratio of supervisors to licensed employees and independent contractors; and
h. Assignment of an experienced licensee to work with new licensees.
7.10(2) The designated broker shall disseminate, in a timely manner, to licensed employees and independent contractors all regulatory information received by the brokerage pertaining to the practice of real estate brokerage.
193E—7.11(543B) Supervision required. An employing or affiliated broker is responsible for providing supervision of any salesperson or broker associate employed by or otherwise associated with the broker as a representative of the broker. The existence of an independent contractor relationship or any other special compensation arrangement between the broker and the salesperson or broker associate shall not relieve either the broker or the salesperson or broker associate of duties, obligations or responsibilities required by law.