A bill that is aimed at solving a dispute between a California company and the state of Utah was passed out of the House Business and Labor Committee with a favorable recommendation Monday.
Last November, Utah Insurance Commissioner Todd Kiser wrote a letter to Zenefits, a software startup and online brokerage firm, stating that they were in violation of Utah’s anti-rebating statute due to the fact that they give free human resource services to Utah companies. They also sell insurance policies using the same platform.
Zenefits replied to the state in December, criticizing the state for being unfriendly to innovation. “It sends the clear message that Utah insurance regulators are hostile to innovation, and that insurers and brokers in Utah run the risk of prosecution if they deviate from regulators’ subjective opinions of how they should operate.”
HB 141 – Insurance Related Inducements, which is sponsored by Representative John Knotwell (Republican – Herriman), advanced on a 12-2 vote. Representatives Sue Duckworth (Democrat – Magna) and Curt Webb (Republican – Logan) voted against the measure. The bill now heads to the house floor.
Under HB 141, companies will be allowed to provide some services for free as long as they are not in any way contingent on the purchase of insurance.
Knotwell doesn’t think the legislation will have any impact on consumer protection. “This will harmonize with our desire as a state to be one that commits to the free market and recognizes innovation and disruption in the marketplace.”
Ian Adams, western region director at the R Street Institute, believes that the state is putting itself at an economic disadvantage by changing its interpretation of what an inducement is. “Our concern is that in moving out of alignment with the mainstream of jurisdictions in the interpretation of what it is to be an inducement, Utah is placing itself at a disadvantage.”
Josh Daniels, a policy analyst at the Utah Libertas institute, spoke in favor of the bill. “Our hope is that the state legislature will sort of follow the model that Texas, Wisconsin, and Washington followed in not regulating Zenefits by recognizing the general public can be benefited from this marketplace innovation in the form of increased value for their dollars.”
Following Monday’s hearing, Governor Gary Herbert issued a statement applauding the committee for passing the bill out and urged the Legislature to move quickly on final passage. “This bill will provide clarity and allow innovative businesses to provide their services in Utah.”