Brokers would have to reveal fees, incentives under new legislation
A provision as part of new bipartisan healthcare legislation would require benefits brokers to reveal fees and other incentives they receive from the insurance industry — a move that could have widespread implications for both brokers and the employers they serve.
“This is going to have a huge impact on the brokers that are not being totally transparent with their clients as far as how much they’re being paid from the carriers,” says Marcy Heath, president of benefits consulting agency InoVentive Solutions.
The legislation was proposed by Sen. Patty Murray, D.-Wash., and Sen. Lamar Alexander, R.-Tenn., and looks to take on issues that include surprise medical bills and high drug prices. The broker provision followed an investigation by ProPublica in February that found the insurance industry often uses money and gifts, which they do not disclose, to influence which plans brokers favor.
“By requiring advisers to disclose all of their sources of compensation, we can level the playing field for employers who are trying to lower their health costs,” says Dave Chase, co-founder of Health Rosetta, a broker certification group which includes members who agree to follow benefits best practices, including eliminating any hidden agreements that raise the cost of employee benefits. “Instead of regularly accepting 5% to 20% annual cost increases, they can be more selective to ensure their adviser is actually serving their best interests.”
Larger brokerages tend to rely heavily on retention tactics to keep their clients with the same carrier, Heath says. The brokers can renew these client-carrier relationships at a higher rate and reap the reward of a retention bonus.
“Your general client doesn’t know what you’re being paid behind closed doors,” Heath says. “And you’ve got some brokers who go a step further, who are unethical and charge clients a consulting fee on top of getting a commission.”
The legislation is going to open a lot of employers’ eyes, Heath notes, as it will force brokers to be more transparent. But while Heath thinks the legislation is positive, she expects mixed reactions from brokers.
“The brokers that are more on a consulting arrangement, like if they are fee-based, and especially some of the brokers that are performance-based … we love it, we think that it’s fabulous,” Heath says. “The brokers that work off commissions, I think you’re going to have a lot of pushback from them.”
Employer-provided insurance is hiding a “dirty little secret” — hidden fees and incentives, Chase says.
Although transparency is “the absolute lowest hanging fruit” when it comes to fixing the health insurance market — and brokers who advocate for it are at the “forefront of the healthcare revolution” — many advisers push back when it comes to disclosing their own compensation.
“The ironic thing is some benefits brokers speak about needing transparency from healthcare providers and PBMs, yet push back when transparency is expected [around] their compensation,” he adds.
Despite the pushback, Chase says, brokers are not the enemy in this situation. Many are trapped in the same convoluted healthcare system as their employer clients.
“I think if this legislation passes it will ensure brokers come up with more creative solutions to save employers the money they should’ve been saving all along,” he says. “Forward-looking benefits advisers have demonstrated that they can both disclose fees and provide tremendous value to their clients while earning a nice living.”