We recently had a major health insurance provider offer us a $15,000 bonus to bring back a pharmacy program that we took outside of their company. And although we don’t have the exact numbers, you can imagine how many brokers would be tempted to take the deal.
After all, that is a significant amount of money to get paid for a client’s signature, who may never know the deal wasn’t in their best interest. For us, the move to the new program was in the best interest of our client and therefore was non-negotiable for movement back to the original provider, and we hope that most professionals would make the same decision.
Incentives like this are not uncommon in the health insurance industry. This example shows just how easy it is to offer a program, plan or policy that is not ideal for clients and how unfair these hidden commissions can be.
Transparency in the health insurance industry
Under the new legislation, brokers, agents and advisors are required to disclose this information to their existing and potential clients. This allows employers to make better decisions about the health insurance they provide. The legislation also comes with new reporting requirements for your business, making transparency between providers and clients essential.
The Consolidated Appropriations Act requires brokers and agents to inform their clients of direct and indirect commissions, including any bonuses and incentives they may receive. These benefits, that are paid to brokers by insurance companies, have been around for a long time and can come in the form of luxury vacations, six figure bonuses, and yearly commission percentages.
The earnings are legal and considered, by some, to be a cost of doing business. However, with the transparency act, employers will now have the opportunity to see information about what they are paying for and most importantly, if there are any conflicts of interest.
Employers are the ones who pay
Knowing this information is important for employers, because they, and their employees, are the ones that will pay for these incentives in the end. Sometimes the costs become wrapped up in the ever increasing yearly premiums.
Not only are employers potentially paying more, they’re also at risk of being penalized for unreported information. Employers can be held responsible for any unclaimed taxes, costs and data that is not reported to the IRS or related institutions, which may lead to fines and charges for non-compliance. To avoid these circumstances, the necessary data and information must be provided by the broker and done so in a timely manner.
Know the questions to ask your broker
There are several questions that will help you get the answers you need from your broker such as:
- Are they receiving any outcome that is not commission based?
- Are they receiving a bonus for selling a certain kind of product?
- Are there hidden revenue streams and if so, are any of them contingent on selling a particular product?
- Are they able to give the data required to you in a timely manner?
- What is their process so you can complete any IRS forms that may be required?
Ultimately, if your broker isn’t truthful or responsive, you could end up being penalized. Our job as insurance advisors is to help you get the information you need, while also providing complete transparency about your health insurance recommendations and plans. If you have questions regarding your health insurance plan, how the new The Consolidated Appropriations Act affects you, or what questions to ask your broker, don’t hesitate to reach out.
The legislation that went into effect in December of 2020 is important to brokers, agents, advisors as well as employers and their employees. Transparency in the health insurance industry like this allows employers to get one step closer to getting important data they need to make the right choices.
