As of Dec. 27, 2021, federal law will require health insurance agents and brokers to disclose all commissions to current clients as well as prospects.
The Consolidated Appropriations Act of 2021, the federal budget act passed by Congress and signed by then-President Donald Trump on Jan. 3, contains a section aimed at commission transparency in health insurance. The law requires health insurance agents and brokers to detail their services as well as their direct and indirect commissions to current and potential clients.
Health Agents for America held a recent webinar explaining the law and its requirements on agents and brokers.
Section 202 of the law calls for disclosure of direct and indirect compensation for brokers and consultants working with employer-sponsored health plans as well as enrollees in short-term medical plans.
The law applies to commissions of $1,000 or an amount set by the Secretary of Labor, said Ronnell Nolan, HAFA president and CEO, during the webinar.
“A description of services you provide must be fully documented,” she said. “Compensation must be revealed to prospective and current clients.”
“This law is directed at our industry and the requirement to comply is ours.”
The services brokers are required to document include:
- Recordkeeping services.
- Medical management.
- Benefits administration (including dental and vision).
- Stop-loss insurance.
- Pharmacy benefit management.
- Wellness services.
- Group purchasing organization preferred vendor panels.
- Disease management vendors and products.
- Compliance services.
- Employee assistance programs.
- Third-party administration services.
“Anything that we do, this includes it,” Nolan said. “If you are paid a commission directly or indirectly, you must list and document that commission in some kind of reporting form to clients.”
Nolan said the Department of Labor has not yet announced the type of reporting form that will be required. “The agent community is asking for some kind of form that works,” she said.
As for disclosing compensation, she said, “compensation” as spelled out in the law “means anything of monetary value, but does not include nonmonetary compensation valued at $250 or less in the aggregate during the term of the contract or arrangement.”
Compensation includes direct commission brokers receive from a carrier as well as indirect compensation, Nolan said. It includes meals or trips provided by carriers.
Nolan said HAFA is looking for additional guidance on reporting. Compensation must be disclosed to current and prospective clients, and broker have 60 days to respond if a client requests that information.
The disclosure requirement also applies to insurance companies when individuals seek coverage in short-term plans, Nolan said. The insurance company must notify prospective clients of commissions included in the policy prior to finalizing plan selection.
“We’re not sure how this is going to happen,” she said. “But as we’re selling this product, before the consumer makes their decision, the subject has to come up. For example: ‘Ronnell is going to make $X on this policy. If you still want to buy it, choose it.’”
Nolan emphasized the following points:
- The law is directed at agents, brokers and consultants.
- The law is not directed at insurance companies.
- Agents and brokers must provide a detailed description of their services.
- Agents and brokers must describe their compensation in detail.
- Describing indirect compensation will be complicated.
- HAFA is hoping for a standardized reporting form.
Nolan said HAFA is still waiting to hear many of the details on how the law will be implemented.
“Although we don’t know all the pieces of this and how it will come together, we know it’s federal law and we’re going to have to adhere to it when we figure out how it actually works,” she said.
The law is not the first time health agent and broker commission has been in the federal government's crosshairs. The Lower Health Care Costs Act was introduced by Sen. Lamar Alexander, R-Tenn., and Sen. Patty Murray, D-Wash., in May 2019 but did not make it to a full vote in the Senate. Buried in the bill was a requirement that health benefits brokers reveal fees and other enticements they receive from the insurance industry.