A bipartisan bill called the Lower Health Care Costs Act is under discussion in the Senate Health committee. It addresses surprise medical bills, high drug prices, and public health problems. It would also improve transparency to ensure that pharmacy benefit managers pass along drug discounts to customers. In addition, the bill aims to prevent certain anti-competitive clauses in contracts between medical providers and insurance companies that increase costs. However, deep inside the bill, on page 111, are new sweeping, little-known, and onerous commission disclosure provisions.
The camel’s nose is already under the tent. ERISA requires disclosure of fees and commissions on Schedule A of Form 5500 for groups of 100 or more employees.
If the Lower Health Care Costs Act is enacted, brokers would have to disclose their compensation, in writing, at the time an employer signs up for benefits, regardless of how large the employer is. Failure to comply might ultimately result in the employer being required to terminate its carrier or broker relationship. Also, insurers would have to disclose broker compensation to consumers of individual health coverage prior to finalizing plan selection.
As you read the following summary of the fee disclosure portion of the bill, it is important to understand that the word “shall” means “must.”
Covered Service Providers (brokers, consultants, third party administrators, and their affiliates) who expect to receive $1,000 or more compensation, directly or indirectly, on the sale, implementation, or plan design, of insurance products (including vision and dental, stop-loss coverage, benefits administration, wellness services, disease management services, compliance services, and employee assistance plans) shall disclose in writing to the Plan (i.e., the Responsible Plan Fiduciary) the following:
- A description of the services to be provided to the plan;
- Identification of any services for which direct or indirect compensation will be received, and the payer of the indirect compensation;
- A description of all direct and indirect compensation (commissions, finder’s fees, or other similar incentive compensation) containing sufficient information to permit evaluation of the reasonableness of the compensation or cost;
- Any change to the information as soon as practicable, but not later than 60 days from the date on which the Covered Service Provider is informed of such change; and
- Any other information relating to the compensation needed by the plan to comply with the reporting and disclosure requirements.
Disclosure is also required anytime an employee makes written request for it. If the covered service provider fails to comply within 90 days of the request, the plan shall notify the Department of Labor. The responsible plan fiduciary shall then determine whether to terminate or continue the contract or arrangement. If the requested information relates to future services, the responsible plan fiduciary shall terminate the contract or arrangement as expeditiously as possible.
The bill has worthy goals, but when it comes to the earnings of brokers and benefit consultants, it seems to be demanding much more than what is required in other industries with expensive goods and services, such as banks, auto dealers, retailers, healthcare providers, airlines, universities, credit card providers, cable companies, restaurants, etc. If you have an opinion and would like to make your voice heard, you can click this link to find out how to send a message to the senator who represents you.