Like a lot of big federal spending bills, the new coronavirus relief package is a grab bag of unrelated legislation.
And one provision in the 5,593-page measure passed last month could lead to revealing conversations between employers and the brokers they rely on to find them the best deals on health insurance and other benefits.
The Consolidated Appropriations Act, 2021, the much-debated legislation that authorized a new round of stimulus checks for many U.S. households, mandates that brokers disclose to employers how much they make from insurance carriers and vendors.
Health benefits brokers are trusted advisers to employers, who sponsor health plans for about 150 million Americans. But ProPublica showed in 2019 how the insurance industry influences the consultants behind the scenes with cash and gifts—from six-figure bonuses to swanky island getaways.
Critics called it “a classic conflict-of-interest” that may cause brokers to put the industry’s interests above those of their employer clients, which drives up costs. In response to the ProPublica story, senators proposed legislation to require disclosure of the perks and payments.
Companies provide an array of services to employer-sponsored health plans, including traditional health insurance, vision and dental products, pharmacy benefits, third-party administration, claims review and more. Each service provider may provide payments to brokers that might be unknown to the employer.
For example, a pharmacy benefit manager might pay a broker a fee for every prescription filled under a health plan. Or a third-party administrator might give the broker a payment for each employee on a health plan.
Under the newly passed requirement, brokers and consultants must tell employers the various forms of direct or indirect compensation they receive from vendors associated with a health plan. The disclosures must take place at the time the employer enters into the agreement with the broker or when it’s renewed. The act also requires brokers to disclose their compensation to individuals who purchase insurance plans.
“It is a game-changer,” said Doug Aldeen, a Texas attorney who specializes in law and regulations related to health plans. The requirement goes into effect in December, a year after the bill was signed into law, but Aldeen said employers should demand the “big reveal” now. “Frankly, it’s big money.”
A broker’s base commission can be 3% to 6% of the total health insurance premium, ProPublica found. That means the broker makes more as premiums go up. Commissions for some supplemental products can be as high as 40%, and bonuses could be as high as $150,000 for a single employer group.
Bonuses may be based on the size of employers with a carrier or on keeping employers with an insurer when it comes time to renew. In addition to money, the industry treats brokers to bucket-list experiences, like batting against retired Yankee Mariano Rivera or taking a trip to the Super Bowl or a luxury resort.
Aldeen’s clients include the small but growing movement of brokers who have stopped taking industry cash. Instead, they get paid directly by employers, which eliminates the conflict of interest and gives them an incentive to deliver better value.
Adam Berkowitz, a St. Louis broker who has transitioned to having employers pay him directly, wrote about the Appropriations Act disclosure requirement on his company blog. He pointed out that industry payments to brokers are not illegal and have been considered the cost of doing business. But requiring their disclosure will at least alert employers of the potential conflicts of interest, he wrote.
Berkowitz told ProPublica he started his career working for an agency that was funded by industry money. He said emails would come from his bosses, urging brokers to push a particular policy or plan to employers because the agency was close to hitting bonus thresholds. “It’s absolutely front and center,” he said of the influence of industry commissions and bonuses, “and it doesn’t get disclosed to the employers.”
In contrast, getting paid directly by employers “allows us the freedom to be truly independent and work on behalf of the employers,” Berkowitz said.
Some of the big broker agencies are worth more than $1 billion, including Marsh & McLennan and Willis Towers Watson. Those two companies declined to comment for this story.
The National Association of Health Underwriters, the broker trade group, said in a statement posted on Twitter that it supports transparency, but feels the legislation is redundant, and that the requirements “could be a financial burden on carriers, employers, agents and brokers.”
Michael Thompson, president of the National Alliance of Healthcare Purchaser Coalitions, which represents employers, called the new disclosure requirements an encouraging “step in the right direction.” Knowing about the payments “is critical for plan sponsors if they are to interpret the advice they are getting day to day from their advisers,” he told ProPublica.
In 2019, ProPublica sent the country’s largest broker agencies a list of questions, asking if they took various types of bonuses and commissions from the insurance industry players. None of them would answer, but employers may soon be asking their brokers some of the same questions.
Health Rosetta, an organization that certifies brokers and already requires them to disclose to employers all their sources of income, uses this disclosure form. It includes 17 types of vendors that may be paying a broker, including medical, disability, wellness, disease management and more.
Dave Chase, a Washington businessman, created Rosetta to transform how employers buy benefits. For employers, learning how much their brokers have been making from the health benefits industry may be “the business equivalent of finding out your spouse was cheating on you,” Chase said.
Chase said the next step is to reform the contracts that employers sign with the insurance companies and vendors that provide their benefits.
They often limit an employer’s ability to access the data they need to analyze their spending, or restrict an employer’s ability to audit the claims, to make sure they are paid properly, a problem ProPublica has also covered.