By Jason Andrade
If you’ve taken the time to read and understand the Consolidated Appropriations Act of 2021, you will have learned three things:
- It’s time you knew exactly how much and how your employee benefits broker is paid.
- If you haven’t yet, setting up a health plan fiduciary committee should be a top priority, whether yours is a fully or self-funded health plan.
- Employers that fail to comply with the legislation may escape regulatory scrutiny for a while, but will want to brace for the onslaught of lawsuits filed by plaintiffs’ lawyers eager for any excuse to drag them into court.
Anyone in the C-suite who hasn’t had a chance to dig into the nitty-gritty of the CAA is to be forgiven. It is, after all, a 5,600-page law that has gotten little media attention aside from provisions related to ending what’s known as “surprise billing.”
That’s an important, new consumer protection. But the legislation does considerably more that, adding a level of transparency to health care that, well, we’ve never seen before.
For plan sponsors – a.k.a., any company offering health insurance to its employees – the CAA is a new compliance obligation but also an altogether new transparency tool to ensure their broker payouts aren’t being padded by hidden commissions.
Under the law, plan sponsors can now see exactly what they’re paying for, allowing them to more easily and clearly determine which brokers provide the best value for their dollars.
Don’t get me wrong. This isn’t about finding the cheapest broker. A plan sponsor that gets stellar service isn’t – and shouldn’t – fire a broker just because they’re paying a little more.
But if a broker is delivering marginal service or worse, the employer will know it’s time to start looking for a better deal elsewhere.
A case in point can perhaps be found in Osceola County, Fla., where the school district has sued a consultant in federal court for allegedly secretly collecting nearly $4 million from insurance carriers.
In its lawsuit, the school district noted the consultant it hired was paid more by the carriers it was supposed to scrutinize than by the district itself.
There’s more in the suit but the gist is that greed overtook all else. How the matter gets resolved is a question for the courts to take up.
Rather than wait for that to happen, plan sponsors need to get up to speed on the CAA so they can better protect themselves and their enrollees.
The compensation disclosure rules in the law require brokers and consults to spell out exactly who’s paying them and how much, including non-cash gifts such as meals or tickets.
All direct and indirect payments equal to $1,000 or more must be disclosed, as well as non-cash compensation that equals $250 or more.
To be clear, employers can’t simply hope this gets done. Under the CAA, they’re required to make sure it happens, in the same way sponsors of retirement plans have had to for the past decade.
To help get this done, companies need to designate a “responsible plan fiduciary.” This can be a committee or just one person. Either way, be sure to report non-compliant brokers to the Department of Labor.
That, or be ready for those plaintiffs’ lawyers to bang down the doors with fiduciary breach allegations that you paid excessive fees and failed to pay proper attention.
Jason Andrade is the Employee Benefits practice leader at The Mahoney Group, one of the largest independent commercial insurance and employee benefits brokerages in the U.S. For more information, contact us online or call 877-440-3304.
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.