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Insurance Insights – Employer’s Right to Know Health Insurance Commission – InsuranceNewsNet

By on March 30, 2022 0

The March column is for business owners who offer group health insurance.

As a business owner, you have to deal with multiple insurance contracts to mitigate risk to you and your business. You can also offer employee benefits through group insurance contracts

Just as I always wonder what the real markup is when I buy a car from a dealership, you might be wondering how much your agent/broker gets paid.

The Consolidated Appropriations Act of 2020 has been considered the largest enacted piece of legislation in American history. He created a series of complex new laws for many industries, including health insurance.

Effective December 27, 2021, brokers and consultants are required to disclose expected commissions – in writing – to clients prior to a new sale, renewal or change to a health insurance contract. This includes all ranges: health, dental vision, FSA, HRA, COBRA, etc.

The disclosure threshold is whether the agent or agency expects to receive at least $1,000 in direct or indirect compensation.

Additionally, the law states that the employer has a fiduciary responsibility to ensure receipt of this information from the broker. If either party fails to comply, the plan is considered non-compliant and may face penalties or denial of deduction for the plan.

To complicate matters further, the US Department of Labor did not issue guidance, but allowed for “good faith efforts” for compliance.

One of the biggest challenges for a broker is to estimate the bonuses and additional compensation paid to him in the form of money or services. Many of these bonuses are based on production and the agent may not know what the production will be at the end of the calculation period.

The lack of transparency has always been a bit of a thorn in the side of brokers when they lose a case to a professional employers’ organization or other human resources company providers. There’s no reason for the band to drop their current broker, but the employment organization often makes it appear that way so they can get extra income on top of all the other fees they charge.

I wasn’t surprised when some agents railed about the revelations. These are usually people who simply issue a renewal and do nothing more for the customer. When I had my practice, we usually paid all the costs for the online registration platform for our groups as well as many other services. In many ways, I was on call 24/7, responding to emails or inquiries from the employer and employees in my groups. I had office staff and overhead. I have never been embarrassed by the compensation I received. Often, if a client asked and I told them my compensation, they were surprised that we weren’t earning more for everything we did for the bands.

There is a difference in transparency between large groups – with 100 or more employees – and small groups with less than 100. Large groups generally understand that they can negotiate the broker’s commission, which is generally 3-5% of the bonuses medical insurance. Commissions on ancillary services are around 8 to 10%. Self-funded groups may be charged a fee per member per month, plus a percentage of stop-loss bonuses.

With smaller groups, base commission is built into the contract, ranging from 5% to 7% for health insurance and 8% to 10% for ancillary products such as dental, vision, life, etc Some providers such as Kaiser will pay the broker one per member, per month membership fee. This commission is built into the product and is generally non-negotiable.

As employers prepare their group renewals, it is important that they request this information. It is not inappropriate to ask the broker why he is recommending a certain provider. Are they getting a bigger incentive from this company or is it really because there is a quantifiable benefit to the customer and the employees?

Marguerite Beck has been a licensed insurance broker since 1978. Call her at 530-225-8583.

Marguerite Beck

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