A bipartisan bill to reform the cost of health care for Americans is making its way through the US Senate. In a nutshell, the Lower Health Care Costs Act, or Alexander-Murray bill, sets out to do four key things: 1) prevent surprise medical bills; 2) reduce prescription drug prices; 3) improve transparency in health care, and; 4) invest in public health and improve health information exchange.
There are many ways this legislation could benefit consumers; there are very few who would argue against paying less for health care.
The Lower Health Care Costs Act could impose changes from which employers could benefit as well. Included in the bill is a component that would require disclosure of direct and indirect compensation for brokers/consultants to employer-sponsored health plans and individual market enrollees.
Expands broker compensation disclose
Currently, employee benefit plans covered under ERISA must disclose on Form 5500 broker fees and commissions paid or reimbursed by insurers.
The bill expands the current regulation by requiring providers of brokerage or consulting services to group health plans, who reasonably expect $1,000 or more in direct or indirect compensation in return for such services, disclose a greater amount of information to the plan fiduciary such as descriptions of:
- Services to be provided
- Arrangements between covered service providers and payers of indirect compensation and identification of services for which the indirect compensation will be received
- Any transaction-based compensation that will be paid to the provider (e.g., commissions, finder’s fees, incentive comp, etc.), along with the payers and the services for which the compensation is being paid
- Any compensation the provider expects to receive for termination of the contract or arrangement and how prepaid amounts will be calculated and refunded
- How compensation will be received.
If passed, I believe this component of the law would bring greater transparency to employers, promote greater choice for broker clients and provide the bargaining chip for employers to demand more value from their broker.
Improved ability to evaluate
This component of the bill has set off a debate within the broker community. As the CEO of PeopleStrategy, which is both an employer and a full-service brokerage, I appreciate both sides of the argument.
As an employer, although I am not directly responsible for paying my broker, I want to understand how they are compensated because it helps me better evaluate our broker’s performance. From my company’s perspective, I can better determine if the commission and incentives our broker makes properly reflect the value our broker brings to the table.
Additionally, in my opinion, revealing how — and how much — brokers are paid and creating openness across the industry will ensure employers receive the best guidance and recommendations from their broker. While I believe most brokers do fulfill the trusted advisor role, carrier incentives could lead a broker to favor plans from that carrier, which may not best meet the needs of the client and their employees.
Full disclosure of indirect and direct compensation from carriers allows employers to understand the full scope of benefit plan options. Armed with this information, employers are better positioned to hold their broker accountable and may even empower them to challenge the broker to realize savings in new ways.
As a brokerage, I can understand the hesitation as it creates additional work for our brokers, and I am not convinced a greater level of disclosure will help reduce health costs. That said, employers look to brokers to serve as trusted advisors and, in that role, it is our obligation to be as transparent as possible.
Beyond just pricing
The broker role has changed considerably over the past decade. The ability to affect a client’s insurance premiums has been limited by the Affordable Care Act, carrier consolidation, and, ultimately, depends on the size of the group. Being able to offer clients meaningful savings on their benefits plans has become increasingly more difficult.
In order to maintain their trusted advisor status, brokers must transition from being just a conduit for renewal to one that offers more value to clients, such as comprehensive technology solutions and administrative services support across the client’s organization. The brokers that thrive, who I call 21st century brokers, take it one step further to show strategic value, combining other HR functions, including payroll, workforce management, compensation planning, and recruiting.
21st century brokers will not be concerned if the Alexander-Murray bill passes because they can easily demonstrate the value they bring to the table.
Like PeopleStrategy, some benefits brokers aren’t waiting for sweeping legislation to overhaul the way payments are disclosed. Health Rosetta, a broker movement calling for self-regulation, is growing. It will take additional advocacy and education to speed up change in an industry that’s rejected change and where federal regulation has been slow to actualize. The reality is that similar legislation has been introduced by two previous administrations and has fallen on the vine. Perhaps the third time’s a charm.