In December of 2021, the Consolidated Appropriations Act (CAA) was signed in the legislation, and among other things it now requires full transparency and disclosure by brokers and consultants and service providers as to the amount that they charge for every service, or program that they provide to you and your company.
Service providers may include:
- Insurance companies
- Brokers
- Administrators
- Consultants
- Pharmacy Benefit Managers
- Among others…
As a former broker, I can attest that there are plenty of brokers and agencies that do not disclose all of their income and it’s never been at the forefront of their business. In fact, excessive income would be an embarrassment for them to disclose. Hopefully the CAA will change that.
Broker and Agency income can come from multiple sources:
- Commissions
- Fees
- Commission overrides on their book of business
- Underwriting profits on their book of business
- Favorable loss ratios on the book of business
- Profit-sharing
- Contingent income
- Fees and rebates from pharmacy benefit managers
There are so many undisclosed revenue sources paid to brokers and consultants that it would make your head swim. I’ve been in the business long enough to know that these amounts are not only significant but are also ‘under the table’.
Check out this article – real life example of what’s going on: Osceola Schools vs Gallagher How do you know is your broker/consultant isn’t doing something similar?
As a Plan Fiduciary, the CAA requires you to request, receive, and document that you have requested this information from your service providers. Once disclosed, this enables you to determine and negotiate what is fair and reasonable compensation for the services provided on behalf of the plan beneficiaries – your employees.
There are expectations that Class Action Law Suits are going to arise by disgruntled employees against their employers for not acting in their best financial interest with parties to the Plan. You don’t want to be one of those employers!
If you would like more information how to do this, or a copy of a Disclosure Agreement, or a complete Compliance Guide, please let me know. Also, if you would like to learn more from a webinar we conducted, please let me know and I can send you the link as well.
