The Consolidated Appropriations Act (CAA) of 2021, which was signed into law at the end of 2020, included several provisions on COVID-19 relief in addition to a host of other provisions, most notably a ban on surprise billing that seeks to increase transparency in healthcare, including broker compensation. This week, NAHU submitted a letter to the relevant federal agencies outlining our questions and concerns surrounding the implementation of this law.

Section 202 of the CAA requires that agent, broker and consultant compensation related to all group health plans and individual health insurance policies be disclosed for arrangements entered into, renewed or extended on or after December 27, 2021. This law requires agents, brokers and/or consultants (and their subcontractors) to disclose their compensation to plan fiduciaries. Specifically, any covered service provider that receives compensation in excess of $1,000 annually must provide this disclosure. The disclosure must include amounts paid directly and those received indirectly related to group and individual health plans. This requirement applies to contracts with both fully insured and self-funded group health plan arrangements.

In our comments, we requested additional guidance in several areas, including additional information about the timing of compensation disclosures and advance disclosures. We made it clear to the Administration that the broker community would prefer to provide the calculation and disclosure when a purchasing decision is made in order to reduce the administrative burden and chance of error when providing calculations based on multiple options, and even then there are other factors at play that could complicate the timing. For example, in the case of electronic employee enrollment (something that happens more and more), the brokers will not know what their compensation for a group will truly be until they receive their first commission payment, which may be up to two months after the contract goes into effect.  As such, there is only so much accuracy possible in an advance disclosure.

NAHU also requested clarification regarding agents and brokers who receive commission statements from insurance companies or third-party administrators detailing their compensation. For some markets and covered service providers, broker disclosure through carrier or TPA invoicing might be the easiest option. For others, it may not even be a possibility to rely on a third party. Additionally, it is currently unclear how this law deals with multi-year contracts. For example, a broker might have a multi-year contract with a large self-funded employer group plan that does not change over its lifespan.  However, the plan may have annual arrangements with the PBM or the rental network that renew on the basis of the group’s plan year. Will employer fiduciaries expect to receive a disclosure every year?  Or, is a new disclosure only necessary if the compensation arrangement changes mid-contract?

Section 202 specifies covered service providers must provide comprehensive descriptions of their compensation agreements. What makes a description comprehensive? In our comments, NAHU requested that the departments release a model disclosure form. We noted that a streamlined template approved by the Departments would be useful not only for guiding brokers to comply with the law, but also to provide a uniform disclosure device for brokers who may have clients in multiple states with varying rules of their own. We also requested guidance regarding what constitutes indirect compensation for both group and individual markets.

In our comments we also made sure to educate the Administration on the complexity of compensation flow. For example, brokers regularly receive indirect compensation from health insurance carriers based on a book of overall business, and not on a plan-specific basis. Since this indirect compensation is paid to an entire firm, and sometimes it might be to an individual producer within a firm, the amount of this compensation is often unknown until over a year after a broker contracts with a related group. NAHU sought clarification on how the law will deal with this issue.

Other considerations we asked federal agencies to make regard the responsibilities and liability placed on employers. We made it clear that virtually no employers understand or are even aware of their new responsibilities as outlined in Section 202, and thus require additional direction. NAHU requested that a model form be made available to plan fiduciaries to assist them with their reporting obligations and asked for clarification on potential future safe harbors for plan fiduciaries.

Section 202 also specifies that a health insurance issuer offering individual health insurance coverage or a health insurance issuer offering short-term limited duration insurance coverage must also disclose direct or indirect compensation information to enrollees. NAHU requested that the agencies begin the regulatory process regarding individual- market compensation disclosures soon, as it would be tremendously helpful to get additional guidance regarding individual-market disclosures, including the types of coverage affected by the requirements and any related agent or broker responsibilities, as soon as possible. We also requested clarification regarding disclosures for products that touch both the group and individual markets.