With all that’s going on in the world, many consumers aren’t thinking about things like insurance broker fees or insurance commission disclosures. But, with health insurance costs on the rise, it‘s time to start paying attention. Fortunately, Section 202 of the recently-enacted “No Surprises Act” will make this task a whole lot easier. Among other things, this federal legislation (which goes into effect in January 2022) mandates that health insurance brokers disclose to their customers the direct compensation they can receive from a health insurance company as a result of selling that company’s policies.
The problem with broker fees, and the No Surprises Act solution
The fact that insurance broker fees and commissions exist is not in and of itself surprising. As consumers, we’re used to the idea of commissions. If a real estate agent sells your house, she gets a commission. When a car dealer sells a car, they typically receive a commission from the manufacturer. The same goes for insurance brokers. Sometimes, when they sell individual or group health insurance plans, they receive a commission from the insurance company.
The problem isn’t the existence of insurance broker fees and commissions. It’s the fact that if an insurance company offers its brokers excessively lucrative commissions, brokers might be tempted to suggest policies based on a company’s high broker pay-outs as opposed to making suggestions based on what’s actually best for the consumer. Moreover, the cost of those commissions is ultimately passed on to the consumer. No one wants to pay more for health insurance than they absolutely have to.
As noted above, Section 202 of the No Surprises Act seeks to remedy this situation by compelling insurance brokers to implement a billing disclosure policy that discloses the amount of broker fees and commissions they receive when they sell a health insurance policy. Brokers must also disclose the amount of compensation they received from an insurer in the prior year. This information must be made available both to prospective and existing customers. The hope is that this information will not only arm consumers with the information necessary to make good insurance decisions but also remove the broker’s incentive to sell policies that are better for their pocketbooks than for their customers’ health.
What you can do to protect yourself from excess broker fees
For some insurance brokers, the broker fee provisions of the No Surprises Act will simply mean business as usual because transparency has always been a point of emphasis. IOAUSA has always disclosed these fees to customers as a normal course of business. If your broker hasn’t done this, it may be time to start asking some hard questions. For example:
- How much health insurance broker commission has your broker earned off your policies? Be aware these may have been tacked onto your bill in the form of fees.
- Why weren’t those fees or commissions disclosed earlier?
- Were other policies available to you that would have resulted in lower commission payouts to the broker?
- What policies and procedures does your broker have in place for January 2022, when the No Surprises Act takes effect?
If you have questions about Section 202 of the No Surprises Act, insurance broker fees in general, or even questions about the fees we have collected in the past, we’re happy to help. Contact Roger for more information.