Answers to Common Questions from Brokers and Employers
This started with disclosures in the 100+ market and the financial services sector many years ago. Congress determined that employers should know the compensation when brokers make recommendations. This gives the client all the facts regarding a recommendation.
Disclosure must be provided starting with renewal analyses presented to clients on or after December 27, 2021. Going forward, disclosures must be provided at least 60 days prior to final renewal decisions. Upon request, any other information relating to compensation must be made within 90 days of the request.
No. The disclosure requirement is much broader and must be addressed to the employer, disclosing forward-looking compensation. The Form 5500 is a public record, filed with the Department of Labor, and retrospective in nature.
The requirement generally applies to all types of health insurance plans, across all market segments – Small Group plans, Large Group plans (regardless of funding), FSAs, HRAs, etc. It does not apply to life and disability, nor does it
apply to governmental or church plans.
Your service model for your client may be different than other brokers. You should describe the services that make your business model unique for the commission/fees you receive. The following list of service may be helpful:
If you expect to offer fiduciary services to the plan, you must include a statement indicating this. A fiduciary is someone who exercises discretionary authority or control over the administration of the plan.
Most brokers do not offer this service.
No, this law only applies if the broker reasonably expects to earn more than $1,000 in compensation. While working with prospects any presentation your make that includes a recommendation of selecting Carrier A over Carrier B must show direct, indirect and non-monetary compensation for both carriers.
The minimum amount you would disclosure is $1,000, since you must disclose if you expect to receive $1,000 in compensation for brokerage or consulting services. This number may be made up of direct compensation and indirect compensation (which includes non-monetary compensation that exceeds $250 per year).
The disclosure must be made in writing to the responsible plan fiduciary.
These bonuses should be reported regardless of whether they are paid by the carrier or by a general agent
The disclosure required under the CAA does not supersede already existing state disclosure laws unless a state law prevents the required disclosures. These requirements are in addition to any state requirements.
Yes, it is the broker’s responsibility to have this documented discussion for all clients during each renewal process.
In most cases embedded or loaded commission can’t be changed during the policy year. When discussing your compensation for the service model you offer it is expected to have this conversation and written confirmation. If it is a fee-based client, it would be prudent to include your fee as part of your service agreement.
Absolutely, please remember that your commission statement shows the compensation on your current client with the current carrier; not the compensation from the other carriers presented while working through the renewal process.
Your ability to charge a client outside of standard carrier-based commissions is generally managed by either the insurance carrier or your resident State Insurance Department.
Yes, you need to disclose each plan year.
If you commission changes, you need to notify your client of the change. You are permitted 60 days to update your disclosure based on new information.
Premium (community rated) rates developed by insurance carriers typically consist of both a claim and a retention component. Included in the retention component are the various administrative costs borne by the carrier for conducting business, such as rent, employee salaries, postage and broker commissions. Since these costs are all embedded in the filed rates, individual components such as broker commissions, cannot be adjusted up or down.