We've all been there. You go to a doctor's appointment, see the doc and leave without a hint or idea of what you'll end up owing. You take your car to a mechanic and brace yourself for the bill.
No one likes to be kept in the dark, especially when it comes to their own money. Yet this is still the case with benefits brokerages. Every year, employers sign on with their broker without an inkling of how much they're really paying, or what exactly they'll receive for that payment.
But this might change sooner than you think. A new policy could lift the veil on how much benefits brokers are actually charging their clients. Let's talk about what this policy is and why it's good news for the healthcare consumer.
Introducing the new Consolidated Appropriations Act (CAA) — or, as we like to call it, a gateway to the Modern Era of Broker Transparency
Under this new policy, benefits brokers will be required to disclose a range of information previously kept fuzzy at best, hidden at worst. They'll have to give clients complete transparency on their compensation, including all commissions and kickbacks they receive from carriers. It'll all be on full display: back end commissions, retention bonuses and multipliers, not to mention the material non-financial compensation and perks (think sports games, fancy dinners and boondoggles). The kickbacks alone often account for a whopping 20-30% of brokerage compensation.
In short, clients will now have a full view into the true incentives that guide brokers' decision-making — the good, the bad and the costly.
But that's not all. Brokers will also be expected to share more detail into the services they provide. While this feels like it should be table stakes, this is the first time employers will be able to see exactly how much they're paying their broker, and what they're getting for those dollars.
The disclosure requirement applies to contracts and agreements entered into or renewed (i.e., extended) on or after Dec. 27, 2021, so we expect plan sponsors will begin receiving these disclosures over the next several weeks. I think it's safe to say: new year, new rules.
Why does this matter to you and your employees?
This law opens a door that some brokers would rather remain closed. And many brokerage firms are going to have to make some big changes to comply.
But fee disclosures are generally not new. They're standard operating procedures for anyone working in retirement planning, 401k or real estate.
Because benefits brokerage commissions are rarely disclosed (and, in many cases, actively hidden), they vary wildly. Some carriers offer higher commissions and bonuses tied to client retention — to steer brokers to decisions that don't always favor the employer. Plus, many brokers are under pressure from their own firms to bring in those commission dollars.
Who is footing the bill for those additional commission dollars? At the end of the day, the employer and their employees are, in the form of higher premiums.
So no matter how committed a broker is to their clients, when renewal season rolls around, there will always be a little devil on their shoulder, reminding them about the bottom line. Thankfully, most brokers do know how to tune him out — but others can't help but listen.
On top of that, there's often a stark disconnect between the payment rendered and the product received. Despite all the brokers out there who compete for new clients by showing off the laundry list of services they might perform, something is almost always missing: accountability.
That's because there is currently no universal standard of quality when it comes to the services benefits brokers provide. Choose two employers and they may be getting wildly different levels of support from their broker at similar price points. Without expectations around service or quality, how can we expect to drive innovation or promote accountability?
The CAA is making a lot of brokers uncomfortable. But the Nava team sees things differently. To us, the CAA is a positive (and somewhat inevitable) change. That's because we believe transparency is crucial to building a consumer-friendly healthcare marketplace. After all, sunlight is the best antiseptic.
You should know what you're paying, and feel satisfied with the services you receive
This isn't news to us at Nava. Transparency and accountability have been core to our company values since day one.
That's why we developed the Nava Performance Guarantee to deliver transparency and accountability for every client we serve. It's simple — if our clients aren't fully satisfied with our service, they can fire us and receive a full refund. We're the first (and only) brokerage firm to do this, but we hope we won't be the last. We worked with regulators for months to build this policy, so that trail has already been blazed; we encourage other brokerage firms to follow it. (Really.)
Don't get us wrong, providing clients with a world-class benefits experience takes A LOT of effort and we firmly believe brokers deserve to be compensated fairly. But we also firmly believe that removing the deep financial misalignments between brokers and the employers they serve is a critical step towards fixing our healthcare system.
So as brokers ourselves, the CAA doesn't scare us. We think it's about time that transparency and accountability become the norm, and we're working hard to lead the way.
To paraphrase the legendary Coach John Wooden, a true test of character is what you do when no one's watching. Now that the spotlight is on brokers, we don't feel the need to hide.
Your next step? Talk to your broker about the CAA. Here's how to start the conversation.