Direct and Indirect Compensation Transparency Requirements for Your Group Health Plans

In response to the Consolidated Appropriations Act of 2021 (CAA) enacted by Congress in December 2020, brokers are now required to disclose compensation amounts if they reasonably expect to receive $1,000 or more in compensation, whether direct or indirect, for their services. This includes all revenue related to brokerage services and/or consulting services for all medical, dental, and vision group health plans of all sizes. These regulations are subject to change in the future upon release of further regulations, but this is the information we have thus far.

This law applies to contracts that are executed or renewed on or after December 27, 2021. This means, if you close your renewals by December 27, you will not have to disclose compensation for 2021. You would, instead, start disclosing compensation with February 1, 2022, groups.

This law also applies to individual market coverage (including student health insurance), however, the interim regulations have put the disclosure responsibility on the carriers.

The description of the compensation can be expressed in multiple ways in the fee disclosure. This means, because most commission scales from the carrier are on a per employee per month (PEPM) basis, you can disclose the PEPM, percentage of premium compensation, or you can choose to disclose the total annual compensation.

As a result of this law, brokers must provide a contract or consulting agreement that includes the following information:

• A description of the services to be provided by the agent, including:
  • Enrollment
  • Renewal
  • Human Resources
  • Account management
  • Compliance
  • Consulting
• A description of all direct and indirect compensation

So, What Now?

Cornerstone has provided disclosure and engagement letter templates for your benefit to ensure the communications with your clients are as seamless as possible.

Here are your next steps:

1. Comprise a list of all your active groups for medical, dental, and vision sales, regardless of size.
2. Gather your most recent commission statements. Medical and ancillary commissions for Anthem KY, Anthem IN and Humana can be found on the AGB broker commission portal. Statements for medical and ancillary lines from all other Cornerstone carrier partners have been provided to you directly by the carriers, including Aetna, Anthem OH, Humana, Medical Mutual of Ohio, and UnitedHealthcare.
3. Select one of the two available disclosures and use the template letter to disclose compensation amounts for each
   1. Template broker compensation letter
   2. Disclosure option 1 (provided by NAHU and Cornerstone)
   3. Disclosure option 2
4. Email the disclosure to each of your groups’ primary contacts.
5. Repeat annually with each client or as compensations changes due to carrier moves throughout the year.

Please note on the disclosures that it is suggested that you obtain your client’s signature acknowledging receipt of this information. For January 1, 2022, renewals completed before December 27, it is recommended that you follow up with an email from your client to acknowledge the renewal is finalized. Contact your Cornerstone broker advisor with any questions you might have about this new law and the requirements.