Welcome to a New Era of Benefits Transparency: Three Questions to Ask Your Broker About the CAA
This legislation is creating a new standard for transparency in the benefits brokerage industry. Under the Consolidated Appropriations Act of 2021 (CAA), benefits brokers are now required to share key information with their clients, including the details of their compensation and services. HR leaders and employers, here’s your guide to talking about the CAA with your healthcare broker.
Until now, there's been no way to be 100% certain that your benefits broker has been recommending healthcare plans based on your company's values, goals, and needs — or because of the possibility of a big commission from the carrier.
But that's all about to change. Starting in January 2022, a new policy will pull back the curtain and bring key information to light. And this could have a big impact on your relationship with your broker.
What is the CAA?
Known as the Consolidated Appropriations Act of 2021 (CAA), this law will require brokers to disclose info that's been previously kept under wraps. This includes their compensation (both their salary as well as any carrier commissions, kickbacks, and "perks" like fancy trips or dinners) as well as the services they provide.
In short, this is the first time you'll be able to see how much they're getting paid, where that money is coming from, and what you're getting in return.
Why does the CAA matter to small to midsize employers?
This policy is finally bringing transparency into the broker-client relationship — and that could set changes in motion across the brokerage industry.
When brokers offer a full look into their compensation and services, their client has the information they need to make informed decisions on their benefits. (It also means brokers have less leeway to pursue deals that aren't in the clients' best interest, or provide anything less than high-quality service.)
Why should I be the one to bring it up? Shouldn't my broker do that?
As much as we hope that brokers everywhere will be thrilled to adapt to this new policy, we wouldn't bet on it. Of course, the vast majority of brokers do fantastic work, uphold their commitment to their clients, and will be happy to disclose this information freely.
But not all of them are like that. We expect that some brokers are banking on the idea that their clients are unaware of the CAA. So you may need to be the one to broach the topic.
What's to gain by asking about the CAA? For many employers, you'll be reassured that your broker is committed to providing the quality of service your company deserves. For others... well, you may learn something new about how your broker does business. (Read: You'll finally be able to tell where you're getting ripped off.)
One thing to note: for most of you reading this, the CAA may not kick in until later in 2022 or even 2023. The policy only impacts employers who entered into or renewed (i.e., extended) their contracts on or after December 27, 2021.
Even if you're not impacted by the CAA just yet, it's probably still worth it to ask your broker about it. Their answers (or lack thereof) may shed some light onto their priorities in your partnership.
Bottom line: While they're not legally bound to disclose this information proactively, you as their client absolutely have the right to these answers.
Here's how to kick off this conversation.
1. Did you receive any kickbacks or supplemental commissions from the carrier that you recommended to us?
This may be the most revealing answer you get. Too often brokers will feel pressured to guide their clients toward plans that are more aligned with their brokerage's bottom line than the client's needs.
Still, we recommend taking this with a grain of salt. Commissions are an inherent piece of the broker comp puzzle. Even the best brokers in the business receive commissions from carriers. After all, being a benefits consultant is hard work, and they deserve to get paid fairly. And just because they received a commission doesn't mean that you're not also being recommended the best possible plan for your company.
- If you didn't receive commissions, would you still consider this plan to be the best for our goals and priorities?.
- Did you receive any non-financial perks, like swag or trips?
2. What actions are you taking to ensure you meet the CAA's new guidelines?
As for Nava, we're looking forward to this new policy. From our perspective, more transparency in benefits brokerage space means we're that much closer to achieving our mission: providing high-quality, affordable healthcare for all Americans. (And for what it's worth, we didn't need the law to tell us to be transparent. It's something we believed in since day one, which is why we created our own performance-based guarantee in 2020.)
Unfortunately not all brokers share that sentiment. A lot of brokers are feeling uncomfortable about this new policy.
Pay attention to how they respond to this one, because it could tell you a lot about their perspective on the CAA. Are they forthcoming with their plans? Or are they surprised you know about the CAA in the first place?
3. Can you send over a document outlining your current compensation structure as well as services rendered?
This document should lay it all out there — from their compensation, to commissions, to what services you'll receive for your money.
Take notice of the way this information is presented. If this document is difficult to understand, maybe there's a reason they feel the need to hide behind jargon. Don't be afraid to ask for clarification if you need it.
- Can you walk me through this document and explain it to me in layman's terms?
- Does this compensation statement also reflect non-monetary gifts from the carrier, like trips or dinners?
Have a question about the CAA? Our team can help.