The committee will consider legislation that would require insurance companies to disclose how much they pay to brokers starting in July and prohibit the inclusion of brokers fees in insurance premiums starting in 2014.
Currently in the small group market in Vermont, which includes businesses with 50 or fewer employees, broker commissions are “baked in” to the rates. Basically, whether people use a broker to help them find the right health insurance plan or not, the cost is the same.
In the final day of discussion of H.559, the health care reform bill, the committee opted to postpone the issue and take it up as a committee bill.
On Friday, as the House debated H.559, two Democrats offered an amendment that would require insurance companies to spell out these fees starting in July and when the state implements a Health Benefits Exchange in 2014, brokers would have to get paid directly from the consumer. They withdrew the amendment on the House floor with an agreement that the health care committee would take it up as a separate bill.
Rep. Mike Fisher, D-Lincoln, offered the amendment, along with Rep. David Sharpe, D-Bristol, and Rep. Suzi Wizowaty, D-Burlington.
Sharpe said through his personal experience running a small business, he would use a broker, but he never really knew how much he was paying for the service or how it factored into the insurance premium.
“What really concerned me was if they presented three options and recommended option A, I never knew whether that option was the best for them or the best for my company,” Sharpe said. “It concerns me that I don’t have that knowledge up front.”
Under the language introduced by the two representatives, all insurance plans would have to disclose what the rates are for brokers.
The issue, for Sharpe and Fisher, who first brought up the issue in committee, is that businesses who do not use brokers are subsidizing those who do. At least in the small group market, people pay a commission for brokers in their monthly premiums, regardless of whether they use one.
“You don’t save any money by not using broker,” Sharpe said. “What it means is if you don’t use broker, you’re paying for other people to use one.”
Fisher, who chairs the House Health Care Committee, said it’s all about transparency. Fisher said he was somewhat shocked when the issue came to light.
“People should know what they’re buying and how much it costs,” he said.
While some lawmakers are concerned by the apparent subsidy, some brokers say a large shift in how they get paid could have unintended consequences.
Tom Rugg, an account executive with Hickok & Boardman Group Benefits, said in the small group market, insurance companies generally include a 3 percent to 4 percent broker commission in the premiums. In other words, businesses that don’t hire brokers are subsidizing companies that do.
In the small group market, if one company buys insurance for $400 a month, he said, it can hire a broker without paying an extra fee. A business that doesn’t use a broker pays the same total monthly amount. For the large group market, payment methods can vary from brokers invoicing larger companies to including the fee in the rates.
Rugg said he understands lawmakers’ intent to create more transparency.
“I’m fine with transparency,” Rugg said. “My worry is that their intent and what they’re actually putting on paper are two different things.”
One of the potential issues that could arise, Rugg said, is an increase in administrative costs. Currently, most businesses in the small group market use brokers, Rugg said. The Department of Banking, Insurance, Securities and Health Care Administration then approves insurance rates with the brokers’ commission built in.
Requiring brokers to collect individual fees from employers, which they would have to do in 2014 under Sharpe’s amendment, would mean brokers would have to track down hundreds of clients to invoice them.
The current system, Rugg said, is far more efficient. He said brokers are all for transparency.
“Don’t just throw the system out,” he said.
