A disturbing new trend among certain carriers may make it more difficult for plan sponsors and their broker/consultants to discharge their plan responsibilities. As we all know, one of the key value propositions that an insurance broker provides to his/her clients is information and counseling designed to permit the plan sponsors to make decisions that are in the best interest of the plans and their participants.

For dental plans and other arrangements, this has meant researching the plan design, network, and claims history to identify whether an alternative carrier might offer a product that offers better value for the premium paid. Although the client is always responsible for the final decision, the broker's experience, assessment of available data, relationships, and knowledge are essential to clients in making these decisions. The recommendations given to the client are based significantly on empirical data from a current carrier, which includes comparing rates and offerings from other carriers. Doing such comparison delivers pertinent information without bias to help estimate plan savings to clients. Carriers have traditionally offered this information without any conditions or strings attached; however, brokers in some cases are recently being notified by carriers that the delivery of this critical information is now subject to some very limiting conditions.

What is happening?

Certain carriers are requiring brokers (and consultants) to sign non-disclosure agreements (NDAs) or are including restrictive confidentiality terms in agreements. In some instances, these NDAs or terms restrict or prohibit the broker from sharing the information provided by the carrier to anyone, including the client (plan sponsor). This restriction effectively prohibits the broker from discussing its findings, including price, network, and claims comparisons.

Everyone in the industry — including the carriers — understand that by being able to provide aggregate information to plan sponsors in the form of disruption reports, which include analyzing claims from in-network and out-of-network providers, brokers can help employers determine which plan is most suitable to their employees and their budget. It appears in some cases the carriers' NDA prohibits the sharing of this information, even in an aggregate form. This makes it almost impossible (if not impossible) for the broker to do his/her job of providing advice and counsel and for the client to do its job — indeed, to discharge its fiduciary duty under ERISA — to select the plan that meets the best interests of the participants. The client simply cannot receive the required information it needs to make an informed and educated decision.

While it is often unwise to speculate about motive and impossible to really know why some carriers have started requiring these NDAs, it is clear that the impact of this decision is to chill the broker's effectiveness in providing advice and information that will permit plan sponsors to be effective shoppers.

The information the carriers have been providing is now called "confidential" and restrictions and limitations are being placed on its use. The data and information provided, though, has previously been unconditionally given to brokers. The carriers involved claim that this information is proprietary to them; whether that is legally correct will likely someday be determined. In any event, it is important to note that the information is always aggregated, anonymous, and not personally identifiable, so it is information that should be given freely, easily and without restrictions. These agreements and provisions severely limit the ability of brokers and their clients to properly scrutinize other carriers and products in order to make the right decision for their employees' benefits.

Potential state law concerns

Brokers should be wary of signing these agreements. Overall, brokers are regulated under state insurance law. States usually require brokers to share certain information with clients, such as network information, costs, and plan design. If the broker is prohibited from doing so through a confidentiality clause or NDA, it could be impacted by the law and regulations surrounding what a broker needs to disclose. Brokers could be accused of misrepresentation if they cannot share information that could have a potential impact on a client. Brokers are responsible for helping a client understand its policies, including advantages and risks associated with any given policy. This not only includes cost, but also what providers employees are utilizing. If a broker cannot accurately communicate with a client due to not being able to share applicable data, it could be a potential violation of ethics and impact a broker's relationship with a client.

On a federal level, plan sponsors should take a stand with these carriers. As noted, ERISA requires plan sponsors and fiduciaries to always act in the best interest of the plan participants. Insurance carriers that interfere with employers who are attempting to discharge their fiduciary duties should be cautioned by an employer's counsel that their actions are placing the employer at some risk. Carriers, who are perhaps more risk adverse than most other vendors, should understand that this means that they are taking on some risk by participating in this action.

What brokers need to consider

Brokers and consultants alike should carefully review NDAs and other agreements and push back, when appropriate. If a provision within the contract terms limits the ability to share information with another carrier or the client, the broker should insist that the language be stricken or consider options for not signing the contract. Another alternative is to attempt to negotiate the definition of "confidential information." The broker's counsel should ask whether the carrier is attempting to claim ownership of information it does not own, for example. While it is important for plan sponsors, brokers, and carriers to try to maintain an amicable relationship, the broker's first obligation is to its client.

If the broker or a client has already signed a contract that contains such a clause and the party wishes to change it, it is suggested benefits counsel is contacted. There is a chance the carrier will not want to negotiate this particular provision, which can place a strain on the relationship between the broker and the carrier. Brokers also have the ability to terminate their relationship with a particular carrier. There may then be an opportunity to renew a carrier relationship that allows for information-sharing for future transactions.

Instead of terminating the relationship with a particular carrier, the broker also has an opportunity to explain to a client that information cannot be shared, which affects the ability to make an educated decision on which plans should be chosen, and that it may be wise to move to a different carrier that allows information sharing.

Next steps

A broker and its clients should carefully review any NDA or confidentiality provision within a carrier contract. If the information sharing is limited — even if the information is provided in the aggregate — the parties may want to reconsider whether this carrier is a good partner for their employee benefit program. Although this may not presently be considered a "deal-breaker" for all brokers, clients, and consultants, it is important to keep in mind that not being able to comparison shop, create disruption reports, or share information with a client for a benefit they are paying for can create relationship issues and make it difficult to change carriers in the future. A carrier often depends on a broker to assist the client and accurately sell the insurance products by providing the most pertinent information. The broker, and its clients, do have leverage within these situations.

Instant Insights /

Are carrier non-disclosure agreements limiting broker-delivered value?

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