Many laws govern the management of health insurance benefits, and though some can be confusing, the laws which prohibit companies from offering rebates are clear. A number of states have enacted legislation that threatens heavy fines for companies that provide inducements of any kind in return for insurance commissions. However, the health benefits industry has recently become rife with companies that actively skirt the boundaries of these laws.
One reason that insurance brokers and national and regional payroll companies are able to successfully steal group health insurance customers is that many of the services they offer do not appear to be rebates at first glance. However, offering free COBRA administration, online benefit enrollment technology, payroll processing services or even human resource management systems is a form of rebating according to the letter of the law.
According to the Insurance & Financial Advisor, the Maryland Insurance Administration issued fines of over $50,000 to local insurance brokers who offered various types of rebates in exchange for companies switching to their brokerage firm. In addition to being unscrupulous, brokers and companies that routinely engage in this activity put employers and HR representatives who hire them at risk. As tempting as they may be, it is important to realize the consequences involved in enacting insurance rebates.
