SHRM: Is It Time to Change Your Benefit Broker?
A subpar relationship with a benefits broker can cause employers to overlook opportunities to manage costs and improve employees’ satisfaction with their benefits package.
If you decide to hire a new broker, preparation is key. An employer that understands its needs and has a sense of what is available in the marketplace stands a better chance of choosing a broker that is a good fit.
Getting the Help You Need
The right broker for a particular employer has experience working with organizations whose size, employee population, benefits budget, geography and industry are similar to the employer’s. The right broker also has a deep understanding of what the employer wants to achieve through its benefit plans and the experience to help that employer achieve its goals.
“HR is often short staffed and overwhelmed by daily responsibilities, making it hard to be proactive about benefits,” said Gil Murdock, a principal at DirectPath, a firm that works closely with brokers and that provides personalized health care benefits education and transparency services. In some cases, a strong broker relationship can alleviate the need for HR to add staff to handle benefit-program management, because the broker is able to step in.
A strong broker relationship also can provide crucial support toward encouraging greater health care consumerism. “For employees to become better health care consumers, employers need access to the tools that can explain complexities like how health savings accounts work and provide transparency in health care costs and pricing,” said Murdock. “Employers often need a place to go to access these types of tools,” and a broker should be able to provide them
Why Do You Want a Change?
There are many reasons employers enter the market for a new broker. Some simply want to make sure that the arrangement with their current broker is still competitive from a cost perspective (see “Uncover ‘Hidden’ Commissions and Fees”).
They may also want to see what levels of services are available in the marketplace for organizations of their size. An employer that has grown rapidly over the past few years may now need a broker that is able to negotiate better deals for large benefit programs. In some cases, a growing company that is expanding geographically may find that it needs a more-compliance-savvy broker that can help manage the requirements of various state and local laws and regulations related to benefit plans.
In other cases, the broker change could be spurred by new HR leadership that wants to shop the marketplace or look for a broker relationship that is more-supportive of the new leader’s priorities. Or, an employer may simply feel that the organization is not getting enough attention or the promised level of service from their current broker.
The Society for Human Resource Management’s BrokerFinder provides a national, searchable marketplace of broker candidates at no cost to employers. The site includes a request-for-proposal template and allows employers to score and assess candidate responses as part of their evaluation process.
Before entering the market for a new broker, take stock of past broker relationships. “It is important to inventory your experience, including what you liked and didn’t like about the relationship,” said Perry Braun, executive director of Benefits Advisory Network, a benefits broker and consulting network based in Cleveland. “Go into it with a clear idea of the type of advisor you need.”
Set Clear Expectations
Once in place, any new broker relationship should begin with clear expectations for all of the activities the broker will perform. “How will the broker get those things done?” Braun asked. “There needs to be accountability to make sure the broker can work with a budget the employer can afford, so employers can provide benefit programs that, within their budget, best meet employees’ needs.”
Uncover ‘Hidden’ Commissions and Fees
“Broker commissions are hard to dig into,” said Sarah Redgrave, vice president of total rewards at Portland, Ore.-based KinderCare Education, which operates 1,400 preschools across the United States. Commissions paid through insurance carriers—or third-party administrators (TPAs) for self-insured plans—and based on a percentage of premiums “[are] like mystery money,” said Redgrave, who spoke April 30 at the World Health Care Congress in Washington, D.C. “But it’s not mystery money; it’s your money, and more importantly, it’s your employees’ money,” she said. “Every time they pay a premium, a portion of that is being carved off the top. You need to know how much [your broker] is getting.”
Benefit managers can start by asking their insurer or TPA for a monthly reconciliation of commissions, she recommended, showing what commissions are being paid to brokers and other service providers and their total costs. With that information unearthed, benefit managers can assess if their broker is being appropriately compensated.
Also seek out hidden fees being paid on top of commissions, Redgrave advised.
“I know it’s not comfortable to have those conversations with your broker/consultant,” she said. “Your broker is often the only person in your corner” when negotiating with insurers or TPAs, or when explaining plan costs to the CFO. “Asking, ‘By the way, are you charging me secret money?’ is not an easy conversation to have. But discomfort is part of what we do,” Redgrave said. “We have to lean into the discomfort of our roles because we have an obligation to our employees and our employer.”
At the same event, broker David Contorno, president of Lake Norman Benefits in Mooresville, N.C., advocated a shift from paying commissions based on a percentage of premiums to a performance-based model. “Create incentives for brokers to better manage the plan,” he recommended. “Get away from ‘perverse incentives’ that increase a broker’s rewards as plan costs go up, and instead create incentives around cost reductions.”
Read the article here.
Joanne Sammer is a New Jersey-based business and financial writer. Stephen Miller, CEBS, contributed to this article.