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Is It Time to Change Your Benefits Broker?

Before deciding to keep your broker, determine how much you're paying

A group of people sitting around a table looking at papers.

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," Murdock said. "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 benefits 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 benefits 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 its 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 Advisors Network, a benefits broker and consulting network based in Cleveland. "Go into it with a clear idea of the type of advisor you need."

[SHRM members-only toolkit: Managing Health Care Costs]

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."

What to Ask Potential Brokers

What makes a broker relationship strong? Bill Gimbel, president of LaSalle Benefits, a technology-enabled corporate benefits firm, suggested questions to ask a potential employee benefits broker:

  • How frequently do you meet with your other clients? If a broker is only getting in front of their client during plan renewal, that could be a red flag. Employers should consider seeking a broker that will check-in frequently with quarterly updates, policy updates and answer any questions a client may have.
  • How have you worked with a client to design a benefits package, based on their unique needs? Benefits aren't a "one-size fits all" deal. When building a plan, the employer should be involved to ensure the plan is built with their employee's unique benefits needs in mind.
  • How have you helped new clients educate their employees on their benefits options? Brokers can offer resources like webinars, benefit newsletters and informational sessions to help a client's employees better understand their benefits.
  • What is the most critical benefits situation you've been faced with, and how did your team resolve it? When the unexpected happens, a broker should be a point person to help their client navigate the issue.
  • Who will be my main point of contact at your firm, and how many clients do they have? As with any vendor, it's important to feel that the broker is an extension of your team. Get to know the person who will manage your account, and understand how many accounts they service, so you can determine the level of attention you'll receive.
  • Can you send me your references? Ask those references the questions above. Whether their answers confirm or negate the answers a potential broker gave can reveal whether or not your broker relationship will be compatible. 

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."

Benefits 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, benefits 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."

Joanne Sammer is a New Jersey-based business and financial writer. Stephen Miller, CEBS, contributed to this article.

Related SHRM Articles:

Self-Insurance Is Just the Start, Say Health Plan Innovators, SHRM Online Benefits, April 2018

It's Probably Time to Re-Bid Your Benefits Contracts, SHRM Online Benefits, March 2018

Know What You Need to Select a Benefits Provider, SHRM Online Benefits, July 2017

Finding the Right Benefits Broker, SHRM Online Benefits, July 2011

Related SHRM Resource:

SHRM BrokerFinder. Contact brokers of interest on your time, on your terms. Assess your candidates with a range of tools and resources.

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