The importance of a comprehensive and competitive employee benefits plan cannot be overstated. This non-salary compensation can extend well beyond health and dental coverages. Think wellness programs, disability plans, retirement plan management, a range of non-traditional benefits and more.
An experienced, unbiased benefits broker can make all the difference. These licensed insurance professionals specialize in understanding what benefit programs are available, the vendors that provide them, how they’re priced and how to save clients money.
An exceptional benefits broker can customize an appropriate program, offer consultative and compliance support, and negotiate cost-effective renewals. This eases the burden of management on HR professionals.
In today’s job market, job seekers have the upper hand. So it’s no secret that a well-structured, competitive benefits plan is key to attracting – and retaining – the best employees. In fact, 56% of employees surveyed1 deem benefits to be “very” or “moderately” important. An equal percentage would even prefer extra benefits over more money.
This is where benefits brokers truly add value for employers – because the sheer amount of offerings can be overwhelming. A benefits broker can help streamline the choices to offer an affordable, customized program that meets the many needs of your employees.
Benefits brokers must pass a state licensing exam, and be insured – in addition to bringing a deep knowledge of carrier offerings and an overall expertise of insurance policies and other workforce benefits. You’re not looking for one expert, but a team of experts. Compliance experts, underwriters, benefit risk analysts, and more. They’ll have access to analytics that not only help secure comprehensive benefits package, but ensure fair costs and renewals, as well.
And some, like Innovo Benefits Group, offer even more services, helping employers administer benefits programs and educate employees on the choices available.
How to Choose a Benefits Broker
It all starts with asking the right questions.
- How long have they been in business?
- Have they managed programs for groups of similar size to your company?
- Are they independent from carrier panels to offer the greatest breadth of options to you?
- Do they maintain carrier panels of any sort for any type of coverage?
- If yes, then how are those carriers chosen for the panel?
- Do those carriers offer any financial incentive, including bonuses?
- Do they accept bonus payments from any carriers? (learn more about broker bonuses)
- Are they staffed with experienced personnel to handle your needs?
- Are they an independently owned firm, or part of a larger group?
- Is there any pending or past litigation or punitive actions against them, brought by a client, state or licensing body?
- Are they willing to share client referrals? Do they publish testimonials?
- If you have a special need, like self-funding, do they have in-house expertise?
- Do they have a compliance expert as part of their staff?
- Will they publish their renewal rates for groups your size?
Commissions vs Fees
Commissions are often built into premiums and can’t be removed, so there’s no reason to pay fees on top of that. By design, these commissions are shared by the employer and employee through a split of the premium payment.
With fees, which might be more appropriate for larger groups, you have the assurance that brokers won’t be paid more (or incentivized) if the premiums increase. This could keep renewal costs in check, too.
It’s important to note that fees could be a client budget line item entirely assumed by the company. An alternative is to pay commissions but have a cap in place.
A great benefits broker should do more than help you purchase benefits; they should optimize your budget with innovative solutions, additional services like marketing and consultation, and offer an informed view on non-traditional benefits, too. These qualities are table stakes. Each year, good brokers will proactively compare your claims utilization trends against industry benchmarks and use your real-world data to refine your plan offerings. They should bring you actionable insights to help reduce costs and provide your employees a robust benefits offering.
Digging deeper on benefits broker selection
When it comes to a comprehensive benefits plan, health coverage is just a starting point. You’ll want a benefits broker who can present offerings for disability and accident insurance, retirement planning, wellness programs, and sought after non-traditional benefits, like childcare, pet insurance, financial wellness, bonus PTO and others.
Of course, there’s the actual benefits administration to consider. If your HR team is already at its workload capacity, finding a full-service broker who can assist here can help ensure your benefit dollars are put to good use.
If you’re offering employee benefits, you are bound by many federal and state laws – compliance is critical. The Affordable Care Act (ACA) brings many of its own regulations, and violations are enforced with stiff fines and penalties. Staying on top of these regulations is a full-time job unto itself. Do you want your internal HR professionals accountable for that? Maybe not. That’s where your benefits broker’s in-house compliance resource can save you many headaches.
A team with solid compliance capability includes the ability to educate your team, as well as actually doing the work, including plan documentation and notice preparation, annual 5500 reporting, and in-person reviews and updates.
When searching for a benefits broker, ask for their expertise with:
- Federal COBRA and state Mini-COBRA
- The Affordable Care Act
- IRC Section 125
- Family and Medical Leave Act (and other state/local rules)
- Health Insurance Portability and Accountability Act (HIPAA)
- Women’s Health and Cancer Rights Act
- Newborns’ and Mothers’ Health Protection Act
- Medicare Part D
- State disability rules
The importance of analytics and benchmarking tools
Insights. Data. Reporting. A great benefits plan is founded upon these attributes to ensure employers are maximizing their benefits dollars to best meet their employees’ needs. Today, access to a customized claims dashboard can give you a one-stop overview where you can see claims, premiums (where applicable), headcount, large loss info, and other related data. Experienced benefits brokers can help you interpret the numbers to offer solid insights that lead to lower costs – and renewals – by benchmarking against comparable-sized companies. Midyear reviews and other proactive reporting measures can help companies assess the program value and see what adjustments, if any, might be warranted.
How do analytics help save you money? Based on your needs, your broker should pull and analyze claims utilization reports as frequently as makes most sense, whether it be quarterly, annually or somewhere in between. Together, you and the broker should look at underlying claims utilization trends, comparing to benchmarks, identifying outliers and using real-world data to help drive plan design decisions, wellness program decisions and overall employee education. For example, if they find ER claims are running higher than average, they should look closer at the diagnoses, the amounts paid per visit, etc. They can then make decisions on ER copays (depending on benchmarking), and focus on employee education to encourage alternatives such as urgent care centers and telemedicine.
Similarly, when reviewing or developing a wellness program, you want your broker to find efficiencies by identifying the areas of concern for your group in particular and develop programs around those. Often the prescription drug utilization can be a significant driver of costs, particularly with specialty drug increases. By identifying trends with reliable data, you begin to explore alternative funding options.
A reputable broker should have access to leading medical data reporting and analytics solutions. For instance, with our access to these tools, we can rapidly integrate all of a population’s eligibility, medical claims, pharmacy claims, health risk assessment and case management data. Ideally, they would apply a wide range of medical rules to predict individual and aggregate risk in that population. Through the use of intensive data mining and predictive modeling techniques, our claims analysis tool automates the analytical process, enabling clients to make medical management and financial decisions more effectively and more timely.
Open enrollment support is a must
Let’s say the average open enrollment period is four weeks. Employees make many decisions – and have many questions – in that time. That could overwhelm your HR team. You’ll want a benefits broker that can create custom communication programs to directly assist your employees and help educate them on benefits choices. Ask about the specific print and digital resources they have to support your employees during enrollment.
In short, ask if they're prepared to offer both guidance AND be an extension of your HR team during open enrollment. A good benefits broker will say “yes.”
For comparison, here is what we consider a comprehensive open enrollment and benefit utilization plan:
- Employee presentations for both their open enrollment and new hire processing, both in person and via Zoom with concurrent real-time chat box Q&As. Session recordings to account for scheduling conflict. You should also inquire about monthly new hire and ongoing employee presentations.
- Traditional, customized and client-branded employee benefits brochures that combine essential benefits summary information with modern, professionally created graphic design elements. Some brokers will provide access to professional writers and graphics designers to help engage employees and ensure impact.
- Interactive decision support tools to research, plan and make decisions about their benefits package and access their personalized benefits statement.
- Tools that allow HR offices to easily publish company documents, such as employee handbooks, and let employees find relevant and timely company news and information.
- A database that lets employees and their families access explanations, health risk assessments, illustrations and interactive video on thousands of health topics.
- An interactive site where employees and their families can create and maintain personal health records, including doctor visits, medications and immunizations, safely and securely.
The question of compensation – broker bonuses, limited panels and non-standard commission levels
It seems obvious, but fully understanding how brokers get paid2 can go a long way to ensuring you get the most value for your HR dollars.
Have you ever heard of brokers bonuses? They can be earned across virtually all insurance lines. Who pays these bonuses? Plan sponsors (you) indirectly pay them as part of your premium.
Bonuses can be sizable, equaling almost a third of a brokerage’s total revenue. The risk is a broker may be persuaded to steer clients toward carriers who offer bigger bonuses. If you see this the potential for conflict of interest, you’d be right.
To remove any risk of bias, brokers could shun bonuses all together, although a bonus for a job well done seems justified. There is another option for dealing with broker bonuses, without risking objectivity – donate them!
To be fair, we don’t think bonuses are inherently bad, but we still donate all of ours to charity just to remove any risk of impropriety. Read more here.
If you’re interviewing a broker, see what percentage of their revenue comes from their “top” carriers. What you’re looking to understand is if a firm’s income is concentrated with just a few carriers. If it is, you’re not getting the benefit of wide marketing. And maybe you’re paying too much for renewal. Don’t limit your choice of carriers, instead work with a large group of carriers to find the best value.
Here’s what you need to know:
- Does the broker use panels and, if so, how many carriers are in the panel?
- What vendors make up the panels for each product line (medical, dental, life, disability, etc.)?
- What is the broker’s criteria for selecting these carriers?
- What percentage of the broker’s current clients are with their top carriers? (This gives an indication of just how many (or how few) carriers the broker does business with.)
- Why does the broker include particular carriers in their marketing?
The answers to the above questions can be telling. It’s important to know whether a benefits broker is getting a standard or non-standard commission – including non-cash compensation – or working with preferred carriers for established bonus incentives. Thankfully, a new federal broker compensation disclosure law will add transparency to the broker/client equation. Learn more about the Consolidated Appropriations Act of 20213 (CAA).
Personalized service & industry consolidation
At a time when more and more small benefits brokers are being bought by larger, private-equity-backed firms, employers may think they must choose either a Goliath or align with a David for more personalized, high-touch service. The choice, however, doesn’t have to be mutually exclusive – if you can find a benefits broker that blends national resources and technology with old-fashioned attention.
When considering the question of size, employers should know who will be handling their account. It’s not unusual for larger firms to pitch their business with a senior team… then transfer the staffing to less experienced personnel. Not ideal.
Ask who will be handling your account. Know their credentials and experience. Get a feel for the level of personalized service you’ll have at your disposal.
Your employees are counting on it.
Non-Standard Commission Levels
With a basic understanding of the industry’s standard commissions, it’s easy to think there would be no reason to find out what your broker gets paid by the carrier on your policy. Here’s is a little known fact – for groups over 100 employees or even over 50 in some states, brokers can determine their own commission levels. In these situations, they can request a higher than standard commission. This is another opportunity for a conflict of interest to be created, so it’s worth asking your broker.
Different laws can impact compliance
Since laws and regulations differ from state to state, not all brokers can legally practice in every jurisdiction or have the necessary experience to help you maintain compliance. The variances at each level can have significantly impact compliance. You’ll want a benefits broker well versed in the local, multi-state and multi-national regulations that affect your organization.
Small and medium sized benefits brokers do have a powerful tool in partnering with a large national or international broker. Here at Innovo, we are associated with NFP. Their resources and national footprint help boutique brokers enhance their service while maintaining a level of white-glove, personal service.
What sets Innovo apart
At Innovo, our experience and service-first approach have positioned us to meet your needs. Through our partnership with NFP, we have access to the tools of the largest firms while maintaining our independence and ability to work nimbly with zero red tape. By donating 100% of broker bonuses to charity, insisting on standard commissions and remaining fully transparent on renewal rates, we have earned the trust and partnership of many clients. See our client testimonials to learn more.
- Puckett, J. (2015, February 4). Study: Do Perks Matter for Employee Retention? TechnologyAdvice.
- Wooldridge, S. (2022, February 2). Broker compensation disclosure: Will CAA put brokers on the hot seat? Benefits PRO.
- Tirone, C. (2021, January 28). Why the Consolidated Appropriations Act of 2021 matters and how to take advantage of it. Benefits PRO.