Brian Freeman is the CEO of Mployer Advisor.
We are entering Q3, and for most HR, finance and employee benefits professionals, the planning process for 2024 employee benefits and healthcare coverage is beginning.
Planning your company’s healthcare benefits can be intimidating in today’s economy. The numbers behind employer-sponsored healthcare are staggering: At a high level, employers cover healthcare for over 159 million Americans—nearly half of the U.S. population. Employers and employees pay for the vast majority of private healthcare spending in the U.S., which is over $1.2 trillion each year. Employers pay even more than that for their employees when you also incorporate dental, vision, disability, life retirement and many other employer-sponsored benefits. What is also staggering is the price increase: Over the past 20 years, employee wages have increased by an average of 16.25% every five years, while healthcare premiums have increased an average of 30% every five years.
Unbeknownst to many people, however, there is one person who can have a large yet often overlooked impact on employees’ personal benefits cost and quality. It is not the name on their insurance card, nor is it their physician or even their employer; it is the insurance broker that a company hires to help negotiate rates and design its benefits plan. But what are the tangible benefits of working with an insurance broker, and how can you know if you are partnered with the right one for your company?
The Basics
First, let’s go over a few basic facts about insurance brokers.
• What is the difference between an insurance broker and a consultant? They are largely the same. However, brokers are paid a percentage of premium for the most part, while consultants are paid on a fee basis. Most insurance advisors are paid with a combination of both.
• What does an insurance broker do? An insurance broker is someone you hire each year to solicit quotes from insurance companies and design your plans, including what your deductible is, max out-of-pocket, copays and the plan type, from a high-deductible to an HMO.
• How is an insurance broker paid? Insurance brokers are paid in several ways. For large companies, they can be paid a flat fee. For small-to-midsize companies, they are often paid a commission, or a percent of the employer cost directly from the insurance carrier. The same commission also applies to insurance like dental, vision, life and disability. Brokers are often also paid contingent commissions from insurance carriers at the end of the year as bonuses for the number of clients placed with that carrier or for hitting retention numbers.
• What is a fiduciary duty? Insurance brokers are hired by the employer to get the best rates, but they are paid by the insurance company, often as a percent of that employer’s spend. So how do you know if you’re getting the best outcome? The answer is that insurance brokers/consultants have a legal fiduciary duty, meaning an obligation to serve their employer clients’ best interests even though they are paid by the insurance carrier.
Can an insurance broker actually impact insurance rates?
While initial quoted insurance rates are calculated on the risk profile of the company’s employees, insurance brokers can play a role in helping their clients 1) secure more favorable rates and 2) design and implement custom plans unique for that employer. A knowledgeable and experienced broker can leverage their expertise and industry relationships, analyze the market, and negotiate with insurance carriers on their behalf to identify cost-saving strategies, recommend suitable coverage options and negotiate competitive premiums and terms.
How do you know if a broker is right for your business?
Determining whether you have a good employee benefits broker can have a big impact on the success of your organization’s benefits program, cost, hiring and retention. To evaluate their fit with your organization, consider these three criteria.
1. Expertise With Companies Like Yours: There are certain strategies to use for a manufacturing firm with 250 employees, and there are other strategies to use for a finance company with 50 employees. Does your insurance broker have experience with firms just like yours? You don’t want to be an orthopedic surgeon’s first case. Ask your prospective insurance broker whether they have had other clients in your same industry and size group.
2. Measurable Results: A good broker delivers tangible value. They secure competitive rates with optimal coverage to meet your strategy. They should also contribute to the ongoing success of your benefits program through claims management, employee education and enrollment assistance. Ask what your trend of success says about your broker. What trends are they seeing with their other clients? However, keep in mind that some factors are outside of a broker’s control on a year-to-year basis.
3. Feedback From Other Clients: Do not settle for the two references offered or three quotes provided. Ask for specific references from clients just like you, and ask for measurable results.
There are many great insurance advisors in the U.S., including ones that will fit perfectly with your business to help drive the right employee benefits strategy balanced with cost. As you are beginning to plan for 2024 benefits, I advise taking these steps to ensure you have the right broker partner for your company. Just as firing a coach is necessary when a team fails to perform, if your broker lacks the necessary expertise, fails to communicate effectively or doesn’t deliver measurable results, it may be time to make a change. By seeking a broker who excels in these criteria, you can help ensure that your employee benefits program thrives, benefiting both your organization and your employees.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
Read the full article here
