Is Your Benefits Broker Overpaid?

Offering scant services while collecting commissions that top HR Directorsý salaries, many insurance brokers fail to make fiscal sense.

As a dark cloud continues to hover over the economy, companies throughout the country look for ways to cut costs. Solutions range from small savings like motion-sensor lights to more acute measures like layoffs. But few organizations realize that something as simple as switching insurance brokers can save thousands of dollars.

For a Dallas-based title company with 220 employees, monthly health insurance costs totaled $165,000. Of that, their broker was making $6,600 a month, plus commission from ancillary benefits. Although he handled renewal negotiations, gave enrollment data to the carrier, and assisted in issues when needed, he hardly provided $79,200 worth of services a year. In fact, the companyýs two-person HR team bore most of the burden, including all open enrollment paperwork, new-hire enrollment, and ongoing employee services throughout the year.

Then the questions came to them: Would they pay an employee the same salary for the same amount of work? Or would they let him/her go? Why should their insurance broker not be held to the same standards as their employees.

Traditionally, insurance brokers act as salesmen, rather than as a branch of your staff. They follow the standard definition of a broker, which unfortunately benefits them much more than you. As a result, HR juggles the vast majority of benefit-related work, while an insurance broker collects commissions totaling more than the HR Directorýs salary.

Depending on your companyýs size and your insurance carrier, your broker is most likely making between two and five percent commission just on your health insurance premiums. If not, he or she is probably charging a flat monthly fee based on your number of employees. On top of that, he is making more on your ancillary services like life, dental, and vision.

Does your brokerýs commission align with the services he provides? Is money that could go toward your bottom line going to your broker? To determine thatýand discover what you can do about itýfollow these four steps.

1. Ask

If you donýt already know, ask your broker what he makes annually on your companyýs commissions. If he wonýt tell you, be leery. If a broker isnýt open and honest about what he makes from your company, he probably isnýt looking out for your companyýs best interests.

Also, you may want to review Schedule A of your filed IRS 5500 form. There you should find the reported brokerýs commissions.

2. Assess

Once you know what your broker is making, determine whether he earns that income. How does what he makes compare to what he provides? Does he only handle annual enrollment and renewal negotiations, or does he provide services throughout the year? Does he meet with each of your employees and handle ongoing maintenance, or do those tasks usually fall on HRýs desks?

Looking at it mathematically, the ratio of your brokerýs commission to the value of his services should be one to one. If your broker is making $55,000 a year from your group, you should expect $55,000 worth of services.

3. Compare

After you assess the cost/value ratio of your brokerýs services, compare that to other brokers and calculate what you can save.

If you have 51 or more enrolled employees, Ovation Health & Life Services will waive the commission on your health insurance. Those annual savings can go toward your companyýs bottom line and/or reduce employeesý contributions. The previously mentioned title company was able to save nearly $80,000 a year yet receive more services than before.

ýWe provide the same servicesýmost times even more servicesýas other brokers, and we do it without taking health insurance commission,ý says Daniel LaBroad, President of Ovation. ýOur technology-driven, streamlined, efficient procedures and programs allow us to forgo that commission but still provide excellent services.ý

Ovation still makes a commission on your benefits, but only on supplemental and ancillary benefitsýservices that other brokers collect commission on too. For that substantially smaller commission, Ovation provides the following services:

ý         Open enrollment assistance each year, plus enrollment throughout the year for new employees

ý         Custom HR web portal

ý         Custom benefit books for each employee

ý         One-on-one consultations with each employee to ensure that he/she understands benefits (On average, 73 percent of employees donýt understand their benefits. When they do, they appreciate their employer much more.)

ý         Printed employee benefit statements

ý         Assistance seven days a week via e-mail and live chat if questions or issues arise

ý         A free iPhone app for employers and employees (includes forums, service request forms, contact info, and more)

ý         Benchmarking to compare your business against local competitors to see how your benefits stack up

ý         Free wellness options for companies with more than 100 employees

ýOne of my goals is to make sure that what weýre getting is proportionate to the services a client receives. We see ourselves as extensions of the companies we serve, so we want to take hassles off HRýs desks to ease their burdens,ý LaBroad says.

4. Contact

To learn more, contact Daniel LaBroad at Ovation Health & Life Services. Heýll show you what Ovation can provide in terms of services and savings.

ýA lot of us can be adverse to change, but it can be good and really help a company,ý LaBroad says. ýIf a company switches to Ovation and decides they arenýt happy with the change, weýll help them switch back to their former broker. But thatýs never happened.ý