Paying Broker Fees

Gracie

Would anyone care to share if their company is paying its benefits broker traditionally (i.e., through the insurance companies) or paying the broker directly?

Please also share the reasons behind the decision. Thank you in advance for taking time to help with this question.

Down_the_Middle

We pay the insur company-----------I suspect the rationale for this is simply that it has worked in the past and no one sees any reason for changing it. Not very scientific, but it is what it is!

HRQ

We pay through the insurance companies. Wasn't involved in the decision making process at the time - it's how I inherited it.

The thought did strike me, though, that if the broker is paid via some kind of commision structure, and the broker is the person who solicits bids each year for us, what is the broker's incentive for getting the lowest bid possible on the best product? And how would I know the difference anyway, since all I see is the bidded premium structure and plan summary?

I'm learning as I go on benefits, and never thought of this 'til now.

AnneLa

HRQ,

I'm in the same boat, this person has always been the broker and I really don't feel that there is a way out........... We'll have to try and be more creative, Fourumites, any suggestions?

jrzgrl

One thing I do to keep my broker honest is to take note of trends that are reported in the media and to see if he informs me of and reacts to them. For example, I had read that Aetna was becoming more competitive with their rates this year, and my broker told me as much and said he would show me quotes from them for our next renewal. Also, you can choose to take one of those annoying unsolicited calls from another broker and schedule a meeting. Pick their brain and see what they offer you that your current broker does not. If your broker knows that you're shopping around, it might even encourage him to work harder for you.

marc

Good question. I did not know we even had a choice on this. Don't most health insurance companies require a broker of record letter so they do not quote more than once to a company?

I think other benefit plans are less strict about brokers but was not aware of any choice about commissions being paid direct. It might be like all real estate deals; just a commission away from closing!

SMace

Regarding health insurance, I just went to a meeting w/ a consultant that gave the advice to fire your broker and hire a consultant. Brokers get paid a commission on your total premium, so they have no incentive to keep your costs down. I would suggest renegotiating how you pay your broker or follow the consultants advice. My experience is that brokers don't know s**t about controlling health insurance costs.

HRQ

Since I'd never dealt with a broker prior to this job, I finally asked him what his role was. (I never had contact with him other than during the bidding process each year) He described himself as the "quarterback" of our insurance plans.

I'm still not quite sure what that means, but considering he makes thousands of dollars for the equivalent of less than one month's work, I now use him a lot more. I refer all problems with the insurance companies to him, and let him spend the time sorting out the "wierd stuff" instead of me, like chasing down our account rep when my web enrollment isn't working or chasing down enrollment supplies when my reps claim they've been sent. Might as well get some service for all that dough!

marc

I started feeling the same way last year. I instructed our staff to let the broker know when we were having customer service problems with our HMO. If the issue is not resolved in the first call, or their customer service department does not follow up on promises - the broker gets a call. Unfortunately, they are earning the money, because the customer service in our HMO sucks!

I have similar issues with our umbrella liability broker, who also does our workman's comp. Costs continue to rise with no proactive suggestions from him for ways to mitigate, especially in the WC area. We are thinking of and taking all of the steps on our own. Contacting the underwriter, demanding site inspections, formulating safety manuals, distributing materials on proper lifting techniques (in an office), how to sit properly to mitigate carpal tunnel, etc.

It is so frustrating to pay the commissions without the customer service.

Nat

[font size="1" color="#FF0000"]LAST EDITED ON 09-29-03 AT 08:58AM (CST)[/font][p]Our broker is paid through commissions from the insurance companies. I don't have a problem with this. I do think you have to keep them in check and do some homework yourself. I always have some idea of what the trends are but I trust the broker we have now implicitly. In fact, we were facing some pretty tough budgeting issues this year and he asked the medical insurance company not to raise his commission so that they could keep the rates as low as possible. On the other hand, when I first came to work here, had not met our broker and was faxed an 84% increase in our medical premium. According to him, there was no other insurance company that would take us. I changed brokers to the one I have now as soon as I could, did not accept the 84% increase and have not had anything close since. He seemed shocked that we would go to someone else - go figure!

mwild31

I hope I'm not too late to get into the discussion, but as I've recently gone through the process, I have some recent experience with this issue. I always knew our former broker was getting paid through commissions, but I wasn't aware of how much or how the amount was established. I was reviewing our 5500 earlier this summer and noticed the commission rates. Our broker received about $20,000 for all of our accounts - and I was doing all of the paperwork and having to put up with HIS arrogant ways. I brought all of my issues to the CEO (he's my boss) and I proposed we do an RFP. He couldn't help but agree. So, the RFP was sent out & our former broker (who didn't like me much) decided to lower his commission rate from 5% to 4% (this rate is set by the insurance company) in order to beat out the competition and save the account. The competition found out what this guy was doing (he never told me) & matched his commssion rate. Thank you former broker, I think your tops now. x:*

marc

So how does this work? The commission is paid through the insurance carrier, but your brokers bid a lower fee. Do they give you a rebate, or do they quote a lower fee to the carrier and it is rolled into the overall price? Just curious.

mwild31

[font size="1" color="#FF0000"]LAST EDITED ON 10-03-03 AT 12:08PM (CST)[/font][p]Hi Marc

They (broker with insurance approval) quote a lower overall price.