As an employer, you understand the importance of having a competitive employee benefits program.
Following rising employee demand for a compensation package that includes better benefits, it has become a top priority for you to make sure that the benefits program you offer meets the mark.
So – in true 21st-century fashion – you take to the internet, confident that an unmatched employee benefits program is but a click of your wireless mouse away.
But with every click, page, and pop-up, you are inundated with an overwhelming amount of insurance information.
And with it, your confidence crumbles into a ruins of questions:
- Which insurance carrier is the best?
- Which plan offers optimal coverage?
- Which option is most cost-effective?
As you look for answers, your search queries all seem to point in the same direction – working with a benefits broker.
By working with a benefits broker, you’ll gain access to a wealth of industry knowledge, current market research, and expert advice…all at no cost to you. It seems almost too good to be true.
And you are left to wonder – how is a benefits broker paid for the services they provide?
Here at Combined, our team of benefits experts has helped countless employers understand the ins and outs of a business-to-broker partnership. We want to equip you with the tools you need to secure the best employee benefits program for your business.
In this article, you will learn how a benefits broker is paid for the third-party services they provide to employers and why working with the right one will benefit your business.
What is an employee benefits broker?
An employee benefits broker is a licensed insurance professional with expertise in employee benefits administration.
Recall the aforementioned internet search that led to nothing but questions – working with a benefits broker will eliminate the search, the questions, and the frustration with either.
A benefits broker researches insurance carriers, coverage, and costs for you
An employee benefits broker simplifies the difficult process of selecting a benefits program by gathering and providing you with your best policy options.
Your broker does this by researching and comparing different insurance carriers, the variety of coverage plans they offer, and the cost associated with each.
In doing so, your broker narrows what is otherwise a laundry list of potential policy quotes, down to only those best suited to your business.
In simple terms, your broker is your one-stop shop for finding your best-fit employee benefits program.
A benefits broker represents you not the insurance carrier
Your benefits broker has your best interest at heart. They act as a liaison between you and competing insurance companies to find, negotiate, and secure your ideal employee benefits program.
Imagine you are on trial. The stakes are high, the gavel pounds, it’s time to plead your case. Who presents the evidence, delivers the argument, and influences the verdict? Your lawyer.
In the same way that a lawyer represents a client, your benefits broker represents you. Your benefits broker works, amidst insurance carrier competition, to make sure that you get the best possible benefits program for the needs and goals of your company.
So, in the case of Your Business V. Insurance Carriers, who defends you? Your benefits broker.
How is a benefits broker paid for their services?
The difference is, unlike a lawyer, you don’t have to pay a fee to your benefits broker.
I know what you are thinking. This doesn’t make sense – why would a benefits broker provide services for free? The short answer is, they don’t.
When a broker helps you to purchase a benefits plan, they receive a commission from the insurance carrier. This commission is typically a flat percentage of the premium you pay the insurance carrier for your plan.
Your insurance carrier pays your benefits broker
Regardless of the broker you work with or the insurance carrier you decide on, your insurance carrier will pay your broker a percentage of your benefit plan premium.
A few examples:
Let’s say that your broker receives a 5% commission from the premium you pay for your benefits plan. If you purchase a $100 plan through insurance carrier A, insurance carrier A would pay your broker $5 of this premium.
If you decide to upgrade to insurance carrier A’s $200 benefits plan, insurance carrier A would pay your broker $10 of this premium.
If you are unhappy with insurance carrier A and your broker helps you to switch to a $200 plan through insurance carrier B, insurance carrier B would now pay your broker $10 of this premium.
But let’s say you are also unhappy with your broker. You can begin working with a new broker at any time during your plan year – and once you do, they will receive the policy commission for taking over your plan’s responsibilities.
So, I repeat - Regardless of the broker you work with or the insurance carrier you decide on, your insurance carrier will pay your broker a percentage of your benefit plan premium.
In other words, the cost of broker services comes out of the insurance carrier’s pocket, not yours.
Insurance plan premiums will be the same whether or not they are brokered
Call me a mind reader, I know what you are thinking again – if an insurance carrier pays a broker commission out of your benefits plan premium, will your plan premium be lower if you purchase it directly from the insurance carrier?
And the answer is, no – if you go directly to an insurance carrier to purchase your employee benefits plan, you will still pay the same plan premium that you would if you had the assistance of a broker.
So, by going directly to the carrier, you do more work while the insurance carrier saves on broker commission.
With this in mind, why not work with a benefits broker?
Why not work with a benefits broker?
By working with a benefits broker, you make sure that you purchase the right employee benefits plan from the right insurance carrier at the right price.
Your benefits broker will provide answers to some familiar questions:
- Which insurance carrier is the best?
- Which plan offers optimal coverage?
- Which option is most cost-effective?
And your benefits broker will guide you through this entire process, assisting you at every turn.
Most importantly, these broker services come at no cost to you.
All things considered, there really is no reason not to work with a benefits broker.
Take the next steps toward the right benefits broker partnership for your business
If you are here, you want to offer your employees the most competitive, comprehensive, and cost-effective employee benefits program possible. Now, you just have to find it.
But try as you may, the sheer amount of different insurance options – all varying in perks and price point – has made it seem an impossible search.
In this article, you learned why working with a benefits broker can simplify it and how doing so won’t cost you a dime.
Here at Combined, our team wants to equip you with the tools you need to secure the best employee benefits program for your business. By reading this article, you know that a benefits broker may be the resource you need to do just that.
Partner with a benefits broker and end the search!
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.
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