Compensation Conflicts: The Top Three Questions to Ask Your Broker

As a not-for-profit cooperative of employers and insurance trusts that self-fund their health benefits, The Alliance is pleased to work with many forward-thinking, ethical brokers for health benefits. Most brokers will steer you to a product that’s right for your business.

You may still question how do you properly vet your broker?

The simplest way to identify good broker behavior is to ask questions. We’re going to outline the three easiest, most important ones below.

“How Do You Get Paid?”

To begin, you’ll want to ask where the broker gets their money. This question will help you learn about any financial incentives that may influence a broker’s decision-making.

This is a necessary ask because some payment arrangements from vendors or health systems are structured in a way that allows brokers and brokerage firms to receive commissions for guiding a client’s business to a particular vendor.

In this scenario, a broker might get a bonus for retaining a specific percentage of customers, or for guiding a minimum percentage of their business to a specific insurance carrier. Since it’s not labeled as “commission,” they may deny receiving one.

That’s why it’s important to broaden your question. A proper way to pose it might be, “Do you receive any money from insurance carriers or from vendors who provide services to self-funded employers? Does this include any commissions, bonuses, or other types of rewards?”

Sometimes brokers claim to work on fees – not commissions – but they sometimes build commissions into ancillary service lines, like life or dental insurance.

And if the broker won’t respond to this question? Well, you’ve probably got your answer.

“Who Pays You?”

We suggest following up with a more specific question: “Do you receive the majority of your revenue—more than 50%—from a single insurance carrier or another source?”

Why does this matter? Brokers who receive the majority of their profit from a single source are unlikely to look for a better deal for you and your employees. They’re also more likely to reject new ideas, options, or approaches, which means you could miss out on innovations that deliver big cost-savings.

You want to work with someone who’s motivated to find you innovative, cost-saving opportunities.

“What Makes You Effective?”

The final question you should ask a broker is, “How will you find the right solution for my organization?”

If a broker assures you that they always look around but consistently end up with an HMO, a fully-insured plan, or a solution from large national carriers, then it’s possible they’re limiting your solutions.

Look for a broker who examines the marketplace with vigor to find opportunities that work for you. In most cases, that means finding a broker who is experienced with self-funding so they understand all available options for employers today.

Aim for Transparency

While it seems simple, these questions play an integral part in finding a good broker – one who’s transparent.

Satisfied with the answers to these three questions? Then you’re ready to learn more. (Of course, that means asking more questions!) Other areas to explore with your broker include:

• Their knowledge of self-funding, and if it’s a good option for the employer or not.

• Their ability to use data and dive into costs and potential savings.
• Their willingness to explore plan design to deliver better outcomes for employees.
• Their approach to learning about innovations that could help you improve services or reduce costs.
• Their willingness to consider performance-based contracting – where the broker and business mutually agree on goals for the plan year, then tie a set percentage of compensation to achieving them.

To learn more about how The Alliance works with employers and brokers to make health care more affordable, contact our Business Development team. Members and their advisers are encouraged to contact the Member Services Team.