Who does your business’s health insurance broker work for?

Who does your business’s health insurance broker work for? That’s easy, you of course. Well, yes and no. The recently passed Consolidated Appropriations Act, 2021 is going to help shed some light on that exact question. Included in this bill that approved the latest round of stimulus checks was an amendment mandating that brokers disclose the amount of money that they make from insurance carriers and other vendors.

No big deal, right? You know your broker received commission payments from the carriers. But did you know that certain insurance companies pay more than others and that, when your rates go up, so does your broker’s commissions? Also, are you aware that many carriers pay large bonuses to move business to them? I just received $750 because three of my groups chose to move to a particular carrier last month.

But wait, there’s more…

In addition to those bonuses, most carriers have an annual broker bonus schedule that groups brokers and agencies based on the number of groups and lives they have covered with the insurance carrier. According to Blue Cross Blue Shield of Massachusetts’ (BCBSMA) 2021 Broker Bonus, a Tier 1 Agency can earn an additional $90 per subscriber for placing groups with them. If you meet the minimum requirement of 180 new subscribers, that equates to an additional $16,200. That same broker can also gain $70 per subscriber if they keep 95% of their groups with BCBSMA. For some agencies, this can add up to a six- or seven-figure bonus checks every year. I don’t want to pick on Blue Cross this whole time because they are not alone. Some carriers send brokers on lavish, all-inclusive trips to thank them for keeping business with them. I remember one carrier telling me if I moved enough business their way, I would qualify for a trip to Ireland.

Where do you think the carriers get this money? Well, the carrier’s only revenue stream is your insurance premiums. These millions and millions of dollars are baked right into your insurance premiums each year. This cost doesn’t have to be there. Now, don’t get me wrong, I don’t begrudge people making a living and earning what they can, but these bonuses can sway decision making.

When moving a group from one carrier to another can drop your annual bonus by $100,000, you think long and hard about not moving the group, even if moving that group to a different carrier can save your client money. Carriers know this, and that’s why they meet with agencies on a regular basis to discuss where they are on the bonus plan, what they need to do to qualify for more money, and what will happen if groups leave. They know these bonuses sway decision making. Not all the time, but frequently enough to beg the question, who does your broker work for?

A different approach

I have never been a fan of these bonuses and regularly let my carrier representatives know that they shouldn’t discuss them with me. If I get them, great. A bonus should be unexpected and not deliberately planned. In fact, my goal is to move away from such arrangements and move toward consulting agreements in which our clients are paying us directly for our services. Although I do not let these arrangements sway my decision making, I would like to remove anything that would make my clients think otherwise.

Are you wondering if your business is getting the best deal possible for health insurance?

Schedule a free consultation with Ben Hall and find out how your business can save money on this expense.