Company Health Insurance: Breaking Down the Cost of Hiring a Health Insurance Broker
A strong benefits package is critical to your company’s ability to thrive in the market. When you hire a health insurance broker, you are hiring an intermediary between your company and the insurance provider. How you spend your company’s money finding an insurer is up to you, but brokers can help you find deals you wouldn’t otherwise have access to. Understanding how you pay for help may help you see a broker’s value.
How Can a Health Insurance Broker Help You Remain Within Budget?
A major misconception is that independently finding group insurance is more affordable than working with a broker. Brokers can be integral to keeping your business’s insurance hunt under budget.
Fewer Legal Risks
Businesses that don’t meet federal and state insurance requirements can face various penalties, including heavy fines. Unfortunately, laws can change every year and most business owners need more time to keep up with every law and regulation regarding health insurance. Brokers, on the other hand, come prepared with the knowledge. To sell insurance, brokers must pass an exam.
Budget Safeguards
When you hire a broker, you have an opportunity to explain your budget and your financial limitations. The broker uses his or her expertise to determine the best policies for your company while also staying within your budget. A professional will deliver options that match your monthly and annual budget and explain any health tax credits you qualify for.
How Are Health Insurance Brokers Paid?
Most small businesses pay more than $500 per month per employee for a health insurance plan. Before you ask a health insurance broker to break down the costs to you, it’s normal to want to understand how much money goes to him or her.
Payment for Client Retention
If an insurance broker cannot retain clients, the broker loses money each month. Once the broker of record letter is signed and you have a health insurance policy, the broker continues to work with you as your company grows and changes. If your health insurance needs to change, he or she can guide you through finding a more suitable option.
Brokers receive payment based on how many employees remain enrolled in a healthcare plan. If you change plans but keep the same broker, the health insurance broker will continue to receive compensation.
Commissions From Health Insurance Companies
Brokers earn money via commissions from health insurance companies. Generally, the brokers can provide quotes, enrollment assistance and information about different plans at no cost. Instead, the broker offers various services to encourage clients to work with them. The commissions incentivize brokers to maintain a good rapport with the clients.
Brokers receive a commission from the monthly premiums paid for health insurance. However, the Affordable Health Care Act requires that at least 80% of the money paid to health insurance companies from insurance premiums go toward healthcare costs. 20% of those premiums can go towards marketing, administrative costs and broker commissions. Most insurers will pay a fixed percentage of the premium, but others might pay a flat fee per policyholder.
Pay Structure for Health Insurance Brokers
A common misconception about health insurance broker commissions is that brokers receive a lump sum when you first sign onto a policy. The reality is that the broker only gets a commission once a month. Typically, brokers also receive graded commissions. The insurance company pays the largest percentage for the first dollars of the premium. As the premiums increase, the company will decrease the rate given to the broker. A graded structure allows brokers to receive reasonable compensation on small accounts and incentivizes working with large and small companies equally.
How Much Control Does Your Broker Have Over Costs?
Most states regulate the cost of health insurance premiums. Your broker cannot increase the costs of your premiums to line his or her pockets with more money. While your broker has incentives to enroll all of your employees in a healthcare plan, he or she will not be biased toward any one plan. The system is set up to keep brokers from biases based on their pay.
Brokers tend to make more money on new policies because they receive a higher rate. Generally, they receive a lower rate for renewals.
Find a Health Insurance Broker for Your Company
Insurance brokers provide an invaluable service to small and large businesses alike. For more information on how to find a health insurance broker for your company, contact or request a quote at Sacket & Associates Insurance Services.
