5 Red Flags to Watch Out For in Your Benefits Broker

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Oct 9, 2020

As an HR professional, you know firsthand how demanding and challenging your job can be under normal circumstances. In the midst of a global pandemic, such challenges are even greater. Nonetheless, one of your main priorities often includes finding the best health benefits at the lowest cost.

You might think this is as simple as asking your benefits broker what’s best. However, in reality, there are some benefits brokers who do things that do not have their clients’ best interests in mind. Consequently, with your company’s healthcare and budget on the line, be on the lookout for these five red flags, which could indicate that your organization’s needs aren’t aligned with your benefits broker’s incentives.

1. The broker refuses to reveal commissions and bonuses from carriers.

While some benefits consultants will happily share this information, others might not. That’s a serious red flag. Knowing how brokers are being compensated and by whom is the key to making sure your company isn’t overpaying for a plan that isn’t the right fit. Unfortunately, we have found up to 17 undisclosed revenue streams from both direct and indirect compensation that profoundly impact how brokers operate.

If an advisor offers full disclosure on revenue streams, plus transparency about any compensation received from certain insurance carriers, that’s a good sign that they will be motivated to truly work in your best interests.

2. More than half of the broker’s compensation comes from one carrier.

If your benefits advisor recommends working with one particular carrier instead of giving you real options to choose from, they’re probably operating much more as the sales arm of the carrier than your unconflicted advocate.

Insurance carriers sometimes offer brokers a bonus for funneling business through them or, on the punitive side, include a clause in their contracts allowing for termination with only 30 days’ notice. Even when your advisor has good intentions, if they feel torn between protecting their own interests or yours, odds are that theirs will win out.

Imagine that over half of your income could disappear overnight. That gives you an idea of the power that carriers can have over their brokers.

3. The broker doesn’t implement plans with value-based primary care.

Providing high-quality care in the short-term will definitely pay off, so if your benefits advisor isn’t offering plans built around providing superior healthcare services upfront, you’re losing out on a large share of savings.

Traditional care, however, is built around a fee-for-service model. But typically, unnecessary surgeries and ER visits are reduced 30% to 50% when proper primary care is in place. Likewise, when individuals have serious conditions, they often result in multiple specialists, procedures, hospitalizations, etc., where an independent primary care physician plays a vital role in being the overarching point of continuity that is vital to achieving the best outcome. .

When it comes to providing quality care at an affordable price, the best option is value-based primary care, an alternative to the status-quo kind of care that results from the expensive fee-for-service system traditional insurance plans are built around. In the fee-for-service system, payment is determined by the volume of tests/procedures ordered rather than the quality of care provided in a value-based reimbursement system.

4. The broker doesn’t see value in carving out the pharmacy benefits manager.

The drug supply chain is riddled with absurd fees, obfuscation, and waste-filled formularies. We have seen 32 different revenue streams for PBMs — most that employers are unaware of.  It’s nearly impossible to receive value if you don’t have a pharmacy benefits manager (PBM) that is fully independent of your carrier. 

Oftentimes, carriers will use the trick of offering “free” claims administration as there are so many opportunities to profit in the drug supply chain. But transparent pharmacy benefits is an easy way to save money when working with an ethical and independent PBM because the status quo is so riddled with profiteering.

5. The broker doesn’t have experience providing alternatives to carrier networks.

It’s common to see carrier networks paying five to 20 times the rates that Medicare pays hospitals. Medicare rates are a common benchmark as hospitals are legally required to report on their costs to ensure Medicare covers them. 

Healthcare isn’t expensive. After all, clinicians only receive $0.27 of every $1 ostensibly spent on healthcare. What’s expensive is profiteering. Removing price-gouging and administrative bloat is how countless employers spend 20% to 40% less than status quo health plans with superior health outcomes. This can only be done with choosing one or more of the range of options that perform better than carrier networks (e.g., direct contracts, bundled payments, etc.) that experienced benefits advisors deliver to their clients.

It’s your job to advise your employer about which health benefits plan to adopt, but you can’t do that if your benefits advisor is little more than a sales agent for carriers and PBMs rather than helping you save your company money. By keeping these red flags in mind, you’ll be able to make an informed decision about your advisor and find the best health plan for your company.