Why switching benefits brokers mid-year makes good business sense

Why businesses switch brokers

One of the main reasons to work with a benefits broker is that not every business is one-size-fits-all, or has the same budget. A broker should act as a strategic advisor, helping a business determine exactly what its perks program should accomplish.

Data from the Society for Human Resource Management (SHRM) highlights a gap in how these partnerships are handled. While 90% of companies follow strict vetting processes when bringing on new hires — even for entry-level positions — fewer than 10% apply the same scrutiny to their external benefits broker.

Most employers expect a benefits package to catch the eye of top talent on job listings and encourage long-standing team members to stay. But when evaluating an existing broker relationship, employers typically look for a change across three primary areas:

• Ongoing plan education: You should expect benefits partners to help across two fronts:
  1. Employer training: Brokers should keep companies informed on new marketplace trends or products, such as voluntary benefits, so you can scale coverage as the business grows.
  2. Employee guidance: Teaching a workforce how to navigate their benefits maximizes the value of the coverage. For instance, showing employees how to use telehealth options at no co-pay or choose a $40 urgent care co-pay over a $350 emergency room visit dramatically cuts out-of-pocket costs for families. Additionally, providing a total rewards statement to highlight their actual total compensation.
• Proactive customer service: If a current broker is unreachable, disappears during open enrollment, or immediately after open enrollment, it’s a sign to seek representation elsewhere.
• Hands-on account support: A broker should take an active role in resolving claims issues and managing day-to-day administrative challenges. It includes being reachable when problems arise and actively managing additions (adds)/terminations (terms) or any other changes to confirm that invoices reflect the correct active headcount.

Beyond the bottom line

As a small business, if you find that a specific offering is being pushed too hard, it should raise eyebrows. A broker should be agnostic and think about what is best for you and your team. If they’re being aggressive instead of educating you, it’s probably not the right fit. On top of service gaps, some benefits consultants may share insights but try to steer a business into perks programs they cannot afford, or one employees show no interest in.

New brokers can identify opportunities for voluntary products, such as short-term disability insurance or accident insurance. They should also offer cost-saving ideas and help identify compliance reviews that the current broker may have missed.  Transitioning in the middle of the year also allows for a data-driven strategy rather than a reactive one. Part of the reason owners change is simply rethinking the traditional benefits renewal cycle.

Cost check: Good service vs. bad service

When it comes to small-group plans, commissions are already built into the premiums being paid.  A new broker typically won’t add additional fees to manage existing policies. This reality often flies under the radar, but employers pay the same amount for a broker that’s complacent as they do for an active partner who provides hands-on support and overdelivers. So, these are things to think about:

• Will you be getting better service?
• Is this a more congenial personality to deal with?
• Are you working with someone you can trust?

According to SHRM data, a benefits broker helps a small business manage an enrollment budget that accounts for 25% to 40% of its total payroll.

Because the financial stakes can be high, even a slight difference in a broker’s compliance capabilities or skills can cause a fluctuation in your planning strategy. If your broker is helping you review other options, you can achieve a better outcome at the end of the year.

Now that we’ve covered some of the basics around switching, let’s cover a topic that is bound to come up when considering a move.

What a Broker of Record letter does

The transition process is driven by a document known as a Broker of Record (BOR) letter.

This is a simple, one-page document written on company letterhead that officially notifies the insurance carrier that a new broker represents the employer. Employers making a mid-year BOR change should know that the transition has zero impact on current benefit plans, carrier rates, or employee member IDs. There is no risk of affecting employee coverage or disrupting active care.

This document plays an important role in a transition. We’ll come back to it again a little later when talking about the steps to switch. Now, let’s touch on why moving sooner rather than later is likely the right move.

This document plays an important role in this transition. We’ll come back to it again a little later when talking about the steps to switch. Now, let’s touch on why moving sooner than later is likely the right move.

Why mid-year can be the strategic time to switch

Though businesses instinctively look to year-end, brokers are often in the thick of things: simultaneously trying to close out the calendar year, managing the influx of clients reviewing renewals, and coordinating open enrollment. The result is that brokers are often overwhelmed throughout the fourth quarter and into December.

Switching outside of your specific renewal time helps to make sure this process stays stress-free. Waiting until the typical renewal window opens can put employers in a tight spot and lead to rushed decisions. Appointing a new broker at least 90 days before your renewal allows a business to analyze data and create a strategy for the upcoming plan year.

The table below is another way to get a sense of why it pays to get ahead of the game.

Why avoid waiting until renewal time

When premium hikes hit at the same time as an end-of-year renewal deadline, employers often stay with an underperforming broker just to get through the calendar year because they feel they have no choice.

Additionally, insurance carriers can sometimes take one to two weeks to process a BOR letter. Waiting until the last minute can prevent your renewal planning from moving forward.

Remember, though many companies do switch before the calendar flips to January, there’s no set rule saying employers must wait if they are unhappy with their current level of support.

When considering a change, employers can use a few targeted discussion points to gauge a potential partner’s capabilities and service model.

Questions employers should ask when evaluating a broker

To be sure that a prospective benefits partner is a good fit, employers can run through a few targeted questions before signing a BOR letter:

• Compliance support: Will you keep us in the loop throughout the year on any compliance-related benefits rules?
• Employee onboarding and care: How do you resolve direct claims mix-ups and streamline open enrollment education?
• Software integration: Do you incorporate all-in-one software into your value proposition? Opting for a system that integrates payroll, HR, and benefits administration avoids creating disjointed data workflows and administrative errors.
• Renewal workflows: What multi-step timeline is used to confirm that standard health carrier adjustments and ultimate choices are finalized before the open enrollment timeline?

Once a company decides to make a change, moving to a new benefits partner is straightforward.