By Donovan Pyle

When it comes to managing employee benefits, many mid-size and large companies rely on traditional benefits brokers. However, as healthcare costs continue to rise and the regulatory landscape becomes more complex, some employers are considering alternative approaches. One such option is a fee-based benefits firm.

What’s the Difference?
The primary difference between a traditional benefits broker and a fee-based firm lies in their compensation models. While brokers often receive commissions and bonuses from insurance carriers, fee-based firms remove commissions from products and charge employers directly for their services. This change eliminates potential conflicts of interest and ensures the firm works solely in its clients’ best interests.

Do Fee-Based Firms Cost More?
It depends. Since many employers need more visibility on how their benefits broker gets paid, understanding the financial ramifications of switching from a benefits broker to a fee-based firm takes some attention. To achieve this, employers should have their broker complete the compensation disclosure form required by the Consolidated Appropriations Act of 2021. Once that’s finished, employers can add up all of their broker’s forms of compensation and compare it to the fees being charged by fee-based firms.

The Client Experience
Since no brokerage or fee-based firms are identical, the client experience depends on the firm’s process, scope of service, and service team experience. Whether you’re switching to a fee-based firm or another brokerage firm, getting clarity on roles and responsibilities between parties is essential for a successful working relationship.

The Leap of Faith: Overcoming Challenges
Companies often switch from traditional brokers to fee-based firms because they want better returns on their benefits investments. However, fee-based firms usually don’t offer free quotes for insurance products, so switching to them can feel like a leap of faith, even though it won’t affect your current coverage.

While fee-based firms generally offer a more comprehensive range of product options, there’s no guarantee that these options will immediately provide more value to your organization. Understanding your firm’s procurement process, scope of service, and fee structure is critical for mutual success.

Gaining Stakeholder Approval
One of the biggest challenges when considering a switch to a fee-based firm is gaining approval from stakeholders. Here are some tips to help you navigate this process:

Communicate the benefits: Explain the benefits of working with a fee-based firm, such as reduced costs, improved employee satisfaction, and increased compliance.
Provide evidence: Share data and case studies demonstrating the success of other companies that have switched to fee-based firms.
Address concerns: Be prepared to address any concerns or questions from stakeholders, such as potential disruptions to the benefits program or increased costs.
Involve key stakeholders: Ensure key decision-makers are involved in the process and clearly understand the benefits and risks of switching.

Conclusion
While switching to a fee-based benefits firm may require some adjustments, the potential benefits can outweigh the challenges. By carefully evaluating your options and understanding the differences between traditional brokers and fee-based firms, you can make an informed decision that will help your company achieve its benefits goals.