What is an employee benefits broker? A key strategic partner for your business

Managing employee benefits is a complex task, requiring time and effort for businesses of all sizes. From understanding the intricacies of healthcare history to navigating the nuances of health insurance for startups, businesses of all sizes face unique challenges. 

This is where an employee benefits broker can be a strategic partner. These specialized professionals act as your partners in crafting robust benefits packages. 

If you’re debating whether an employee benefits broker will add value to your bottom line, consider these statistics: 

• The Bureau of Labor Statistics (BLS) reports that employee benefits accounted for 31.2% of total compensation costs in June 2024. 

• Employers contributed 80% of medical plan premiums for single coverage in private industry in March 2024, according to the BLS.

• A 2023 Pew Research Center study found that 51% of workers say it’s extremely important that their job offers employer-sponsored health insurance, while another 28% said that it’s very important to them.

A strong benefits package can be crucial for attracting and retaining top talent. Partnering with an employee benefits broker can help you streamline the enrollment process and optimize the value of health insurance premiums. In the coming sections, we'll look closely at the benefits of working with a broker, and give you actionable tips to help you find the perfect fit for your company's needs, including a helpful checklist of key questions to ask when vetting a benefits broker.

An employee benefits broker is a licensed professional who specializes in creating customized benefits packages for employers.

What is an employee benefits broker?

Employee benefits brokers are essential partners for businesses seeking to optimize their employee benefits programs. They serve as intermediaries between employers and insurance providers, crafting customized benefits packages that align with individual company needs and providing expert guidance throughout the entire benefits process.

Brokers excel at shopping for plans from a variety of insurance providers, ensuring employers have a wide range of options. This comprehensive approach allows them to tailor benefits to each specific company’s requirements, considering factors such as employee demographics, industry trends, and budgetary constraints.

Beyond plan selection, brokers often offer a broader range of services. These can include providing employee assistance programs, conducting educational workshops, and assisting with ICHRA reporting and compliance matters, as needed.

While benefits consultants may also be involved in employee benefits, brokers typically have a more hands-on role in the day-to-day management of benefits programs. They often have direct relationships with insurance providers and are well-versed in the nuances of plan design and benefits administration. This specialized expertise sets them apart from consultants who may have a broader focus on HR strategy or risk management.

Why your company needs a benefits broker

Partnering with a benefits broker can help transform your benefits program from a burdensome administrative task into a strategic asset that enhances employee satisfaction and drives business success.

Some of the key benefits of using a benefits broker include:

• Streamlined administration: Brokers can handle the time-consuming tasks of researching, negotiating, and managing benefits plans, freeing up your HR department to focus on other strategic initiatives.

• Improved benefits: Brokers can help you design a benefits package that meets the needs of your employees while staying within your budget. They have access to a wide range of plans and can negotiate favorable terms with insurance providers.

• Cost savings: Brokers can help you identify cost-saving opportunities, such as negotiating lower premiums or implementing cost-effective benefit options.

• Compliance: Benefits brokers stay up-to-date on the latest regulations for both applicable large employers and small businesses. They can also help you ensure that your benefits program complies with all applicable laws.

• Expert advice: Brokers can provide valuable guidance on various benefits-related topics, including plan design, employee communication, and compliance. They can also leverage data analytics to help you make informed decisions about your benefits strategy.

• Employee satisfaction: A well-designed benefits package can help improve employee satisfaction and morale, leading to increased productivity and retention. They can also provide employees with the information and assistance they need to make the most of their benefits.

7 steps to choosing the right benefits broker

Finding the right employee benefits broker is essential for a successful benefits program. The broker you choose will play a critical role in designing, implementing, and managing your company's benefits offerings. Follow these seven steps to identify the best broker for your company.

1. Assess your company’s unique needs

Before selecting a benefits broker, you should conduct a thorough evaluation of your company's unique needs and objectives. This involves identifying the types of benefits you want to offer your employees, as well as the level of service and support you require from a broker.

Start by considering your company's size, industry, and budget. These factors will influence the types of benefits that are most relevant and affordable for your employees. For example, a small startup may prioritize core benefits like health insurance and retirement plans, while a larger corporation may offer a wider range of options, including dental, vision, life insurance, and disability coverage.

It's also important to determine the level of service you need from a broker. Do you want a broker to handle all aspects of your benefits program, or do you prefer a more hands-on approach? Think about the frequency of communication, the level of support you require during open enrollment, and whether you need assistance with compliance and reporting.

Additional questions worth considering:

• What benefits do you currently offer? Are you satisfied with your current coverage, or are there areas where you'd like to improve?

• What benefits are important to your employees? Conduct surveys or focus groups to gather feedback from your employees and identify their priorities.

• What compliance requirements do you need to meet? Consider any industry-specific regulations or mandates that apply to your company.

2. Start early

Search for a benefits broker well before your plan renewal to ensure you have ample time to conduct thorough research and select the best possible candidate. By starting early, you can:

• Avoid rushing: Rushing through the selection process could lead to hasty decisions. Early planning allows for more time to make informed choices.

• Allow for a thorough research process: A well-planned search allows you to investigate multiple brokers, compare their offerings, and identify the best fit for your company's needs.

• Ensure a smooth transition: A timely selection process gives your broker sufficient time to prepare and implement your new benefits plan, minimizing disruptions to your employees.

3. Understand the payment structures

When selecting a benefits broker, it's important to understand how they are compensated. Brokers typically use one of two main payment structures:

• Flat fees: With a flat fee structure, you pay the broker a fixed amount for their services, regardless of the size or complexity of your benefits plan. This can ensure costs are predictable and transparent.

• Commissions: Commission-based brokers earn a percentage of the premiums paid to insurance carriers, potentially incentivizing cost-effective plan selection. However, be aware of potential conflicts of interest and consider comparing multiple offers.

Take time to consider the potential advantages and disadvantages of each payment structure and choose the one that best aligns with your company's needs and preferences. 

4. Rigorous screening

Just as you would carefully screen potential employees, it's equally important to rigorously evaluate employee benefits brokers before making your choice. A thorough screening process helps ensure that you select a broker who is qualified, experienced, and committed to providing exceptional service.

Here are some key areas to consider:

• Experience and qualifications: Look for brokers with a proven track record in the benefits industry and relevant certifications or designations.

• Client references: Ask for references from previous clients to get a sense of the broker's reputation and the quality of their services.

• Communication and collaboration: Assess the broker's communication style and their ability to work effectively with your team.

• Customization and flexibility: Ensure that the broker can tailor their services to meet your company's specific needs and adapt to changing circumstances.

• Ethical standards: Verify that the broker adheres to high ethical standards and prioritizes the best interests of their clients.

5. Seek recommendations

One of the most effective ways to find a reputable benefits broker is to ask for recommendations from other businesses in your industry or network. Reach out to colleagues, industry associations, or online forums to gather information about their experiences with different brokers.

When seeking recommendations, be sure to ask about the following:

• Broker's expertise: What specific areas of expertise does the broker have?

• Level of service: How responsive and helpful is the broker?

• Cost-effectiveness: Has the broker helped the company save money on benefits?

• Overall satisfaction: Any issues or problems with the broker? Would they recommend the broker to others?

6. What to ask an employee benefits consultant

To ensure a consistent and organized comparison of potential benefits brokers, consider using a standardized questionnaire. This checklist will help you gather all relevant information and make an informed decision.

We created a free questionnaire checklist that is downloadable and easy to use. It includes questions on topics such as:

• Brokerage firm information: Company size, experience, and areas of expertise

• Services offered: Specific services provided, such as plan design, compliance, and employee support

• Fees and compensation: Payment structure and any additional charges

A standardized questionnaire can help ensure that all potential brokers are evaluated on the same criteria so it’s easier to compare their offerings and select the best fit for your company.

7. Consider contractual limitations

While many benefits brokers work with various insurance carriers, some may have exclusive contracts with specific insurers. This can limit your options and potentially restrict your ability to find the most competitive rates or the best coverage for your employees.

When evaluating potential brokers, it's important to inquire about their relationships with insurance carriers. Ask if they have any exclusive contracts that may limit your choices (as done in question 19 in the questionnaire above). Additionally, consider whether the broker's preferred carriers align with your company's needs and preferences.

Employee benefits broker FAQ

If you’ve still got questions about benefits brokers, these frequently asked questions may be able to help. 

How much will hiring a broker cost?

Benefits brokers typically earn a commission based on the premiums you pay to insurance carriers. However, some brokers charge a flat fee. The cost depends on your company's size, plan complexity, and the services you need. Consider the potential savings and value a broker brings to your company when evaluating costs.

Are benefits brokers worth it?

Yes, benefits brokers can save you time and money, as well as ensure compliance. They offer expert advice, design competitive benefits, and can help you attract top talent. Consider the long-term benefits and potential return on investment when evaluating the value of a broker.

How often should I review my employee benefits package?

It's ideal to review your benefits package annually to ensure it remains competitive, aligns with your company's goals, and complies with any changes in regulations. A benefits broker can help you assess your plan and make necessary adjustments.

Partnering with an employee benefits broker can be a game-changer for your business. Leveraging their expertise and resources, can help you streamline your benefits administration, improve your offerings, and achieve significant cost savings. From staying compliant with regulations to attracting and retaining top talent, a qualified broker can help you optimize your employee benefits program and drive long-term success.

If your company is ready to transform your benefits program and unlock the full potential of employee satisfaction and business growth, schedule a demo with Thatch to learn more about your options for employee benefits management.

Or, if you’re a benefits broker looking to expand your offerings and provide even greater value to your clients, Thatch's innovative ICHRA solution empowers businesses of all sizes to offer competitive benefits packages. Learn how you can become a Thatch broker to unlock a new stream of revenue while helping businesses thrive.