• Benefits brokers/consultants serve as necessary intermediaries between employers and the rest of the healthcare ecosystem.
• Brokers/consultants help employers overcome gaps in healthcare knowledge and a lack of bandwidth by helping companies research, compare, procure, and administer benefits.
• While benefits brokers/consultants work on behalf of employers, misaligned incentives can hamper innovation in employer-sponsored insurance.

With so much focus on the role health plans and employers play in commercial insurance, benefits brokers/consultants are often overlooked. However, they play a crucial role in almost all healthcare benefit decisions made by employers. Brokers/consultants help employers determine which benefits and plan design is right for their employees and influence the process of choosing an insurance carrier, pharmacy benefit manager (PBM), and/or other health services vendors. (Note: For the purpose of this cheat sheet, we use the terms “brokers” and “consultants” interchangeably.)

Employer benefits brokers/consultants work as contractors to help companies research, compare, procure, and administer benefits. The job of benefits brokers/consultants is to use their healthcare expertise and access to data to help employer clients select the right benefits for their organization. Therefore, benefits brokers/consultants tend be very trusted by their employer clients, and employers commonly select the benefits they recommend.

In addition to helping employers select their health insurance carrier/third-party administrator (TPA), benefits brokers/consultants also often advise their clients on how to incorporate pharmacy benefits and wellness programs into their offerings. Additionally, benefits brokers/consultants can advise employers on what other companies in their geographic region or industry offer, to ensure their benefits package is competitive.

Therefore, benefits brokers/consultants largely play the role of “expert advisor” and serve as the liaison between employers and the healthcare ecosystem. In fact, many health plans and health services vendors must go through benefits brokers/consultants first if they want to get their products in front of an employer.

1. Most employers lack the expertise to manage healthcare benefits alone.
   Healthcare benefits are incredibly complex and require individuals with a high degree of expertise to adequately research, compare, select, and administer benefits to employees. These decisions usually fall on the human resources (HR) department, but due to the wide array of other tasks they’re dealing with — such as hiring, training, and managing salaries — they can’t specialize just in healthcare benefits. Therefore, most employers rely on benefits  brokers/consultants to fill that gap in knowledge.
2. Employers lack the bandwidth.
   Researching and selecting which benefits to offer employees, and then implementing and administering those benefits, is a time-consuming process. Employers must gather data and rates across different carriers to compare them. Employers also need to figure out what benefits their competitors are offering in order to remain an attractive place to work. Therefore, employers look to off-load this heavy administrative burden by bringing in third-party experts that can simplify the process for them and reduce the amount of time employers need to spend focused on healthcare benefits.
3. Employers want an unbiased third-party to help with these decisions.
   To select the best healthcare benefits for their employees, employers need to compare different insurance carriers, pharmacy benefit managers (PBMs), and vendors. However, employers don’t view these parties as unbiased partners, since their primary motivation is to sell their product to the employer. So, employers look to a neutral third-party to ensure the benefits information they’re viewing is fair and accurate. 

Misaligned incentives: Some brokers are paid by plans/PBMs/vendors despite their primary responsibility to work on behalf of employers.
The most concerning aspect of benefits brokers’/consultants’ relationship with employers is their incentive structure. Benefits brokers/consultants are supposed to work on behalf of employers to help them select the best offering for their organization. However, many brokers/consultants receive compensation from health plans, PBMs, and vendors in exchange for employers purchasing their products. Broker/consultant compensation methods vary, but these types of payments often come in the form of commissions, bonuses, and loyalty programs. Some examples of potentially misaligned compensation include brokers/consultants being paid a percentage of premiums/claims or a flat per-member-per-month (PMPM) arrangement by the health plan. Brokers/consultants may also receive compensation from other players, such as PBMs and point solution vendors, if the employer chooses their product. An example of this is a PBM paying a broker/consultant a flat rate on every prescription filled by the employer.

Maintaining the status quo: Brokers/consultants don’t always have an incentive to push change on employers.
Benefits brokers/consultants want to keep their employer clients happy, so they’re unlikely to make any benefit recommendations that could be seen as disruptive. Brokers/consultants often receive a retention fee annually and aren’t necessarily rewarded for driving down costs. In fact, depending on their financial arrangement with a health plan, it may even hurt their financial compensation if they drive down costs for their employer clients. Additionally, if a broker/consultant recommends an innovative strategy that doesn’t work, it’ll reflect poorly on them and could cost them business. So, brokers/consultants don’t have an incentive to rock the boat. This can lead to brokers/consultants recommending “safer” benefits options to employers and limits opportunities to drive down spend.

Employers can take steps today to minimize the potential for conflicts of interest with their benefits brokers/consultants. While there may be some “bad apples” in the benefits broker/consultant space, there are also many well-intentioned brokers/consultants that can serve as trusted partners for employers.

Determine your broker’s/consultant’s current compensation structure.
Self-insured employers’ fiduciary responsibility for the healthcare services they purchase was expanded with the passage of the Consolidated Appropriations Act (CAA) in 2021. It is now the employer’s responsibility to show that the healthcare services they purchase are cost-effective and high quality. Additionally, employers are now required to evaluate broker/consultant compensation for “reasonableness.” Benefits brokers/consultants can now be held legally liable if they don’t disclose their compensation to their employer clients.

Ask to see your broker’s/consultant’s compensation structure and look for any potential conflicts of interest. To avoid any confusion, when requesting to see your broker’s/consultant’s compensation, ask them to put it into dollars and cents.

Align incentives with your benefits broker/consultant.
Pay your broker/consultant an up-front fee for the work they’re doing to help you select and administer healthcare benefits. Many trusted brokers already use this payment structure, as it minimizes the risk of misaligned incentives. This also ensures you’re meeting your fiduciary responsibility of evaluating your broker/consultant compensation for reasonableness.