What Happens When We Switch Insurance Brokers

Wednesday, Dec 09, 2015

You may likely be experiencing anxiety from just the title alone. Switching insurance brokers can be scary because of the unknown. Is the broker going to deliver on the promises they’ve made? Are the services they offer going to have an associated cost? Is the broker being forthright and will they be better than who we have now? And then, when the decision is finally made to actually switch brokers, that dreaded and uncomfortable call to the current broker requiring a glass of cold water and a few Tums.

Broker/Employer relationships are built on trust, loyalty, and partnership. No one ever wants to say goodbye, even when it’s the right thing to do. In fact, the decision was made in the best interest of the organization and the employees, right? There are many reasons for an employer to switch brokers, especially in today’s volatile market with high levels of uncertainty surrounding the subject of health care in the present and certainly the future.

So, what happens when we switch brokers? Most employers don’t realize that when a switch is made, there’s little work on their part. If it’s a midyear switch and not near the renewal, it’s a simple copy and paste of a Broker of Record Letter onto company letterhead. That’s it. When the Broker of Record is signed and returned, your broker should do all of the work from there. If the broker is proactive, you should have already provided them with the general information about the company, benefits, waiting periods, and contributions.

Oftentimes, employers want to look at switching brokers closer to renewal so that they can see what kind of rates, benefits, strategic planning, and cost containment they will receive to make the new plan year a more advantageous one. While this seems beneficial, it can often be counterproductive.

For the employer, it’s stressful. The brokers typically need a Letter of Authorization to gain access to all of the current benefits and renewals. They may need to ask certain questions of the employer group that can be time consuming and difficult to obtain.

For the broker, it can be difficult working with the current carriers because of the restrictions there are to providing information to the prospective broker. Did you know that some medical carriers will not allow a prospective broker to negotiate rates? That broker may have the ability to negotiate rates more effectively because of strong relationships and may have creative money saving ideas not included in the initial renewal, but this is all superfluous when restricted by the carrier regulations.

Most recently, I was working on a prospect that utilizes Health Net as their medical carrier. If I requested the renewal for the group, I was told that it would cease any and all negotiations between the current broker and the employer. Well, no ethical broker would want to do that. Of course, we want all groups to see rate concessions and negotiate down cost. As a result, we were unable to get creative with the current carrier plan designs or even request the renewal. What if the current broker had higher commissions built into the rates? What if we wanted to lower the commissions for the group? Nothing could be done with the current carrier. In the end, we did manage to market the group, get great rates from other carriers, richer benefits lower our commissions and provide the group with an overall 2% increase.

When was the last time your company received a 2% increase on your medical plan and a move from a $20 copay to a $15 copay with the same access to providers and hospitals? Right. This is why switching brokers midyear versus having brokers go head-to-head is not always what’s in the best interest of the employer and the employees.

Let’s assume for the purposes of this article that you decide it’s time to make the change. The new broker is offering all sorts of bells and whistles you never knew were available and you cannot wait to start working with them – you and your team are excited! Technology, wellness campaigns, compliance, online enrollment, bilingual staff, the list goes on. But, you still have to make the call.

Some of you may know the call I’m referring to, and may have even experienced it. The call to your broker, who may have been your friend in college, your boss’s brother, an old neighbor, the small firm that you’ve grown with and out of because of the additional needs your organization might have, whatever it is that made you pull the trigger on a decision. You’re scared—scared and sad. You like this person, you like your team; they may have been a good partner, but not the best. The HR person loves them and deals with them on a day-to-day basis.

Or conversely, the HR person doesn’t like the broker, but has been forced to work with them because of the relationship at a higher level. Either way, it’s a tough call. I’ve seen scripts for these types of calls, but the words fail you when the broker picks up the phone. Don’t be hard on yourself, because it isn’t easy. What it is, however, is business.

It’s not a personal decision; it’s a professional decision, plain and simple. Employee benefits have statistically been recognized as 1/3 of a company’s overall cost. That’s a lot of money, for any company. The other 2/3 are payroll and operations. No matter what, it’s still hard, and if your in-coming broker is a firm that you’re excited about – it’s going to be worth it. We are all human and when it comes to employee benefits, it’s all about humans – human health, human resources, and human nature to feel empathy in letting someone know that you can no longer continue a partnership.

Think twice about switching brokers around the renewal, it could turn out to be very counter-productive. Take advantage of the plethora of services the incoming broker can offer your organization up until the renewal is released. Let the employees be introduced to the new broker, so that they can see what’s being offered, and give the employees an opportunity to share their experiences with the carriers and plans. What you will find is a happier and hopefully more productive employee base and additional administrative ease for the HR team.

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