Better Benefits: Brokers and the Rabbit Hole of Fees
Budgeting for benefits. Every year during FP&A, finance professionals gather around spreadsheets trying to read the tea leaves on expected company benefit costs for the coming quarter or year.
CFOs need to budget cash reserves (for self funding) or benefits budgets based on headcount. Often, there's simply no way to gain insight. Smaller companies lack claims visibility and larger companies lack the right forecasting tools to model healthcare expenses and benefits.
In comes the broker and their benefits consulting services. $40,000 for claims risk modeling. $50,000 for vendor analysis. This adds up - and ultimately, their pitch is that you’ll save money in the long-term. They draw a projection of opportunity cost (what you would keep spending if you didn’t take their recommendation) and calculate the cost savings off of that (minus their fees of course).
Why must it be this way? You’re trying to conserve capital; spending money to attempt cost savings feels wrong -- because it often is.
If you find a consultant claiming they’re going to save you money by charging you more - run for the hills. Their incentives are not aligned with you as the employer. If you follow such a broker down that rabbit hole, they’ll tell you that in order to really set up a competitive benefits program, you’ll need X and Y service and analysis. Do you hear the cash register chiming?
Don’t get caught up in broker upselling.
Brokers and benefits consultants usually make either a fixed PEPM (per employee per month) fee or a commission off your health plan premiums. Why should they charge more?
Before you move forward with any project-based fee, here’s an alternative.
- Gain insight
Do yourself a favor and understand exactly what you’re getting for what you’re paying for: Your Benefits ROI. How much are you getting back for what you and your employees are paying in premiums or total rates?
- Understand how to be efficient
If you have claims, analyze them and see where there are opportunities to boost coverage options. Are employees hitting their deductibles? Are they contributing and using their medical savings accounts? Evaluate your contributions towards premiums or medical savings accounts. If you’re fully insured, Lumity can shed light in all of these areas and give you a benefits picture that leads you towards level or self-funded options.
- Carry out your benefits strategy where it counts
Don’t cut benefits with a chainsaw; be surgical and precise. Focus on key areas - a minority of employees account for a majority of healthcare costs. Use data to drive health advocacy and point your group in the right direction to access healthcare at better prices. Empower your people to avoid over-insuring relative to needs. Data and technology can help - find out how.
For the first time, Lumity’s data technology is available to businesses at no additional cost with no hidden fees. Don’t dive down the rabbit hole without an idea of where you want to take your benefits program.
We’re aligned with your company’s mission to save money and improve benefits at the same time. Let us show you how - reach out and let us run some numbers for you before you decide.