By Terry Allard, CEBS, Health & Welfare Services Sr. Advisor
As a consumer, you should be aware of the total amount you are paying for the products and services you purchase. Of course, we are sure you have received the same advice before. The wireless carriers love to claim that they have “no hidden fees.” Well, we have no hidden fees or commissions.
As a benefits advisory firm, we aim to be fully transparent. Of course, we won’t tell you what we did or didn’t do back in college, but we will provide you with transparency regarding all compensation that we will receive. (And, upon request, even copies of our insurance licenses.) Hopefully, you are already receiving full transparency from your current advisor. If not, or if you are unsure exactly how much you are paying, here’s a handy little guide.
The amount your advisor receives in commission will depend on a variety of factors, such as the type of product and the size of your group.
Medical/Dental (fully-insured) -
For individual policies and the small business market (2-50 full time employees), commissions historically have been at 5%. These rates are filed with the product and cannot be changed. It is becoming increasingly popular for individual and small group policies to be paid based on a flat fee instead of a percentage of commissions.
For groups over 50, commissions of 5% have been the industry norm for fully-insured groups. Most carriers in this market have the capability to reduce or carve out the commissions. If the commissions are carved out, an advisor is typically paid a flat annual fee based on a service contract.
Life and disability insurance are dealt with a little differently than medical and dental and every carrier is different so these can be a little tricky. Typically, life and disability commissions are paid as a flat amount or a sliding scale based on premiums. These carriers have a lot of flexibility but are typically around 10%.
If you have a self-insured plan, you may be paying your advisor an annual fee for the management of the plan. However, it is possible that you are paying commissions on the stop loss insurance premiums, as well. (If you are unsure if your advisor is receiving commissions on stop loss, ask them.)
In a stop-loss environment, there is no right or wrong way to pay your advisor. Some employers prefer a flat fee, others want to pay only through commissions and others prefer to use a combination. You can work with your advisor to determine a payment method that works best for you.
Now that you are aware of what you are paying, you should be aware of what you are getting for the money you are spending. Is the quality of the products and services you are receiving worth what you are paying for them? We believe that for all the money you spend on employee benefits, you should be receiving certain outcomes. Learn all about them in our next blog.
Terry Allard is a Health & Welfare Services Sr. Advisor. She holds a Certified Employee Benefits Specialist designation from the International Foundation of Employee Benefits, a Group Benefits Disability Specialist certification from The National Underwriter Company and is a charter member and Past President of the Alaska Chapter of the National Association of Health Underwriters.