Do you find the prospect of adding or changing employee benefits a daunting decision? You’re not alone. A Google search for "how to create employee compensation and benefits" yields over 150 million results. Where do you begin?
At a growing company, there are endless moving pieces and it can often be difficult to focus on the “ancillary” business needs. Every business needs to manage its business risk, and every strong team needs a solid benefits package to support it. All of these decisions require time and effort. Even if you’re a full time HR / benefits manager, benefits decisions are time-consuming and often confusing. Fortunately, there are entire distribution channels built to offload some of that effort and provide plenty of information to help with your decision-making.
While this post is focused on employee benefits decisions and discusses the merits of a benefits broker vs. a technology platform, much of this can be applied to business risk protection (e.g. general liability, property and casualty, directors and officer) decisions as well. However, we do suggest other resources for business insurance such as the Small Business Association or new platforms like FounderShield.
If your full-time role is HR and you’re responsible for benefits decisions, you’ve got a huge leg up and perhaps you’ve got the time and resources to research and decide on each benefit independently and work directly with vendors (e.g. insurance carriers). But if you manage benefits as only a fraction of your responsibilities (e.g. you’re a founder, CEO, CFO or other decision maker), then the idea of developing or improving a benefits package may be unnerving. Regardless of your role, there are resources to help -- namely traditional benefits brokers or benefits online brokers. I’m here to help you ask the right questions to understand whether a benefits broker or tech platform (or neither) works best for you.
Let’s start with some basic definitions to set the stage.
What's a benefits broker / benefits consultant?
There’s a fine line between a benefits broker and a benefits consultant and I’ll use the terms interchangeably here, but primarily, I’m referring to an individual or organization responsible for working with you to develop and optimize a benefits package. Some brokers will work on business insurance as well, but again, we’re going to focus on the employee-facing side of things. At a high level, the broker is responsible for understanding the objectives and needs of the organization and developing a benefits strategy to help meet your goals and the goals of the company. A component of this is working with various vendors (e.g. insurance carriers) to identify the best insurance plans (and rates) for your company. In addition, they may work with you and the vendors to handle enrollment, either directly or through some benefits administration (BenAdmin) software.
Brokers can be a small, independent broker, a regional player, or a large national corporation with numerous regional offices. A few examples are Sequoia Consulting Group, Woodruff Sawyer & Co., Heffernan Insurance Brokers and Filice Insurance.
What’s an HR Tech platform / Insurtech broker / online brokerage / digital broker?
Over the past couple years, there have been myriad new entrants into the Insurtech and HR Tech space. For our purposes, I’ll define this category as “software that provides access to multiple vendors across a range of benefits and enables employee enrollment and administration of team benefits.” Simple, right? Each business model is slightly different, they may use different technology, and each offers a slightly different user experience. Many of these are geared toward the individual market (e.g. Stride Health, PolicyGenius), but I want to focus on those serving small to mid-sized businesses.
These digital platforms develop partnerships with select insurance carriers and other benefits vendors in order to provide value to their clients in multiple ways, such as:
- Vendor curation
- Plan selection (i.e. working with carriers to identify the best plans for their clients)
- Negotiated rates
- Reduced paperwork (e.g. easy application and individual enrollment)
- Data transfer to vendors
- Member support and simple HR management
Should you use a broker or tech platform at all?
Before answering this question, I suggest asking yourself a few others to help yourself make the decision.
1. What are your objectives in working with a broker or tech platform?
With infinite time, I have no doubt that you could find the optimal choice and price for everyone of your benefits, but we both know that’s not reality. So, what are your priorities as you explore your benefits options?
- Save time?
- Reduce costs?
- Secure information to make an independent decision?
- Get strategic advice and have someone make a choice for you?
- Make benefits easy for you to administer?
- Streamline the process for employees?
- Educate employees?
- Find a solution that operates the way your team operates?
Knowing the answer to these questions will help as you evaluate specific options.
2. What’s your experience level?
One role of a broker / consultant or tech platform is to educate you to help make benefits decisions. Some of these you can likely make on your own and others are more complicated. Moreover, your benefits “partner” is responsible for staying up to date with regulations, trends and innovations. This is some of the primary value they provide, so how much experience do you have making these decisions?
There are a number of fantastic resources available to educate you on benefits options, value to employees, regulations, etc. But do you have the time to devote to learning all the latest? It’s important to have a realistic understanding of what you know and what you don’t. A benefits “partner” can provide a ton of time savings by doing the research for you. However, you might want to consider the following question as well.
3. Should you use a broker / platform for all benefits or just some?
There’s no way around it: some benefits are more complex than others. Take, for instance, medical insurance. Do you understand all the different coverage levels and options? Do you know the ACA reporting deadlines and requirements? Are you eligible for the SHOP marketplace?
Moreover, even if you understand the ins and outs of each benefit, how easy is it for you to access the carriers / vendors you’re considering? Go to a couple insurance carrier or payroll vendor websites. Do you see an easy “Get a quote,” “Start your trial” or “Tell me more” call-to-action? If so, perhaps it’s easy enough to work direct. If not, then there is probably enough complexity that you likely need a “partner” to work with that vendor.
Another point to consider is the efficiency of having all your benefits in one location. This is a key value-add of almost any tech platform, but is that important to you? Maybe you don’t mind using a tech platform for core benefits and having another benefit or two outside that platform. Maybe you can find a broker that will manage it all on one of their in-house BenAdmin solutions.
This is all to say that it’s possible to leverage a platform or broker for some benefits, or for all of them, so it’s worth keeping that in mind.
4. What types of benefits do (you believe) you need?
The final piece to consider is what types of employee benefits you’re currently considering. Make sure you have this list before looking at brokers or platforms as not everyone can help you with everything. Again, I’m ignoring business insurance (e.g. general liability, property), to focus on employee-facing benefits like:
- Medical insurance
- Dental benefits
- Vision benefits
- Short- and long-term disability
- Life insurance
- Pet insurance
- Family care benefits
Knowing what you need in advance will focus your conversations with potential brokers or platforms.
So at this point, you’ve done some preliminary work and understand what you are generally looking for. Let’s talk about the value creation from brokers vs. platforms. Now, to be clear, every individual organization will tout their unique approach and value, so I’m going to discuss high level value here.
Value of brokers
Across the board, brokers and consultants provide two main pieces of value: strategic advice and coordination. They also potentially can secure the lowest price, but not always. This solution tends to be relationship-focused and a great consultant will try to understand your business needs and culture and offer solutions that are perfect for you. They often will provide a single point of contact for you for all your benefits needs throughout the year so that you don’t have to deal with multiple vendors on billing questions, etc. Moreover, many innovative brokers work with fantastic tech platforms (e.g. Flock or Maxwell Health) and provide many of the efficiencies and features that other tech platforms provide as well.
One point to consider though are how much time you have to consult with the broker. Do you want to meet regularly or do you prefer a big up front time investment and then let a platform manage everything for you? Another limitation is that an individual broker may be constrained in the carriers that they can work with, and they may not have access to the most innovative solutions on the market.
Value of tech platforms
The primary value of a tech platform is efficiency for the benefits manager and a consistent (but not always better) experience for individual employees. By working with a tech platform, you can simply set up your company in the system with little to no paperwork, and relatively quickly work through your vendor and plan selections. Then, employee enrollment is digital and streamlined for your team, and it’s easy to manage employees as they come and go. Oftentimes, these platforms have a great UI and work incredibly well for tech-forward, innovative companies as they provide a fantastic experience for the team.
Additionally, tech platforms may offer a wider vendor selection than any one broker, and they also may have the newest, most innovative solutions available to you.
Some concerns are to understand what the support is like (relative to your single broker contact) as well as the vendor limitations. For instance, if you find a great new pet insurance company, you may not be able to bring that onto the platform that you’re using. Worth being aware of.
Value of working directly with a carrier / vendor
That last point brings me to the third option: working direct. Regardless of whether you use a broker or a platform, you may find a solution that is perfect for your company, but the broker isn’t appointed or the tech platform isn’t integrated. In that case, see if you can go direct. In addition to procuring the benefit you want for your team, you may even secure a lower cost. The natural tradeoff here is that you have another relationship to manage, and your employees may have one more place to enroll, but going direct is often a great option to consider for with some insurance carriers, and especially for a unique team benefit or work perk (e.g. Car2Go, Embrace Pet Insurance).
There truly is no right answer to the question of whether to go with a benefits broker or a platform, but hopefully this post has given you a great framework to evaluate your needs and point you toward a potential option. Once you’re leaning toward one option or the other, be sure to check out my two upcoming posts on how to choose a specific broker or benefits tech platform.