Should I Use a Traditional or Online Broker for My Company's Benefits?

Do you find the prospect of adding or changing employee benefits daunting? You’re not alone. A Google search for "how to create employee compensation and benefits" yields over 87 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 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 or 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 information to help 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 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 have a huge leg up. Perhaps you have 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), the idea of developing or improving a benefits package may be unnerving. Regardless of your role, there are resources to help — namely, traditional and online benefits 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 set the stage with some basic definitions.

What's a benefits broker or consultant?

There’s a fine line between a benefits broker and a benefits consultant — and I’ll use the terms interchangeably here — but I’m primarily 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 and independent, regional, or large national corporations with numerous offices. A few examples of the latter 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?

In recent 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 and PolicyGenius), but I want to focus on those serving small and mid-sized businesses.

These digital platforms develop partnerships with select insurance carriers and other benefits vendors 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

Zenefits brought this new breed of tech platforms to the mainstream through its meteoric growth, and there are a number of other highly capable platforms, such as Gusto, Namely, and Justworks.

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 all your benefits, but we both know that’s not reality. So, what are your priorities as you explore your benefits options?

  • Saving time?
  • Reducing costs?
  • Securing information to make an independent decision?
  • Getting strategic advice and having someone make a choice for you?
  • Making benefits easy for you to administer?
  • Streamlining the process for employees?
  • Educating employees?
  • Finding 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 educating 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 or 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 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.

It’s possible to leverage a platform or broker for some benefits or all of them, so it’s worth keeping that in mind.

4. What types of benefits do you need?

The final piece to consider is what employee benefits you’re currently considering. 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 and property) to focus on employee-facing benefits like:

  • Medical insurance
  • Dental benefits
  • Vision benefits
  • Retirement
  • 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 can potentially secure the lowest price, too, but not always. This solution tends to be relationship-focused, and a great consultant will try to understand your business needs and culture to offer solutions perfect for you. They often will provide a single point of contact for all your benefits needs throughout the year so 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 as other tech platforms.

One point to consider, though, is how much time you have to consult with the broker. Do you want to meet regularly, or do you prefer a big upfront time investment before letting a platform manage everything? Another limitation is that an individual broker may be constrained in the carriers 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 — though not always better — experience for individual employees. By working with a tech platform, you can set up your company in the system with little to no paperwork and quickly work through your vendor and plan selections. Employee enrollment is digital and streamlined for your team, and it’s easy to manage employees as they come and go. Often, 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 include the support relative to your single broker contact and 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 you’re using.

Value of working directly with a carrier or 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 trade-off here is that you have another relationship to manage, and your employees may have one more place to enroll. Going direct, however, 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 and Embrace Pet Insurance).

There 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 the framework to evaluate your needs and find potential options. Once you’re leaning toward one option or the other, check out my posts on how to choose a specific broker or benefits tech platform.

Brought to you by Beam Insurance Services LLC. Material discussed is meant for general illustration and/or informational purposes only; is not intended to be relied on as complete information; and is not to be construed as tax, legal, investment or medical advice. This material is not meant to be a sale of or an offer to purchase an insurance plan from Beam®. Should you have interest in purchasing an insurance plan from or through Beam®, you should seek the help of a licensed professional.

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Chris Prochak

Author Chris Prochak

CRO, Beam Dental

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