By David C. Fortosis bio
The responsibility of selecting, designing, financing, and managing employee benefits is a critical task in today’s medical office business. Retirement and medical benefits are subject to more and more legislation and require adherence to legislative mandates. In addition, the combination of retirement and health and welfare benefits (non-medical group benefits) is, for many businesses, the second highest expense—second only to payroll. Those expenses, if managed well, will enhance the success of your practice.
Finding the right advisor to support your efforts is critical to your success. Here are some suggestions:
1. Determine your needs. If you need retirement plan advising, be sure your advisor is familiar with the range of retirement plans available for practice employees and partners. In addition, health care is increasingly getting more complex and….more expensive. Thus the need for expertise to protect your investments.
Brokers and consultants can offer expertise as you manage the practice’s benefits programs. Brokers are typically paid by commissions that often represent a percentage of the premiums you pay the insurance companies. The insurance companies pay the brokers directly. However, those commissions are built into what you pay the insurance companies.
Consultants typically are paid on a project/retainer basis permitting transparency between their value and their fully disclosed fees. Health care continues to be the employee benefit that drives the most of your costs and requires an experienced advisor to help you design and finance the best plans for your people. Welfare benefits (all other benefits besides health care) are important though less complex. With the emergence of new, generational-specific benefits, it is prudent to have an advisor that has knowledge of new benefits that have appeal to the new workforce (i.e. College Debt Reduction Benefits, personalized Wellbeing Programs, etc.).
2. Pay for value; customize your advisor agreement. Brokers often offer a package of services including (high margin) placing benefits like medical stop loss, life insurance, insurance company bonuses for placing business and ‘point solutions’ (e.g., telemedicine services) that pay them extra fees. It is very important to understand all the sources of revenue your broker receives from any vendor or insurance company. Some of those revenue sources are difficult to identify. So it is prudent to ask the broker for all direct commissions as well as contingent or over-ride commissions it receives annually.
It may be wise to list the services you need and ask the broker to cost account each service and price them separately. Then you can back into the fee for value that meet your needs. You can also negotiate a retainer with your consultant or broker that is revisited each year as your annual needs change. Remember that commissions naturally grow as premiums increase thus the need to negotiate fees based on your needs rather than the broker’s income stream.
3. Conduct your own broker or consultant selection process. Many office managers inherit a broker or consultant who has been an incumbent for many years and may not be serving your needs appropriately. Some brokers or consultants were chosen because they were friends with retired leaders or prior managers in the practice. You must be certain you can fully trust the advisor serving you and that the fees you pay are competitive.
A broker or consultant with underwriting experience is a plus. Generally speaking, the more experience an advisor has the more valuable they will be to you. A stint in the insurance business is often a plus as well.
But of equal value is someone you respect and who is extremely responsive, timely, and able to solve problems and access resources within their company quickly if you need them. And, of course, you want someone who is pleasant to work with.
David C. Fortosis is the Senior Vice President, National Strategy Team, in Aon Hewitt’s Health and Benefits Practice and is located in Chicago. In his role, Dave works with clients to develop, refine and ultimately align their health care and benefits strategy to the business and people demands of running a successful business.
