Hi Sabrina!

This is a great question and one that agitated me immensely as an HR professional. Unfortunately most HR pro's have no idea how their broker comp is structured and as a result their companies are paying way more than what is advertised. It can be really complicated and unfortunately not all brokers are transparent and honest about all of this..

I'm more than happy to help you here or offline. Here's my disclaimer - I'm a broker 😱

But I just moved over to this role earlier this year. I spent 20 years as an HR professional, most of that as an HR Director for mid-sized businesses. I've managed a lot of benefit plans and been in relationships with a lot of brokers good and bad and I've uncovered a lot of hidden costs over the years. It's also very interesting being on this side now. 

You're very smart for asking this question. When I first started digging in to this years ago I was so mad at what I found...

Here's some places you want to look:

• Broker consulting agreement - some brokers use this and some do not but if they do then they should disclose their income streams.
• 5500 Filing - if you are an employer with over 100 employees then there should be a 5500 filing and the filing should list the lines of broker comp.
• Contracts. Get ahold of every contract for every line of business and read them thoroughly. I could not believe some of what I uncovered when I started doing that as an HR pro. Ask for the contracts even if you don't hold the contract - for example if you have a TPA administering the PBM you can still ask for that contract even though the relationship is not direct.
• Captive agreement - you mentioned a captive. These can be huge comp traps for employers if they are not careful depending on who is managing them and how they are structured.
• PBM  - This is the biggest area of shadiness that I see. There is so much lack of transparency in pharmacy that its really easy for brokers to hide comp in these arrangements. Here are some of the ways-
  • Rebates from the drug  MFG going back to the broker instead of the employer
  • Broker owned coalitions. Some brokers own the the PBM co-op they are telling you is the "best deal" - then they are making tons of profit off of these coalitions. IF you are in a coalition make sure you know who is running it and how they are paid. 
  • PBM contract - again get the contract because this is where they will have to spell out PEPM fees, etc. 
• TPA - Make sure that you have a contract that breaks out the different lines of income. TPA's are often managing these additional lines of coverage and there can be income in there.

And remember broker are not all evil money launderer's 😎. If you have a good broker they will be a strategic partner for you and your business and can save the company a ton of money while structuring benefits and creating strategy that can drive employee retention and attraction. Look for a broker that is fully transparent about income and charges a flat consulting fee rather than streams of income from the carriers. That is what I do. If this relationship is done right the broker is working his or her tail off to put the company in a solid position and should be paid for that effort but you should know what that payment is. 

Glad to help you or anyone else here navigate these waters. And please be kind when I'm calling you or your friends as I am not the enemy 😜 

John.gallagher@usi.com

440-343-6140