A reader asks: I'm investigating insurance options for my small firm. Someone recommended I go through a broker to arrange benefits. Is this advisable?
An insurance broker works on behalf of businesses large and small to assist them with buying health insurance and other benefits for their employees. Brokers work with multiple insurance companies and are typically paid by the companies on a commission basis, based on the cost of the insurance premiums they sell.
In a small company like yours, where the CEO has to double as human-resources manager, a broker can save you time and help you navigate state regulations governing small businesses and health insurance. Working directly with an insurance company takes time and patience, says Josh Senders, a broker with Pilot Employee Benefits of Melville, N.Y. "By shopping among multiple insurers, a broker is better able to handle a task that could be quite time-consuming without assistance. In many cases, the compensation paid to a broker is included in the insurance price whether or not someone works directly with the insurer or through a broker."
Hilary Topper, president and CEO of HJMT Communications in Westbury, N.Y., says she was approached by many insurance brokers at local networking events but was concerned about finding an experienced broker that she could trust to look out for her best interests. Although she contracted with a broker referred to her by another entrepreneur, her first experience wasn't a good one.
"When an employee left and wanted COBRA [the Consolidated Omnibus Reconciliation Act program], [the broker] was nowhere to be found. So I found myself dealing direct with the insurance firm," Topper says. "I found it very difficult. They kept me on hold for long periods of time, and each person [I spoke to] didn't know what the other people in the company were doing."
BENEFITS BY DESIGN. Topper wound up hiring Senders, and is pleased she did. "It makes my life a lot easier as a business owner to deal with one less hassle," she says.
Along with handling the tedium, a savvy broker can help small companies design their benefits programs, communicate with their employees, and handle government-compliance issues. For Topper, that means she can offer two different insurance programs to her employees and let them choose which works best for their needs. She says, "In terms of the cost, [using a broker] doesn't cost me any more than when I stopped going through a broker."
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