How to Choose an Outsourced Company for Your Employee Benefits
If you're thinking about outsourcing your employee insurance, first get recommendations from industry colleagues, your accountant, or your lawyer, or talk to several brokers and human resource organizations and ask them to submit bids.
If you've already outsourced some aspects of your human resources, check out the offerings of the organization you are already using. If you're starting from scratch, you can use a large national insurance broker, but you might prefer the one-on-one personal relationship of a local broker.
Even though you have a small company, you may be surprised at how interested some insurance brokers are in getting your business. The commission on a health insurance package for even a 25-person company can be more than $12,000.
Another source of insurance and other benefits is trade associations or purchasing cooperatives, which leverage their membership to get better group rates. But be careful here. Some "associations" are nothing but glorified sales organizations for substandard insurance companies. Look closely at their materials and check to see who is on their board of directors or executive management team. If they are executives of insurance companies, there's a good chance the association is just a sales arm. Some of these organizations have been sued for misrepresenting policies and/or raising rates precipitously after an initial grace period. Some warning signs: Rather than getting straight information on their offerings and a full explanation of the benefits package, you'll encounter high-pressure sales people who offer policies at suspiciously low rates. Alternately, they may charge not only a membership fee to join the group but also an "application fee," which is not standard practice in the insurance industry.
Make sure to check with your state insurance commission. Insurance laws differ from state to state, but most state commissions will be able to tell you whether the organization is licensed to sell insurance and whether there have been any complaints about or regulatory actions against the organization.
State regulations keep commissions for insurance brokers at the same rate, so you won't find much variation in the cost of acquiring insurance for your company. So because the prices for all insurance brokers are essentially the same, you can choose a broker based on service.
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