Within the group benefits and insurance industry, there are a few common players. Let’s walk through the top 3 parties that you might come across and what their role entails.
The Insurance Company:
The insurance company (aka carrier) is the organization that provides the benefits offering itself and is the entity that adjudicates and pays plan member claims. It’s also important to note that the insurance company also underwrites the risk for pooled benefits including life insurance, accidental death and dismemberment (AD&D), and long term disability (LTD). With that being said, they also take most of the risk in providing a benefits program to an employer/plan sponsor. Additionally, the insurance company will be responsible for setting rates. They do this by projecting future claims based on your existing claims experience and their overall block of business.
While some sponsors like dealing directly with the carrier, by doing so, you are eliminating an unbiased opinion or recommendations to change insurers for a better offering. And, unbeknownst to many, they're not saving any money by going directly to the carrier versus using a broker.
More commonly referred to as a TPA, a third-party administrator is a company who deals with many insurers to gain preferred pricing on pooled benefits and unique offerings. This ensures competitive rates and solutions while diversifying providers depending on the needs and objectives of the plan sponsor. In this scenario, claims are still adjudicated and paid as with the insurer directly, however, the platforms and specialties may vary from one TPA to another.
Before we move on to an insurance broker, it’s important to connect the value of a relationship between a broker and a TPA – a big value of working with a TPA is that a broker is able to shop the market for alternative plan options without having to move a company's benefit plan to a new insurer.
When dealing with an insurance brokerage, you will typically be working with a dedicated consultant from their firm. This person is your quarterback and unbiased party who has your best interest at the forefront of everything they do. They bring providers to the table so that full market surveys can be obtained, and they operate with complete disclosure and transparency. Once a full and comprehensive analysis has been complete, your consultant/broker will make a sound recommendation based on your budget and unique needs.
Your overall costs are not impacted by using an advisor vs. dealing directly with a carrier or TPA as your premium include such expenses. What should you look for in a brokerage or consultant? Your consultant should have strong industry relationships so that they’re able to negotiate with insurers and TPA’s on your behalf, with a mandate to meet your needs and long term objectives.
Insurance is not a one size fits all approach and while dealing with a TPA or carrier will give you the best of what they have to offer, an insurance brokerage can give you the best of what the industry as a whole has to offer.