HRI Benefits Advisor Compensation Disclosure Form
We can expect more of ourselves and our advisors.
Complete, meaningful disclosure of financial and non-financial incentives is the foundation for wise purchasing decisions.
It's time to move beyond faux transparency that doesn't clearly disclose the true nature of compensation, revenue, and business interests.
The HRI Benefits Advisor Compensation Disclosure Form is step 1 on the path towards this.
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Requiring advisors and vendors to abide by the Benefits Plan Sponsor Bill of Rights is a good way to set disclosure and conduct expectations.
- You have the right to ensure that your obligations in being the Sponsor, Administrator and Fiduciary of your Plans is protected in your Service Agreement.
- You have the right to expect transparency in financial dealings between your chosen representative (broker or consultant) and your carrier and vendor.
- You have the right to ensure those financial dealings do not compromise your fiduciary responsibility and the independence of the advice you receive.
- You have the right to receive information about the full range of options available to you, not just those which preserve your representative’s income and the revenue gained by your Plan Administrator.
- You have the right to an unbiased, independent review of all pertinent market options in an impartial manner, not just those which preserve your representative’s income and the revenue gained by your Plan Administrator.
- You have the right to receive comprehensive reporting of your costs, and the potential drivers of those costs.
- You have the right to receive answers to your questions, with no cloaking of responses with HIPAA Privacy and other “confidentiality” curtains.
- You have the right to expect those you hire to adjudicate benefits to give their best effort to identifying inappropriate and grossly inflated charges before they issue payment.
- You have the right to your data and should agree upon this requirement prior to execution of any vendor agreements
- You have the right to receive complete service and outcome reporting from each of your vendors, including all fees associated with services rendered.
- Product and Account Specific Financial Compensation. These are typically what we think of when we think of how brokers and consultants are compensated, but it's just the start. In particular, look for abnormally highly-compensated additional services.
- Non-Account and Non-Product Specific Financial Compensation. While this may only be a small percentage of the overall compensation you pay, across all of a broker's or consultant's clients, it can be enormous. For some offices, this is their entire source of net profit each year. This can significantly affect products suggested. Common types include book-of-business and volume-based commissions.
- All Other Financial Compensation, Conflicts of Interests, and Perks. Brokers and consultants may have an enhanced position with a carrier or vendor through all-expense-paid trips, conferences, and even paid membership to preferred carrier panels
- All Non-Financial Compensation, Conflicts of Interests, and Perks. Conflicts can also arise from relationships rather than compensation. Brokers and consultants often present options with products and services for which they have a direct ownership or stakeholder position. Coalitions, administrative platforms, and private exchanges are often owned and operated by firms. These products and services are frequently positioned more favorably without a thorough market assessment.
In general, each fee should be calculated in one of four ways.
- Claims-based – Fees are based on the $ amount or number of claims in the plan and generally are expressed as percentages or aggregate per claim fees for the period
- Per member or employee – Fees are based upon the number of eligible employees or actual members in the plan
- Transaction-based – Fees are based on the execution of a particular case, plan service or transaction
- Flat rate – A fixed charge that does not vary
Also, pay attention to abnormal compensation multipliers.
- Expect complete and meaningful disclosure, just like you do in every other significant vendor relationship
- Have pointed conversations and mandate disclosure before entering into an arrangement with a broker, consultant, or vendor
- Be cautious of firms and people that are especially apprehensive about full disclosure. It's a strong indicator of misaligned interests
- During contract negotiations, set expectations that you will request complete and meaningful disclosure
- At the end of each plan year, require complete and meaningful disclosure for the plan year
- Disclosures should be provided within the first 90 days following the end of the plan year
- Require projected costs for each variable cost item for the upcoming plan years while under contract