5 things CFOs don't know that are making the cost of their employee benefits go up year after year

What would you do if you found a $500,000 efficiency in your business? 

That’s what happened to me a few years ago. 

I've been a CFO of a 500 person company for the last 10 years and I learned firsthand about the misinformation that exists in the healthcare space.  

I was tasked with negotiating benefits for my company. Through that process my eyes were opened to how much I was being overcharged for our health insurance, and I learned a lot about the partners our company works with to secure benefits for our employees. 

One of the most shocking things I uncovered was misaligned brokers incentives. 

Here’s the thing, we don't have to accept the kind of status quo that we're given.  Your rates do not necessarily have to go up 5% or more each year. 

Through the process I’ve developed, my company saved half a million dollars in the first year.  It was through this experience I discovered a passion for helping other people which became the foundation of, of  #TrendBreakers.  

I’m on a mission to help educate other CFOs, other employers, and HR professionals and provide them with information that brokers frequently don’t share. 

Consider what might happen if you were able to negotiate efficiencies if you knew where you had leverage. 

Here are five things that CFOs commonly don’t know that are causing the cost of their employee benefits to go up year after year.  

#1: CFOs don’t know how their broker gets paid. 

As CFOs negotiate benefits, we don't speak directly with carriers, we speak with brokers. This is why it is vital that you partner with a broker that is philosophically aligned with your company and is willing to sit on the same side of the table as you during negotiations. 

The first thing you need to understand is how the broker actually gets paid. 

Do they get paid more when the premiums go up or do they get paid less? In most cases, they get paid more when your costs go up. That means, if your broker has a standard compensation plan, they are  financially incentivized to have your premiums increase. 

And that has a big influence on how they work with you, and which options you’re presented with.

I always say that a bad system will eat a good person every day of the week. So I want you to know that there  are good people that are brokers bringing the very best to the table. But realistically, there aren’t a lot of people who choose to work harder to get paid less. 

Understanding the way your broker’s standard compensation is structured, and how they are paid has a huge impact on the cost your company pays for employee benefits. 

#2:  CFOs don’t know what bonuses are attached to their plan.

This is something I've just discovered over the last few years : bonuses. 

Carriers will, on top standard compensation, pay bonuses on different policies. 

For example, here in Arizona there was recently a new plan, a new joint venture. And in order to try and incentivize brokers to sell this new plan, the carrier was  going to give the broker a $10,000 to $20,000 bonus depending on what type of product that they sold.  

That’s a bonus in ADDITION to the standard compensation for selling that plan. 

And so as, as a CFO evaluating the plans that the broker brings to the table, it is imperative that you understand not only how the broker’s base compensation works, but also the bonus structure so that you don’t have to worry if they are “strongly suggesting” a plan simply because  they could get a $20,000 bonus.

#3 : CFOs don’t know about other plans outside their broker’s current affiliations. 

Brokers contract with different carriers and that's how they get paid. I can say with certainty that  there are many, many plans out there that you're not seeing. Not because they're not viable options, it's just because the broker is not contracted with them or does it have any type of relationship with those other carriers.  

Here’s an example to illustrate what I’m talking about:

Imagine going into a retail store and asking that sales rep for the best product.  That sales rep is only going to tell you what's on their shelf. They're not going to tell you to go across the street or go on the internet to evaluate other options. Many times as CFO’s we are limiting the plans we're considering because the broker that we're working with only presents plans from carriers with which they have a pre-existing relationship. 

#4 : CFOs don’t know how their company fits into their broker’s book of business. 

A broker’s expertise has a huge influence on the type of plans that you're being presented. So, if you're looking to expand, make sure you have a broker that is an expert in brokering benefits for companies that are similarly situated.  If you’d like to hone in on a broker’s expertise, ask your broker, “What percentage of your book of business is fully insured versus level funded.”  

As a CFO you need to understand what type of companies and what type of plans make up their book of business.  

Most importantly, you need to know how your company fits into that profile.

#5: CFOs don’t know about non-compensated tools their company could be leveraging to lower costs across the board. 

There are many things that can lower the cost of your benefits that brokers won't get paid for.  

Good RX is something that employees can use to lower the cost of prescriptions at the pharmacy every time they need to fill a script. It's low in the overall cost to the company, but there's no financial incentive for the broker to show those things to you, which means there is no financial gain if they help you implement those tools. 

Implementing options that will help lower the costs of your plan outside of what your broker may be telling you can lower the cost to the company while reducing the cost employees pay out of pocket for their health needs. 

Conclusion

As a CFO the biggest hardship in negotiating benefits is that we are not fully informed to all the places where we can reduce costs.  In our companies, we negotiate expenses like lightbulbs, software, and salaries, but one of the largest line items on our books (employee benefits)  goes unchecked.

I created #TrendBreakers because I have a moral obligation to  share this process with other CFOs to empower their own negotiations.  If I don't share information like this with my peer group, I'm complicit with this messed up benefits system we're all living in.

These are just five things most CFOs don’t know are causing company’s benefits to increase in cost year after year, and there's many other things inside of benefits costs that impact your company’s bottom line. 

I'm on a mission to help a thousand employers this year lower the cost of healthcare because carriers have enough money. 

We should be able to reinvest that money back into our companies; reinvest it back home for our employees to help the people that run our businesses get the right care for the right price.