How to Evaluate Your Benefits Broker
How to Evaluate Your Benefits Broker
Evaluating a benefits broker means reviewing what they are paid from every source, what services they actually deliver, and how they surveyed the market on your behalf — then documenting whether the arrangement is reasonable. Since December 2021, brokers serving employer health plans have been required to disclose their compensation in writing, which gives employers the starting material. Most never take the next step.
This guide covers what that step involves, how often to take it, and why a broker shopping your coverage is not the same thing as you evaluating your broker.
Do employers have to evaluate their benefits broker?
Employers who sponsor a health plan governed by ERISA have a duty to monitor the service providers they hire for it, and a broker who is paid in connection with the plan is one of those providers. No rule prescribes a particular method or schedule. What the law expects is a sensible, documented process for deciding the arrangement is reasonable — and for revisiting that decision over time.
In our experience, retirement plan committees have largely absorbed this. They review their advisor and recordkeeper on a cycle. The same employers often treat their benefits broker as outside that discipline entirely, even though the two relationships are governed by closely related rules.
What does a benefits broker have to disclose about their pay?
Under the Consolidated Appropriations Act, 2021, brokers and consultants to ERISA group health plans who reasonably expect to earn $1,000 or more must disclose their direct and indirect compensation in writing to the employer. The requirement applies to contracts entered into, extended, or renewed on or after December 27, 2021, and covers both fully insured and self-funded plans.
Direct compensation is what you pay the broker. Indirect compensation is what they receive from others in connection with your plan — commissions from insurers, fees from administrators or vendors, and bonus arrangements. The disclosure is supposed to arrive before the contract is signed or renewed, so the employer has time to judge it.
The rule was modeled on the disclosure retirement plan providers have given employers since 2012. The Labor Department has said much of the retirement plan terminology carries over.
What does the disclosure not tell you?
A compensation disclosure tells you what the broker expects to earn. It does not tell you whether that amount is reasonable, because reasonable is a comparison and the disclosure contains nothing to compare it to.
It also says little about the services behind the number. Two brokers can disclose similar compensation while delivering very different levels of work — claims advocacy, compliance support, data analysis, participant communication, actual negotiation at renewal. Judging the pay without pinning down the services is judging half an arrangement.
Isn't our broker already shopping the market for us?
They may be, and that is valuable — but it is a different exercise. When a broker markets your renewal, they are evaluating insurers and vendors on your behalf. When you evaluate your broker, you are evaluating the person who ran that process. The first cannot substitute for the second.
The distinction matters because the broker controls the shape of what you see. They decide which carriers to approach, which quotes to present, and how the comparison is framed. That can be done with complete integrity. But an employer whose only view of the market comes through the broker has no independent way to know whether the shortlist was the right one.
Can our broker run the evaluation of themselves?
They can offer to, and some do. The difficulty is structural rather than personal: the party being evaluated would be designing the review, choosing the comparisons, and interpreting the results.
Plenty of brokers would handle that fairly. But the resulting record has an obvious weakness at exactly the point where it needs strength, and the record is the reason for doing it. The useful question is not whether your broker would be honest — it is whether the file would persuade someone who assumes they were not.
How often should you evaluate your benefits broker?
There is no required interval. A practical cadence is to review the compensation disclosure at every renewal and conduct a full, independent evaluation every three to five years.
That three-to-five-year figure comes from the retirement plan world, where the Labor Department has stated its assumption that plans normally run requests for proposal from service providers at least that often. It has not said the same for health plans specifically. Applying the retirement plan norm to brokers is our recommendation rather than a regulatory expectation — but it is a defensible one, given that the disclosure rules were modeled on the retirement plan version.
What about voluntary benefits?
Voluntary benefits — accident, critical illness, cancer, and hospital indemnity coverage — are often paid entirely by employees, which tends to put them outside any cost review. Because the employer is not paying, nobody feels much need to scrutinize what the broker earns on them.
That assumption is being tested. Since December 2025, several class action lawsuits have alleged that employers and their brokers mismanaged voluntary benefits programs, including through commissions the complaints describe as a large share of employee premiums. Those allegations are unproven, the defendants deny them, and no court has ruled on their merits. But they are a clear signal that employee-paid coverage is no longer being treated as outside the employer's responsibility.
What should a broker evaluation cover?
A thorough evaluation answers six questions and documents the answers.
What does the broker earn, from every source, on every line of coverage — including lines the employer does not pay for?
What services do they actually deliver, and how does that compare with what the market offers at that level of pay?
How did they survey the market at the last renewal, and who was left out?
Do any payments depend on which option you choose, how much business is placed, or how long it stays?
How have renewal outcomes compared with what similar employers achieved?
Who made the decision to retain or replace the broker, on what basis, and when is the next review?
Most evaluations end with the employer keeping its broker. That is a perfectly good outcome. The difference is that afterward, the decision is documented rather than assumed.
How is this different from evaluating a retirement advisor?
Less than most employers think. Both are paid in connection with plans the employer is responsible for, both advise on decisions the employer has to defend, and both are now subject to written compensation disclosure. The main difference is habit: retirement committees have been evaluating advisors for years, while broker evaluation is still unusual.
That gap is closing. Health plan disclosure rules have expanded in stages since 2021, and litigation has begun naming brokers directly. Employers who build the habit now will be doing what retirement committees already do. Those who wait will be building it under pressure.
Most of the committees we speak with are not in trouble. They are in the ordinary position of having made sensible decisions over many years without leaving much of a record behind them.
If that sounds familiar, a short conversation is usually enough to tell you whether you have a documentation problem or simply an uncomfortable feeling. Culpepper RFP runs independent evaluations of benefits brokers, retirement plan advisors, and other plan service providers. We hold no financial relationships with any of them, and we sell nothing else.
Thirty minutes. No proposal unless you ask for one.
Frequently asked questions
Do benefits brokers have to disclose their compensation? Yes. Since December 27, 2021, brokers and consultants to ERISA group health plans who expect to earn $1,000 or more must disclose their direct and indirect compensation to the employer in writing, before the contract is signed, extended, or renewed.
What is indirect compensation for a benefits broker? Payments the broker receives from someone other than the employer in connection with the plan — such as commissions from insurers, fees from administrators or vendors, and bonuses tied to the volume or retention of business placed.
How often should an employer evaluate its benefits broker? No interval is required. A practical approach is to review the compensation disclosure at every renewal and conduct a full independent evaluation every three to five years, borrowing the cycle the Labor Department assumes for retirement plan service providers.
Isn't marketing our renewal the same as evaluating our broker? No. Marketing a renewal evaluates insurers and vendors. Evaluating the broker assesses the person who ran that process, including how they chose which options to show you. One cannot stand in for the other.
Can our broker run their own evaluation? They can, but the party being reviewed would be designing the review and choosing the comparisons. The resulting record is weakest exactly where it needs to be strongest.
Do voluntary benefits count if employees pay for them? They can. Recent lawsuits allege that employers and brokers mismanaged employee-paid voluntary benefits. The allegations are unproven, but they signal that employee-paid coverage is not automatically outside the employer's responsibility.
