Optimizing Transparency Courtesy of Risk International Benefits Advisors

1. *This document and any attached documents are not to be shared with any third-party without prior written consent from Risk International.
Broker & Consultant
Disclosure Standards for
Health & Welfare Plans
Optimizing Transparency

2. © 2017 RISK INTERNATIONAL BENEFITS ADVISORS
BROKER & CONSULTANT DISCLOSURE
pg .2
A CASE FOR CHANGE
The health and welfare industry
exists to provide
comprehensive benefit options
in a highly competitive
environment. So often,
qualified and effective solutions
go unused due to underlying
broker compensation
arrangements and other
conflicts of interest. This
situation continues to prevent
employers from seeing a clear
picture of their benefits
marketplace – optimal services,
clear financial benefits and
enhanced service to
employees.
Employers must demand more.
There needs to be a standard
that cuts through the fog
associated with broker and
consultant compensation,
financial arrangements and
obvious conflicts.
Full Disclosure is Long Overdue
The broker and consulting industry is more complex
than ever. As the health and welfare benefits space
continues to grow and evolve with more plan, carrier,
vendor and broker/consultant options, now is the time
to set standards for full and complete financial
disclosure.
The word transparent has been abused for too long. The
industry has escaped the type of disclosure necessary for
employers to fully understand the flow of all forms of revenue
and business interests that exist. It is critical that employers no
longer accept loose information that has intentionally told only a
portion of the financial picture.

3. © 2017 RISK INTERNATIONAL BENEFITS ADVISORS
BROKER & CONSULTANT DISCLOSURE
pg .3
How to Proceed
It’s not enough to ask for full disclosure and expect the full story. In the following
pages, we’ve provided a comprehensive set of exhibits designed to enable
employers to ask the right questions and obtain the right information.
STANDARD COMPENSATION DISCLOSURES
The crux of the issue is to identify all forms of compensation that come directly from an employer’s health and
welfare plans. Compensation within the plans can come in many forms, but most commonly will materialize
in the form of commission as a percentage of total premium for that particular coverage, fee for service, Per
Eligible Per Month (PEPM) or Per Member Per Month (PMPM).
While brokers frequently disclose some level of compensation, far too often the information is incomplete,
inconsistent and cumbersome. Exhibit 1 on the following page was designed to illustrate the potential
opportunities for compensation across an employer’s full benefits suite.
ADDITIONAL/NONSTANDARD COMPENSATION DISCLOSURES
In addition to commission and fee-based arrangements, brokers and consultants often are compensated by
the industry in other ways. A sample listing of these types of arrangements appears in Exhibit 2.
Brokers and consultants may have an enhanced position with a carrier or vendor through all-expense-paid
trips, conferences, book-of-business and volume-based commissions, and even paid membership to
preferred carrier panels.
DISCLOSURE OF RELATIONSHIPS/CONFLICTS
Conflicts can also arise from relationships rather than compensation. Exhibit 3 is an example of disclosures
specifically designed to highlight non-monetary conflicts of interest.
In many cases, firms are presenting clients with products and services for which they have a direct ownership
or stakeholder position. Coalitions, administrative platforms and exchanges are commonly owned and
operated by firms and are frequently positioned in the most favorable way without a thorough or fair
assessment of the market.

4. © 2017 RISK INTERNATIONAL BENEFITS ADVISORS
Lines of
Coverage
Insurance
Company
Effective
Date
Compensation
Arrangement
Compensation
Multiplier1
Total Annual
Commission or
Compensation2
Medical XYZ 1/1/2018 2% $2.2M $44,000
Rx XYZ 1/1/2018 $0.25/script 10,000 $2,500
Dental XYZ 1/1/2018 5% $500K $25,000
Vision XYZ 1/1/2018 5% $300K $15,000
Stop Loss XYZ 1/1/2018 NA NA $0
EAP XYZ 1/1/2018 $0.50 PEPM 500 $3,000
FSA XYZ 1/1/2018 NA NA $0
Group Life XYZ 1/1/2018 4% $200K $8,000
AD&D XYZ 1/1/2018 10% $50K $5,000
LT Disability XYZ 1/1/2018 10% $100K $10,000
ST Disability XYZ 1/1/2018 $2.00 PEPM 500 $12,000
Cancer &
Critical
XYZ 1/1/2018 15% $50K $7,500
Wellness XYZ 1/1/2018 $1.00 PEPM 500 $6,000
Disease
Management
XYZ 1/1/2018 NA NA $0
Broker Fee NA 1/1/2018 Flat Fee NA $75,000
TOTAL $213,000
1 Number used to calculate total cost to employer. This number can be represented as total premium, # of eligible lives or any other applicable figure.
2 This should be the total amount of compensation by the applicable line of coverage – the method (commission, fee or PEPM/PMPM) multiplied by the count or
amount in the adjacent Compensation Multiplier column.
Exhibit 1 – Sample of Preferred Disclosure Table by Line of
Coverage
BROKER & CONSULTANT DISCLOSURE

5. © 2017 RISK INTERNATIONAL BENEFITS ADVISORS
BROKER & CONSULTANT DISCLOSURE
Compensation Type
Insurance
Company
Actual or Valued
Amount
Contingent/Bonus
Commission
XYZ Company $14,000
Back-end Commission XYZ Company $10,000
Exhibit 2 – Sample of Preferred
Disclosure Table by Additional
Compensation Type
Exhibit 3 – Examples of Broker Conflict
Disclosures
Type
Business
Product/Service
Name
Detail
Wholly Owned
Product/Service
ABC Private
Exchange
Coalition/GPO XYZ GPO
Wholly Owned
Product/Service
ABC TPA
Stakeholder Interest
Product/Service
DEF Benefit
Admin System
9% ownership in
DEF
Conference Attendance XYZ Company
Preferred-vendor Panel XYZ Company
PLANNING AHEAD
Disclosures should be provided within the first
90 days following the end of the plan year. In
addition to these disclosures for the previous
plan year, your broker should be providing
projected cost for each of these items for the
upcoming plan years while under contract.

6. © 2017 RISK INTERNATIONAL BENEFITS ADVISORS
BROKER & CONSULTANT DISCLOSURE
pg .6
WHAT TO DO
Employers must demand disclosure and true
transparency in how brokers are operating. As
covered within this document, there are a number of
opportunities for employers to have pointed
conversations and to mandate disclosure before
entering into an arrangement with a broker or
consultant. If these firms are especially apprehensive
about disclosing all channels of revenue resulting from
employer plans, it should immediately bring in to
question who’s best interests are in mind when
marketing and proposing benefits solutions. During
contract negotiations with a representative, it is
important to set expectations that the employer will
request this level of disclosure. At the end of the plan
year, the broker will be bound to disclose all forms of
commission or fee-based compensation and
demonstrate that in an easy-to-understand method.
The Path to Change
The health and welfare benefits
industry continues to innovate to meet
the increasingly complex needs of
today’s members. As such, it is more
important than ever that employers find
a partner that will work to thoroughly
assess the market in an unbiased
manner and present the most fitting
and impactful solutions. With the
current landscape of broker and
consultant representation, this can be
a daunting task. Industry forces have
made it highly lucrative to prioritize
solutions by compensation, familiarity
and other conflicts of interest.

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