"Half a truth is often a great lie."

- Benjamin Franklin

The benefits industry is rife with misdirection and misleading claims. As someone who got into benefits to make a difference, this drives me up the wall. Not only do these myths distract employers from getting the best plans for them, but it also slows innovation across the healthcare system by encouraging the status quo.

I want to share the 3 biggest myths in the benefits industry. These are hidden in such plain sight, you will wonder how you ever believed them.

Myth 1: Broker A can get you better rates than Broker B

Does your broker talk about their special relationship with your insurance carrier? If not, call a doctor and check their pulse. Brokers love to brag about a mysterious insider eager to cut a deal.

The truth is that your broker has little to no influence on rates. That's because insurance plans are commodity products. Each carrier has a risk model; they run your information through it and premiums pop out the other side. There are no "cheat codes" to lower your premiums, even with the most well-connected broker.

That said, a savvy broker will save you money. They find and remove hidden fees and markups in your plan. They create competitive environments between carriers at renewal time. But great brokers don't rely on secret handshakes and chummy relationships with the same party who sent you a 20% rate increase.

My advice is simple: Don't focus on your broker's relationship with carriers. Focus on their relationship with you and your employees.

Myth 2: If you change your broker, you lose your plan and rates.

This is the industry's biggest and most insidious myth. Too many executives believe that changing their broker means changing their plans. They believe that the rates and plans they have are somehow attached to their broker, and that changing their broker means losing their plans.

The reality couldn't be further from the truth: You can change your broker tomorrow and nothing about your plan will change. Your broker is not your plan.

Have you ever bought a house? If so, you probably worked with a mortgage broker. Let's call her Jane at Acme Mortgage. Banks use mortgage brokers like Jane to sell their loan products to would-be homeowners like you.

While banks are happy to pay Jane a sales commission, they could care less about your ongoing relationship with her. The bank is not going to repossess your house or change your mortgage payment if you no longer work with Jane. How could they? You and the bank signed a contract for specific loan terms.

Your company's health insurance policy works the exact same way. To change your broker, you send a letter to the insurance carrier. This letter says that you have replaced Jimmy at Acme Benefits with Tammy at AAA Benefits. This allows Tammy to contact the carrier on your behalf (and also ensures she gets paid).

The benefits industry has allowed this myth to persist far too long. It's understandable. The harder it appears to switch brokers, the less likely companies like yours are to do it. But this allows brokers to provide sub-par service with less fear of being held accountable or fired.

Bottom-line: You can change your broker at any time without disrupting your plan. Any lingering doubts? Call your insurance carrier and ask them if changing your broker will affect your plan or rates.

Myth 3: Your broker gets paid by the insurance carrier.

If you ask your broker how they get paid, they will likely tell you the insurance carrier pays them. This is only true on paper.

To provide a quote, insurance carriers run your demographics through an actuarial model. This gives them the "rate" they are going to charge you. But before sending that over, they add commissions for the broker into the rate. You never see this broken out on its own line — you only see the combined number, which brokers will tell you is "the rate".

In a perfect world, your broker would show you a quote that clearly differentiates between the premiums and their commissions. And that's not such a crazy idea. In fact, no large employer in America lets brokers present quotes like this. Large companies negotiate their commissions separate from the insurance premiums. This ends up saving them tens (or even hundreds) of thousands of dollars each year.

So how much of what you pay in premiums goes straight into the pockets of your broker? Industry averages are 4-5%, but I've heard of brokers taking home as much as 8%. If you're spending $5M on healthcare, five cents on every dollar goes to the broker. That's $250k each year in commissions. Brokers need to be compensated for their work. But it's important to know how much you're paying your broker and asking yourself if you're actually getting that much value in return.

Want to see how much you're really paying your broker? If you have at least 50 employees (100 in NY and CA), your broker can go to the carrier and get a "net" quote. This "net" quote shows you the actual amount the insurance company is charging, before they add broker commissions. If your company isn't that large, check the "5500 Report" that you file each year with the Employee Benefits Security Administration. This will list the commissions your broker earned across all the lines of coverage you purchased.

Why settle for stories?

Brokerage is an opaque industry. Some of this can be chalked up to convention. Some of it is by design. As HR professionals, it's important to recognize when we're being fed a story. Demanding greater transparency and accountability is the only way to change this market.

Nava could write a book on the myths and half-truths in benefits. Who knows — someday we might! In the meantime, help your fellow HR professionals by busting these myths every time you hear them. If you have any questions or comments, I would love to hear from you: [email protected]