[S2E3] Vincent Catalano - Benefit Brokers 101 (Part 1)

Not all benefits brokers are created equal. In this first episode of a two-part series, Vincent Catalano pulls back the curtain on the employee benefits brokerage industry, sharing insights from his 22 years in the business.

Drawing from his experience working with small brokerages to large national firms, Vincent discusses what employers should look for when evaluating a benefits broker—from understanding funding strategies to knowing the right questions to ask about compensation and expertise.

In this episode, you'll learn:

• Why broker training matters and how most brokers actually learn on the job
• The difference between brokers who sell and those who truly service clients
• Key funding strategies every employer should understand (fully insured vs. self-insured)
• How broker compensation works and why transparency matters
• Questions to ask when evaluating your current broker or searching for a new one

Whether you're considering a new broker or evaluating your current one, this episode gives you the insider perspective on what separates truly knowledgeable advisors from those just looking to close a deal.

Sponsor: This episode is brought to you by CLEAR Healthcare Solutions, providing independent healthcare benefits consulting to help organizations navigate the complex world of employee benefits.

Disclaimer: The views and opinions expressed in this podcast are those of the host and guests and do not necessarily reflect the official policy or position of any organization mentioned. This content is for informational purposes only and should not be considered legal, financial, or professional advice.

Transcript

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Welcome to the Clearly Beneficial podcast,

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the show where we rip off the Band-Aid and explore the future of healthcare,

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benefits,

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and the people driving innovation in the industry.

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This episode is brought to you by Health Next,

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the company leading the way in helping employers build enduring cultures of health

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and well-being,

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reducing medical cost trends,

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and increasing organizational performance.

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To learn more how they can help you, visit healthnext.com.

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How's it going?

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Benny Catalano here.

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For some reason, I've been thinking a lot about brokers.

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I think partly because I spent 22 years kind of really hot in the game and working

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with clients and really enjoying the career.

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Working for small brokerage when I started and then

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getting acquired by a much larger brokerage,

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and then making one final move before I decided that,

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you know,

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I'm gonna pause this and go look at doing other things with my life.

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But I really got to thinking about the brokerage industry.

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And when I say brokerage, I mean employee benefits broker industry in a very broad way.

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Because I look at all the challenges that employers are facing in the area of

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healthcare costs and health insurance costs.

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And I'm wondering where are all the brokers in this conversation?

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You see not a lot of them posting opinions on LinkedIn,

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where I kind of get my healthcare news in a lot of ways,

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with the exception of those who just continually want to keep selling themselves.

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Or the ones that are out there trying to promote a specific strategy,

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which is also entertaining and interesting.

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But it got me thinking about the industry and what's going on in it.

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And,

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you know,

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I just thought I'd share some of my thoughts,

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you know,

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with you about,

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you know,

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first of all,

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you know,

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what makes a great broker?

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Now, I'm not saying I was a great broker.

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We're all legends in our own minds.

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But I felt like,

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you know,

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it starts with knowing the craft,

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knowing,

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you know,

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what does it mean to be a broker,

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consultant,

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advisor,

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or whatever you want to call yourself.

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And a lot of people call themselves what the flavor of the year is,

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but very few are really truly properly trained to do the job that they say they do.

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I don't know that I was properly trained.

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I mean, I learned everything I learned on the fly.

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I walked into a brokerage, a small group brokerage in Sacramento in 2003 and got my start.

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But also...

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You know,

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no one sat me down and taught me X,

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Y,

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and Z.

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Thankfully,

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I had a great cadre of carrier reps in the health side,

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life insurance,

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disability,

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vision,

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dental,

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had a great group of people that I work with in all those spaces.

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And I still maintain those friendships to this day.

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And the rest of it was trial by fire,

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you know,

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get the clients,

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learn what you can and then build from there.

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And that really,

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you know,

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was very obvious as I made this transition from working on small groups until I

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decided to work on large groups and even larger groups.

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and so um it was it was trial by fire it was learn as you do and um you know there

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weren't a whole lot of mentors along the way which was i thought kind of

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interesting uh even at the big brokerages i mean you know you kind of like all they

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really cared about was go get some business and you'll figure it out from there and

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there might be somebody smart inside that inside the house that can help you close

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the business keep the business and long term you know manage the uh uh client

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And so where does that leave us today?

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Let's start with how brokers first get trained or not trained.

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I mean, a lot of them, like I say, are learning on the fly.

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And people who call themselves brokers,

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I think in many cases,

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and again,

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this is my own opinion,

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all they're trying to do is close the business and win you as a client.

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And once they do,

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they are probably not going to be the person who is going to be your lead advisor.

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Something I prided myself on was once,

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especially as I brought on larger and larger clients,

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is once I brought that client on,

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and even in the sales process of trying to win that client,

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I always felt the obligation that I had to know the details of whatever it was I

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was talking about,

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whether it was health insurance and the method of funding or any other,

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you know,

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line of coverage that I was responsible for.

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I needed to know how that integrated and fit in the solution.

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A lot of brokers don't do that today, especially, especially the younger ones.

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You know, they're out there selling, selling, selling, trying to win a piece of business.

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And hopefully that organization has someone of a good caliber that they can bring

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in and quote unquote,

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do the math.

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Okay.

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you know,

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it becomes a challenge because a lot of times all this stuff is sold on a

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relationship basis.

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You know, you like them.

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There's something that went wrong with a current broker.

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They made a mistake.

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They just ran their course.

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They didn't provide enough options.

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They weren't on top of the service, which gives an employer reason to go look for a new broker.

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And once they go on that search, I don't know that any broker

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client or potential client really sits down to try to understand the education

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background bona fides of a broker that they're considering.

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Now they put out RFPs that ask a whole bunch of questions and those questions

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ostensibly are about the company that they're going to be engaging with and the

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company puts together a great proposal.

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I'm sure right now it's all AI driven.

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But the bottom line

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is that the brokers today,

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and especially the older ones,

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I mean,

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there are so many my age and older that are either retiring,

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getting out of the business,

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or they're being acquired by a much larger organization.

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So if I'm looking at what are the ideal characteristics of an insurance benefits

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broker,

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consultant,

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advisor today,

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first I'd say they better know the details of what it is they're talking about.

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And that includes funding strategies,

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contribution strategies,

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risk management,

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all the things associated.

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Because so many companies out there are fully insured,

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especially in California,

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when they really should be self-insured.

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So make sure that that broker really knows what they're talking about across the

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gamut of funding solutions that are available to you.

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So that's number one.

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Number two is how transparent are they about their compensation?

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And many of you don't know this.

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It's incredibly easy to look a potential client up and look at their 5,500 filings

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and see how much they are paying their broker.

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especially if that broker is receiving commissions.

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Okay, very easy.

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All the brokers have the tools.

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Zywave is a well-known tool.

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They go in there, put your company name in, and boom, there you are.

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You're with Broker X. Broker X made $250,000 in commissions last year.

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So now all that new broker sees is dollar signs.

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They want a piece of that action.

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The smart ones, though, aren't the ones who are looking to pick up your commission, okay?

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The smart ones, in my opinion, are the ones who are willing to do it without commission.

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The ones who are willing to do it by transparent fee.

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First of all, you probably don't even know you're paying your current broker $250,000 a year.

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And think about that.

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Take 250,000,

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divide it by your number of employees,

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and now you see how much commission you're paying that broker per employee per

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year.

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Now,

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this number is going to be shocking to you,

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but in California,

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and I've done the math,

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I've got the spreadsheet,

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I've seen it all,

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the median compensation for a broker in California for those paying commission is

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about $450 per year per employee.

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Now, there are other brokers I've seen in the database that make less.

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So the median is $450,000,

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but I've seen two,

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three,

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and four times that number for the annual commissions on a per-employee,

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per-year basis.

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So I've seen groups with 100 employees pay $250,000,

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and I've seen groups with 1,000 employees pay $250,000.

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So do the math and have that conversation because one of the things I always like

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to ask potential clients when I was in the business was,

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so when your broker came in last time and did their compensation review with you,

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what did that look like?

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And if they were like, wow, they never did a compensation review with me,

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that's a great opening to have a transparent conversation about what you,

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you know,

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as a broker or what your broker is really worth to you and what you are willing to

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spend on those services.

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Because if your incumbent's making a quarter million,

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a lot of those other brokers may also want to make a quarter million,

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but you might say,

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you know,

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I think we should be able to do it for $125,000 or pick a number,

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okay?

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But start the conversation because the intelligent broker

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will come into you and tell you, I want to work on a flat fee basis.

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So what's the advantage of that?

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So you think about it, you know, if a commission based situation is what you have today,

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If your insurance company comes along and gives you a 10% rate increase,

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okay,

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and your broker doesn't make an adjustment to their commission,

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that means they just got a 10% raise over what they were making last year.

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And they probably haven't disclosed it, and they probably haven't told you about it, okay?

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So that 10% increase has a direct reflection on what that broker makes.

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If you hire 100 employees and you're on a commission basis,

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that broker is making incremental commission for every single employee that you've

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just hired.

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Similarly, if you've just fired 100 employees, that broker takes a haircut.

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But should you be paying your broker as a function of your headcount versus a flat

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fee that you've agreed to?

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So I think that the brokers with wisdom will come in and have a conversation with

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you transparently about being on a flat fee basis to work with you and something

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it's super obvious.

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And I certainly pivoted to that once I was later in my brokerage career because I

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just felt that the fee basis was far more interesting and entertaining to be

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working with.

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This podcast reflects the personal views of the host and guests,

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not their employers or sponsors.

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See you next time.