A benefits broker helps employers choose and manage their health benefits. A broker who understands DPC can open doors to groups you couldn't reach alone, so it pays to know how they work and how they're paid.
What brokers do
Brokers help employers pick health plans, handle renewals and answer employee questions. A broker may know when each client's plan year starts and what the client is unhappy about. That can make a broker a gatekeeper and a source of leads.
How brokers get paid
Brokers can be paid by insurance carriers as a commission, or by the employer as a fee. Some may ask DPC practices for a fee too, such as a set amount per enrolled member per month. Ask every broker how they're paid on any deal you're part of, and get it in writing.
What a broker needs from you
- A one-page summary of what the membership includes and costs.
- Your capacity: how many new members you can take and how fast.
- How billing and enrollment work.
- Answers on how DPC fits with the employer's health plan. Here's the overview.
Price a broker fee in before you quote
If a broker takes a fee per member, it comes out of what you keep. In a made-up example, you charge $70 per member and pay the broker $5. You keep $65. On 50 members that's $250 a month to the broker. Make sure your floor price still holds after the fee.
How it shows up in your books
Record what the employer pays as revenue in full, and the broker fee as its own expense. Don't net them together. If the fee comes out of revenue on one line, you can't see what the broker relationship costs you. Ask your bookkeeper for a separate line, like "Broker and referral fees."
Ask your CPA whether you need to send the broker a 1099 at year end. This post covers 1099 basics.
Watch the relationship
A broker who sends you one group a year is worth keeping close. Send a short update each quarter and ask what their clients are asking for. Thank them when a deal closes.
What I'd do this week
- Ask two employers you know who their broker is.
- Write a one-page summary a broker could hand to a client.
- Decide whether you'll pay broker fees, and how much your price can carry.
Common questions
Do I have to pay brokers?
No. Decide your policy before the first deal so you aren't deciding under pressure.
Should broker fees be in the contract with the employer?
Your attorney should advise on that. At a minimum, have a written agreement with the broker about the fee and when it ends.
What if the broker wants a percentage of revenue?
Run the math the same way. A percentage of revenue is still a cost per member, and it grows when you raise prices.
Want to see what each referral source costs you?
We reconcile every account every month and send your P&L and Balance Sheet by the 15th, so decisions like this start from real numbers. If that's what you need, apply to work with us.