A 30-year industry veteran says commission conflicts and lack of strategy are failing employer plan sponsors
When your company's medical costs jump 35 percent at renewal, your benefits broker's compensation rises by exactly the same amount - automatically, and for no additional work. That is not a coincidence. It is a structural feature of the commission-based model that still governs how most US employers pay for benefits advisory services.
John Cicchelli, head of employee benefits at World Insurance Associates in New Jersey, has spent more than 30 years on every side of the group benefits market - carrier, wholesale, and retail broker. He has led and rebuilt employee benefits practices at firms ranked among the top five in the US brokerage industry. His assessment of the current state of play is that employer plan sponsors are not getting the strategic partnership they are paying for, and most do not realize it.
"Insurance consultants and brokers are only talking about coverages," Cicchelli said. "They have yet to harmonize what the expense of insurance is and how it has a material effect on an organization's strategic plan."
What HR leaders should know about how brokers get paid
The commission model works like this: broker compensation is built into the pricing of the insurance product itself, as part of what carriers call the retention component of a plan. When premiums rise - as they have consistently in the US group health market - broker revenue rises with them, regardless of whether the broker has done anything to earn the increase or contain the cost.
"Is it really appropriate when an employer gets a 35% increase in their medical costs and the broker gets a 35% increase in their compensation?" Cicchelli asked. "It seems like an inherent conflict of interest - where on a fee basis, that goes away."
The alternative is a fee-based model, where the broker charges a flat, negotiated fee for advisory services rather than earning a percentage of premium. Cicchelli favors this structure - particularly for mid-sized and larger employer groups - because it removes the commission conflict and gives plan sponsors a clear, predictable cost for their broker relationship.
For a broader overview of how fee disclosure requirements are changing the broker landscape, the Department of Labor's (DOL) guidance on group health plan broker compensation disclosure under the Consolidated Appropriations Act (CAA) of 2021 sets out what employers are now entitled to know.
But he cautions HR leaders and benefits managers not to accept the label of "fee-based" at face value. Some firms charge a stated fee on the medical side while earning undisclosed commission revenue on ancillary lines - dental, vision, life, and disability coverage - that sits below the declared fee. "A lot of firms look good on the surface, but the broker is really being compensated a lot more than what they propose their fee to be," Cicchelli said. "That goes back to transparency."
Are you getting strategy - or just coverage placement?
Beyond compensation, Cicchelli identifies a deeper gap in what most employers are actually receiving from their benefits advisory relationship: genuine strategic thinking.
Employee benefits - group health insurance in particular - typically represent the second-largest business expense for an employer after payroll, according to data from the Society for Human Resource Management (SHRM). Yet Cicchelli argues most brokers treat it as a placement exercise rather than a strategic input.
"I would love to know how many consultants really know what the strategic direction is of the organization around various components - R&D, strategic positioning, how they market themselves," he said. "One is piggybacking off of the other, and they both should be meeting. That never happens."
The practical implication for HR leaders is that if your broker's annual presentation consists primarily of a carrier renewal comparison and a benefits summary, you may be leaving significant value on the table. A more rigorous broker relationship should include an explicit conversation about how benefits spend connects to workforce strategy, retention goals, and total compensation positioning.
The RFP process: necessary discipline or expensive distraction?
Many HR and procurement teams rely on formal requests for proposal (RFP) to benchmark and select benefits brokers. Cicchelli's view on this process is nuanced and worth considering carefully.
He argues that the RFP process has become over-applied, now reaching employer groups as small as 50 to 60 employees, and that it has increasingly become a mechanism for evaluating price rather than capability. "People spend tens of hours completing and reviewing these RFPs," he said. "Typically, there is no compensation for a broker - whereas in a law firm or a consulting firm, you're being charged for that time."
The concern for HR leaders is not that competition is bad - it is that a purely RFP-driven selection process may systematically favor firms with strong proposal-writing capabilities over those with genuinely superior advisory practices. Cicchelli suggests that structured interviews and direct dialogue with the actual team that would service the account can surface quality signals that a written proposal cannot.
What to look for in a broker relationship
Cicchelli has a clear list of what distinguishes a high-performing benefits advisor from one who is simply processing renewals. In his view, the non-negotiables are transparency on compensation, genuine education of the client on why costs are what they are, and a willingness to explore alternatives to the fully insured commercial market - including self-funding strategies - where appropriate.
He also flags a talent issue that HR leaders in particular should take seriously: consolidation in the brokerage market is driving experienced advisors toward smaller, boutique firms or out of the large broker houses entirely. "I am seeing more and more people leave firms from one to another because they are looking for real, true servant leadership," he said.
The practical implication: the broker brand name on your contract may matter less than the specific individuals assigned to your account and whether they will still be there next year.
The Kaiser Family Foundation's (KFF) 2024 Employer Health Benefits Survey provides independent benchmarking data that HR leaders can use to assess whether their plan design, costs, and broker relationship are aligned with peer employers and is a useful starting point for any broker accountability conversation.
