Employers don’t have to wait for renewal to change benefits brokers. The broker of record letter is the document that tells each carrier about the change, and planning its timing keeps the switch orderly.
What a broker of record letter does.
The letter tells a carrier that the employer has appointed a new broker for a named policy, starting on a stated date. From then on, the carrier works with the new broker on that policy instead of the previous one.
The letter appoints a broker. It isn’t a new policy and it doesn’t move the plan to a new carrier.
Broker of record letters are an industry practice rather than a statute. The New York State Department of Financial Services has said its insurance law “does not specifically address” these letters. The Independent Insurance Agents of Texas, writing about agent of record letters, notes there are no regulations covering them. Each carrier applies its own process, so confirm the details with each one.
What to put in the letter.
Check each carrier’s requirements. A letter generally includes:
- The employer’s legal name and address, as they appear on the policy.
- The carrier’s name and the group or policy numbers the change covers.
- The lines of coverage being moved, such as medical, dental, vision, life and disability, or stop-loss for a self-funded plan.
- The new broker’s name and a clear statement that they are appointed as broker of record.
- The effective date of the change.
- The signature, name and title of an officer with authority to act for the plan.
Send a letter to each carrier and vendor the broker works with on the plan. Self-funded plans may have several, such as a third-party administrator, a stop-loss carrier and a pharmacy benefit manager. Make a list first so none is missed.
The waiting period, explained.
Some carriers notify the current broker when a letter arrives and wait before making the change. The Independent Insurance Agents of Texas suggests a 5 to 10 business day wait after the carrier’s notice. During that window the current broker may contact the employer, and only the employer can rescind the letter.
Expect the call. If the decision is made, tell the current broker the employer stands by its letter.
Mid-year or at renewal?
| Mid-year change | Change before renewal | |
|---|---|---|
| When the new broker takes over | When the carrier processes the letter | Before the renewal is negotiated |
| Compensation | Under the practice IIAT describes, the new broker services the policy without commission until it renews | Settled with each carrier and disclosed in writing by the new broker |
| Best for | Service problems that can’t wait | A full market review of the renewal |
| Watch for | Carrier rules that differ by line of coverage | Sending the letter too late to market the plan |
For how far ahead renewal work starts, see the health plan renewal timeline.
What employers should check first.
Treat a change of advisor like any other plan decision: compare, decide and keep a record. Before signing:
- Get the new broker’s written disclosure. Under ERISA section 408(b)(2)(B), a broker or consultant to a group health plan who reasonably expects $1,000 or more in compensation in connection with its services must describe those services and its direct and indirect compensation, reasonably in advance of the contract. See broker compensation disclosure.
- Ask for your data in writing. Request claims reports, renewal history, plan documents and vendor contracts, so the new broker starts with the full picture.
- Record the decision. Note why the plan changed advisors and what was compared, in committee minutes if the plan has a fiduciary committee.
- List every carrier and vendor the letters need to reach.
For more on comparing advisors and vendors, see how to vet benefits vendors.
How Ethos Benefits helps.
Ethos Benefits helps employers plan a change of advisor, from the carrier and vendor list to the timing around renewal. See fiduciary governance for how Ethos Benefits supports plan decisions, or Request a Strategic Analysis.