When Chris Whelton took over as business manager at Riverside-Brookfield High School last summer, he noticed that RB’s insurance broker was being paid more than his previous employer, the much larger Maine Township High School District 207, was paying its insurance broker.

“It was clear to me that we were paying too much,” said Whelton.

So this year Whelton put RB’s insurance brokerage business out to bid.

After receiving bids from four insurance brokers, RB ultimately decided to retain its longtime insurance broker, Warrenville-based Employee Benefits by Design, but has changed the way it pays the firm.

By switching to a flat fee payment system from a commission payment system, RB expects to cut its payments to Employee Benefits by Design by a whopping 71 percent.

This school year Employee Benefit by Designs received $65,883 in commissions for brokering RB’s insurance plans for RB employees, but RB expects to pay the company only $19,296 next year under the flat-fee contract, according to Whelton.

“We achieved significant savings,” said Whelton.

Employee Benefits by Design had been receiving a percentage of RB’s insurance premiums, 3 percent in 2007-2008, but under a new three-year agreement RB will now pay the insurance broker a flat fee of $8 per employee per month.

“It doesn’t make sense to be on commission anymore because premiums are constantly rising,” said Whelton. “It’s definitely more cost effective [to be on flat-fee system]. I know this is the right thing to do.”

The District 208 school board unanimously approved the new contract on March 11.

Employee Benefits by Designs serves as RB insurance broker for health, dental and life insurance for RB employees, negotiating with insurance carriers on RB’s behalf.

After specifying he wanted to switch from a commission based payment system to a flat fee payment system, Whelton interviewed four insurance brokers; Employee Benefit by Designs submitted the best bid.

“Our current broker was the best deal of the four,” said Whelton.

Since Employee Benefits by Design, or its predecessor firms, has handled RB’s insurance for the past 22 years, it is intimately familiar with the details of RB’s health and dental insurance plans. RB employees will continue to work with the same company when they have problems with their insurance carriers.

Jerry Schilf, the president and owner of Employee Benefits by Design said he was happy to retain RB as a client despite the blow to his bottom line by the new payment system.

“I’m proud to have RB as a client,” said Schilf. “I know RB is in a financial crunch. I looked at the longevity of the client, and I felt they were fair to me.”

The reduction in fees will not impact the service that RB or its employees receive.

“Our intention is to provide the exact same service no matter the rate,” said Schilf.

Schilf defended his past payments from RB.

“I think we were charging them a correct fee,” said Schilf. “What we charged them over the years was fair and reasonable in the marketplace.”

Last year Schilf reduced his commission to 3 percent of premiums from 4 percent, a move which saved RB $15,457 this year, as commissions dropped from $81,340 in 2006-2007 to $65,883 this year.

This year Schilf was also able to negotiate Blue Cross and Blue Shield-proposed 4.6-percent increase in health insurance premiums for RB down to no increase in premiums.

Both Whelton and Schilf said that the trend in recent years has been away from commission-based compensation for insurance brokers towards a flat fee for large clients.

Oak Park River and Forest High School (OPRF) changed from a commission payment system to a flat fee for its insurance broker five years ago.

“Generally I can say it has provided a significant savings,” said Kay Foran, a spokeswoman for OPRF.

Lyons Township High School does not use a conventional insurance broker, but uses a consulting firm that charges LT an hourly rate for the services that an insurance broker typically provides said LT business manager Dennis Sellers.

Sellers estimated that LT paid between $35,000 and $40,000 last year to the consulting firm. LT has 392 full-time staff covered by health insurance compared to 186 for RB.

According to Whelton, paying a broker a flat fee instead of commissions has a number of advantages which include a reduction in premiums and eliminating the automatic increase in brokerage fees as insurance premiums increase. He said it also makes it easier to compare the fees of various insurance brokers and removes the link between premiums paid and the broker’s compensation.

Schilf said this is the first time he has had a multiyear contract with RB. In other years the business has been renewed on a year-to-year basis without a written contract.

RB’s former business manager, John Gibson, who left RB last year to become assistant superintendent for finance and business at Kankakee School District 111 said that he had not thought about switching to a fee-based system while he was at RB.

“I had not considered it,” said Gibson last week. “That wasn’t an area we had focused on.”

Gibson said that his current district pays its insurance a flat flee instead of by commission.