How Employee Benefits Brokers Get Paid
Commission is built into your rates. Some brokers add a fee on top. Here is exactly how benefits brokers get paid.
Trey Driver, President of Medcore Brokerage
Most business owners never ask — until something at renewal makes them.
A number moves. An invoice shows up. A fee appears that wasn’t there last year. Then it becomes the only question that matters, and it turns out nobody ever explained the basics.
Here’s the whole picture, in plain terms.
Commission is already built into your rates
When a carrier files small group rates in Texas, broker commission is built into the premium. The carrier pays it out of what you’re already paying.
Which means going without a broker generally doesn’t get you a cheaper plan. The commission sits in the rate either way. The only real question is whether anyone is using it to actually work for you — running your renewal, handling enrollment, sitting with your employees, chasing down a claim when someone gets a bill they don’t understand.
If you’re not using a broker, you’re not saving that money. You’re just not getting anything for it.
Some brokers also charge a fee
On top of commission, some brokers charge the employer a separate broker fee or consulting fee — sometimes a flat monthly amount, sometimes per employee per month.
A fee isn’t wrong by itself. If it’s attached to real services — a benefits administration platform, compliance work, dedicated support — and you can see exactly what you’re getting for it, that’s a fair trade and plenty of good brokers work that way.
What should bother you is a fee nobody will explain. If your broker can’t tell you what it pays for, or the number moves without a reason, or it quietly comes off the moment you push back on it — the problem was never the price. It’s that you weren’t being told the truth.
The question to ask any broker
“What do you make on our plan?”
You should get a straight answer, in any month of the year, without having to threaten to leave first. If you have to force the question to get a number — or the number changes once you do — that tells you something more important than the number itself.
Common questions
Does using a broker cost me more than going direct to a carrier?
Generally no. Small group rates are filed with commission included, so the premium is the same either way. Going direct means the commission still gets paid — it just doesn’t buy you any service.
Am I allowed to ask what my broker is paid on my plan?
Yes, always. It’s your plan and your premium. A broker who won’t answer that question has told you everything you need to know.
What’s the difference between a commission and a broker fee?
Commission comes from the carrier out of your premium and is built into the filed rates. A broker fee is a separate charge billed to you, the employer, on top of the premium.
Trey Driver owns Texas Benefits Directory and Medcore Brokerage. This article first appeared on medcorebrokerage.com.