Employee benefits broker commissions: How do brokers make money?

If you've ever wondered how your benefits broker gets paid, you're asking the right question. Most employers never see a line item for broker compensation, since it's typically built into the premiums carriers charge, not billed separately. That lack of visibility used to make it hard to know whether your broker's incentives matched your own.

That changed with the Consolidated Appropriations Act of 2021, which requires brokers to disclose their compensation in writing. Now you can actually see how your broker is paid and use that information to evaluate whether you're getting real value or just paying for access.

This guide breaks down how broker compensation works, what you're entitled to under the CAA, and what questions to ask before your next renewal.

How do employee benefits brokers get paid?

Benefits brokers can be paid in many different shapes and sizes. The most important takeaway from this section is that payment should be discussed up front, and it's one of many pieces of the contract that can be negotiated. Here's how brokers generally get paid:

Carrier commissions

Most benefits brokers are paid through commissions. These commissions come from health insurance carriers and are usually a percentage of the total premium based on the number of employees enrolled in the plan. This percentage averages between 2-10% of the total premium, but there are outliers in some situations. For example, some ancillary benefits vendors offer commissions upwards of 50% of the total premium.

One important note here is that when premiums go up (especially as healthcare prices have steadily risen) or employee and dependent counts increase, the broker makes more money. This is why aligning compensation with your benefits strategy is crucial. Your broker stands to receive a "raise" while your premiums go up, so your renewal conversations should be open and transparent to ensure mutual value for both parties.

While the employer isn't technically paying the commission, renewal increases can be affected by broker commissions. At the end of the day, the carrier wants to make as much money as possible, and without someone to advocate on your behalf (a good broker should be doing this!), you could see a cost increase that's not in your favor.

Flat fees

In some situations, like if an employer is self-funded or manages their benefits through a third-party administrator (TPA), broker fees will come in the form of flat per employee per month (PEPM) fees. Although this type of fee is pretty straightforward, it's much less common than commission-based payments, especially for smaller employers with less than 500 employees.

Are benefits brokers required to disclose their compensation?

Yes, benefits brokers are required to disclose their compensation. The Consolidated Appropriations Act of 2021 (CAA) requires brokers to proactively disclose their compensation to their clients before a contract is signed. Compensation can include:

• Direct compensation like commissions or fees
• Indirect compensation like fees paid by a TPA
• Potential conflicts of interest like incentives from insurance carriers

(Important note: Although the CAA ensures transparency around health insurance, there is some grey area about whether that protection extends to other benefits, like vision and retirement benefits.)

What should a complete CAA disclosure include?

A compliant disclosure should give you enough detail to evaluate your broker's incentives, not just confirm that compensation exists. Look for:

• A dollar estimate or percentage range, not just a category label like "commission-based"
• All carriers and vendors paying your broker, including ancillary lines like dental, vision, and life
• Indirect compensation, such as override payments, bonuses for hitting volume targets, or fees from a TPA
• Any non-cash incentives, like trips, events, or gifts tied to carrier placement

If your broker's disclosure is vague, limited to a single carrier, or arrives after you've already signed, that's worth raising. A good broker treats this disclosure as a starting point for conversation, not a compliance formality to get through.

How does broker compensation affect your employee benefits strategy?

As the architect of your employee benefits strategy, you know that having all available data is crucial in making an informed decision. Compensation is a great data point to help you identify the value your broker is bringing to the table. Are you getting the most bang for your buck? Let's look at a few value adds your broker should be offering to really earn that commission.

Timely plan selection and cost management

Your renewal comes around every year, but for many HR leaders, quotes arrive at the last minute, leaving little time for strategy discussions on plan design or cost containment. You should be able to rely on your broker for timely, creative renewal strategies that set you up for success.

Dedicated employee support

You don't have time to answer complicated billing questions, but your broker can (and should) offer that service. Brokers who use technology like AI or have dedicated benefits advocates can help significantly ease the burden on HR.

Industry-leading technology

Brokers who are pioneers in technology can be a huge value add to both you and your employees in leveling up your processes and support. A platform like Nava HQ gives HR teams real-time renewal modeling, instant answers to benefits questions, and centralized documents for audits, replacing the spreadsheets and email chains most HR teams are stuck with. On the employee side, tools like decision support and 24/7 support help you lean on technology for some of the most time-consuming benefit admin tasks and offer an elevated employee experience.

Strategic vendor partnerships

Your broker can and should guide you through selecting your benefits, and they should also use vendor relationships to work harder for you and your team. At Nava, our Preferred Partnerships program gives clients better access to top-tier vendors, with better pricing, easy contracting, and in some cases, vendor access directly through the Nava Benefits App.

As someone who works with HR teams of all shapes and sizes, your broker should also help you choose and implement an HR technology that's best for your needs.

Frequently asked questions

Do all benefits brokers get paid through commissions?

Most do, but not all. Brokers working with self-funded employers or through a third-party administrator often charge flat per-employee-per-month (PEPM) fees instead. Some brokers use a blend of both.

How much do benefits brokers typically make?

Commission-based brokers generally earn 2 to 10 percent of the total premium, though some ancillary benefits carry commissions as high as 50 percent. The exact number depends on the carrier, the product, and your broker's specific agreement.

Are benefits brokers required to disclose their compensation?

Yes. Under the CAA, brokers must proactively disclose direct and indirect compensation before you sign a contract. This applies clearly to health insurance; coverage for other lines like vision and retirement benefits is less consistently enforced.

Does broker compensation affect my premiums?

Not directly, since you don't pay broker commissions out of pocket. But because commissions are typically a percentage of premium, a broker has less incentive to push back hard on rising costs than an employer does. That's part of why aligned incentives matter.

Should I ask my broker about their compensation at renewal?

Yes. Renewal is the natural moment to revisit this. For a full list of questions to bring to that conversation, see 6 questions to ask your employee benefits broker at renewal.

If you want a great benefits offering, you need a great broker, especially if you work at a small business. You need a broker who works as a member of your team and will go to bat for you against premiums. They should be transparent about their commissions, as well as the value they bring to the table.