The Commissions Paid to Brokers for Fully Insured Health Insurance Plans

Insurance agents and brokers play an important role in facilitating the contracting of fully insured health insurance and pharmacy benefit plans for U.S. employers. They are primarily compensated with a commission charged back to the plan. Using a national sample that covered 11.7 million employees enrolled in 33,689 health plans in 2017, we found that a plan's commission (median: $178) was positively associated with a plan's premium (coefficient: 0.01 for the full sample and 0.03 for small plans, p < .001) after controlling for the number of enrollees. The commission-to-premium ratio was greater for smaller plans and plans offered by nonmajor insurance companies, and varied by geographic region. Policy makers should consider improving transparency of the commission to facilitate employers making efficient broker contracting and plan purchasing decisions. The fee-based brokerage model has the potential to help employers and workers contain health care spending.