How Texas Employee Benefits Brokers Get Paid: PEPM vs Commission

An employee benefits broker in Texas gets paid by carrier commission, by a flat per employee per month (PEPM) fee, or by a mix of both. Either way, the pay is built into your monthly carrier premium, so you do not write the broker a separate check. Switching to a flat fee structure built into your carrier invoice locks that compensation in place regardless of rate hikes.

How commission works

Commission is the traditional pay model for group benefits in Texas. You pay your regular bill to the carrier. The carrier pays a commission out of that premium to your broker of record, usually each month as it collects. Sign a broker of record letter and the commission moves to the new broker going forward. Medical, dental, vision, life, and stop-loss each carry their own compensation.

Carriers set commission as a percentage of premium or as a flat dollar amount per enrolled employee. It depends on the carrier and the product. With a percentage, broker pay moves when the premium moves. With a flat amount per employee, it moves when headcount moves. Either way, it stays inside the premium, and there is no broker line on your bill. To see the broker's share, ask for the percentage or the dollar amount in writing. It is also worth knowing what an employee benefits broker does all year for that pay.

How PEPM works

PEPM stands for per employee per month. It is a flat dollar amount for each employee enrolled on the plan. Like commission, it is built into the premium. It is not billed to the employer separately, and it is not a line from a third-party administrator.

When we run a level-funded quote, we set the PEPM in the quote. It sits inside the monthly carrier payment, next to the claims fund, stop-loss, and administration. You make one payment to the carrier. Ask us to show the PEPM as a dollar amount in the quote, so you can see exactly what part of the payment it is. If you are weighing the two funding types, our comparison of level-funded vs fully insured health insurance in Texas covers the tradeoffs.

A PEPM is flat, so a rate change alone does not change it. Headcount does. If you add employees, the total PEPM rises with enrollment. If premiums rise at renewal and your headcount holds, the PEPM stays where it is.

What federal law requires a broker to disclose before you sign

Federal law requires a broker to disclose pay in writing before you sign, extend, or renew. The rule is ERISA section 408(b)(2)(B), added by the Consolidated Appropriations Act of 2021. It covers a broker or consultant to a group health plan who reasonably expects $1,000 or more in direct or indirect compensation. It has applied since December 27, 2021, and it covers plans of any size.

The disclosure goes to the plan fiduciary who has authority to sign, often the owner. It has to describe the services, say whether the broker acts as a fiduciary, and list direct pay, indirect pay with who pays it, and any pay tied to ending the contract. It can be stated as a dollar amount, a formula, or a per employee charge. Any change is due within 60 days.

This covers all forms of pay. Commission and PEPM paid from the premium are in scope. So are carrier bonuses and incentives tied to a broker's whole book, not only your group. The disclosure must come reasonably in advance of the date you sign or renew. If a broker refuses to show you their complete compensation breakdown, they are violating federal rules. As the plan fiduciary, you are entitled to that disclosure in writing.

Five questions to ask any broker before you sign

Ask these five at your next renewal meeting. Keep the written answers with the quote.

1. Will you give us a written breakdown of all your compensation, including carrier bonuses and overrides, before we sign? A clear broker hands you a one-page disclosure without excuses.
2. If our rates change at renewal, does your pay change? The answer shows whether your broker is paid a percentage of premium or a flat amount.
3. Do you receive bonuses, trips, or other incentives from specific carriers for placing our plan? You need to know whether a recommendation rests on your team's needs.
4. If we go level-funded, what is the PEPM, and where does it sit in our monthly carrier payment? You should see it as a dollar amount in the quote.
5. What enrollment, compliance, and claims work do we get for that pay? Ask for the day-to-day list.

Get the pay in writing before you sign

Our broker cost to the employer is $0. Our pay is built into the premium, whether it is commission or a PEPM we set in the level-funded quote. You never get a separate bill from us. We put our compensation in writing with the quote, before you sign. Send us your census and current plan, and we will show you the numbers. See how we run large group health insurance in Texas from census to renewal.

The short answer

Brokers get paid by carrier commission, a flat PEPM fee, or both. Either way, the pay is built into your monthly carrier premium. We set our PEPM in the level-funded quote, and it sits inside the monthly carrier payment. Federal law requires written disclosure of broker pay before you sign. Our broker cost to the employer is $0. Groups 2 to 250+. We do not cap. 40 Google reviews.

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Get broker compensation in writing on your Texas group

Send the census. We will put our compensation in writing with the quote, before anyone binds. Corpus Christi base. Statewide license. Clint Wallace, Lic 3200999 / NPN 21250478. Groups 2 to 250+. We do not cap.

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