Compare commission and fixed fee
The carrier's schedule for this product.
Used to see when the commission passes the fee.
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Get an instant quoteEverything is in the browser and nothing is stored. The defaults show a 20-person group on a $800 premium with a 4% commission against a $30 fee, which is close to the range I see in small group quotes. Change the premium increase to see how quickly the commission overtakes the fee.
A commission pays the broker a share of the premium, so it rises every time the group renews. A fixed fee does not. Enter the group's census, premium and the two arrangements to see what each pays in year one and the year the commission overtakes the fee.
- Commission model
- Percentage of premium
- Fee model
- Fixed per employee per month
- Hidden input
- The renewal increase
- Disclosure
- Required under ERISA rules
How to read the result
The first-year figure is what the broker is paid, not what the employer saves. If a carrier commission is $7,680 and a fee is $7,200, the employer is paying about the same in total either way, but the arrangement differs: in the fee model the number is on an invoice, and in the commission model it is inside the premium.
The renewal line is the part that matters. A commission recalculates on the new premium every year. A fixed fee does not move unless the headcount changes or the broker renegotiates. That is why the gap between the two structures widens with every renewal, and why the crossover year, or the fact that there is none, is worth showing a client before they choose.
| Result | What it tells you |
|---|---|
| Commission, year one | The carrier-paid amount at the current premium |
| Fixed fee | The employer-paid amount at the current headcount |
| Difference | Which structure pays more in year one |
| Renewed commission | The commission after the assumed increase |
| Crossover year | The first renewal where commission exceeds the fee |
What the calculator leaves out
This compares compensation, not the whole value of the service. A fee that includes monthly claims review, an on-site enrollment meeting and compliance support is not the same product as a commission with a quote-only scope. Put the services next to the number before the client decides.
- Carrier fee reductions. Some carriers reduce the rate when the commission is removed, some do not.
- Commission schedules by product. A carrier may pay different rates for fully insured, level-funded and marketplace products.
- Overrides and bonuses. Volume-based or persistency payments belong in the disclosure and in the client conversation.
- Services outside scope. Claims advocacy, HR support or a compliance review may be priced separately.
For the rules behind the disclosure, see our guide to broker commission versus fixed fees.
A worked comparison
If the client expects the premium to fall, the arithmetic reverses and a commission may cost less. That is why the assumed increase belongs in the comparison as an assumption, not hidden in a spreadsheet.
Using this in a client conversation
Show the screen, not a later summary. Clients trust a number they watch change when they change an input. Start from the client's own census and current premium, then let the finance lead move the renewal assumption to the number they actually expect.
Then state the scope. Write one line for each structure saying what it covers and what it does not. If the answer is the same under both structures, say so: that is the point of showing the comparison rather than asserting a preference.
For an employer who wants a fixed number rather than a premium-linked commission, Prescience quotes one monthly cost with no admin fees, so it can sit in the fixed-price column against a commission-bearing fully insured proposal.
Where the commission rate comes from
The rate in this calculator is an input because there is no single industry number. A carrier's small group schedule may pay a different percentage for a fully insured plan, a level-funded plan and a marketplace product, and it may pay differently in one state than another for the same product. Ask the carrier for the schedule that applies to the product you are quoting, in writing, rather than using a rate from a previous case.
Some carriers now publish level schedules, where the broker is paid the same percentage on every product in a class. That removes the incentive to steer a client by revenue, but it does not remove the link between the premium and the broker's pay. A level rate still rises 10% when the premium rises 10%, which is why the crossover calculation above still applies.
| Structure | How it is set | Moves at renewal |
|---|---|---|
| Percentage of premium | Carrier schedule by product and state | Yes, with the rate |
| Per-member-per-month from carrier | Carrier schedule by product | With enrollment and renewals |
| Employer-paid PEPM fee | Negotiated with the client | Only if scope or headcount changes |
| Flat annual fee | Negotiated with the client | Only by agreement |
| Reduced commission plus fee | Both of the above | In part |
Enter the rate the carrier actually pays for this case, then run it a second time at a lower rate to see how much of the difference is the rate and how much is the premium. If a lower commission produces a nearly identical year-one number, the structure is doing the work, not the percentage.
The same schedule question decides who you are really comparing. A fully insured commission quote and a fee arrangement are answers to the same client question but not the same product: one is a share of a premium the carrier sets, the other is a price for advice with the carrier premium reduced. Compare them on total employer cost for the same plan design, or the commission will look cheaper simply because the premium it rides on is larger.
When a carrier will not share the schedule, ask for the compensation in dollars per member per month on the quote itself. Most will provide it on request, and a dollar figure converts to a percentage with one division.
The disclosure behind the numbers
Under ERISA, a broker who receives indirect compensation from a carrier must disclose it in writing reasonably in advance of the contract and at least every 12 months. The Department of Labor's Field Assistance Bulletin 2021-03 covers group health plans, and it treats carrier-paid commission as compensation that has to be described.
That means the numbers in this calculator are not just a sales tool. They are the same numbers that belong in the disclosure: the form of compensation, the amount or rate, who pays it, and whether any part is contingent. If the calculation and the disclosure disagree, one of them is wrong.
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