Insurance brokers retained by persons for individuals’ coverage ,or  by employers for group coverage for their employees , constitute with insurance carriers an important part of the middlemen structure that contributes  to pricing obfuscation. Often brokers have  contracts with one or more insurance carriers to steer their clients to them. Commissions and bonuses which brokers  receive from  these carriers create a conflict of interest which is usually not voluntarily disclosed to their clients . Although the Consolidated Appropriations Act of 2021 contained a provision requiring brokers to disclose to employers any direct or indirect compensation from industry vendors such as insurance carriers, the fines for noncompliance are not substantial . Moreover  this right to information   is not widely known among employers and their personnel benefits managers who  seek guidance in selecting group insurance plans  from these brokers. It is therefore uncommon for brokers to be asked by their clients about any such conflicts of interests .

Here’s how healthcare insurance  brokers  typically work.   Insurers pay brokers a commission for the employers  they sign up. That fee is usually a healthy 3 to 6 percent of the total premium. That could be about $50,000 a year for a single client. As the client pays more in premiums , the broker’s commission increases.

Commissions can be even higher , up to 40% or 50 of the premium, on supplemental plans that employers can buy to cover employees’ dental costs, cancer care  or long term hospitalization. These commissions come from the insurers, but the cost is built into the premiums the employer and employees pay for the benefit plan. Then, layer on top of that the additional bonuses that brokers can earn from some insurers. Many brokers say the bonuses are not disclosed to employers unless they ask.

A Johns  Hopkins University team led by Dr. Marty Makary analyzed the commissions paid to brokers in 33,689 fully insured health plans and found a median commission of 4.1 per cent  of the premium each year.  That’s like buying a house and paying your agent a commission for each year that you own it. Based on this study, the average American worker will pay about $4,000 in extra costs to a health insurance premium over the course of a career without even knowing it. The study did not include the bonuses paid to brokers because these are not tracked in a way that is publicly reported. The commissions were found to be associated with the premiums in a direct positive correlation which suggests that the brokers are influenced by these commissions as they seek higher premiums from their clients. The study suggested that commissions should be reported as a per member per month cost that  should be built into health plans to promote transparency.