Employers Should Benchmark PPE and CPE to Evaluate Employee Benefits Broker and Plan Performance

As noted in Part 1 of this post, employee benefits broker commission rates are a poor—and sometimes misleading—measure of broker performance and plan value.

A far more effective place to start is by evaluating what you actually pay in total dollars: Premium Per Employee (PPE) and broker Compensation Per Employee (CPE). These metrics provide a clearer, more accurate picture of plan cost, broker value, and fiduciary reasonableness.

PPE, CPE and CAA: Let There Be Light

Employers can start by looking holistically at Premium Per Employee (PPE) and broker Compensation Per Employee (CPE) across their plans and then, if necessary, drilling down to premium, broker compensation, and participants by each individual line of coverage.

Premium Per Employee (PPE). PPE measures the total premium paid divided by covered employees. Comparing PPE to peer organizations with similar industries, plan designs, and demographics has long been a trusted method for evaluating health plan cost efficiency.

Compensation Per Employee (CPE). CPE measures the total compensation paid to brokers and other intermediaries, divided by covered employees. Historically, this metric was rarely calculated because compensation was expressed as a percentage of premium—and often not fully disclosed.

That has changed.

The Consolidated Appropriations Act (CAA) of 2021 now requires brokers and other service providers to health and welfare plans to disclose their compensation in dollar amounts (or reasonable estimates) rather than relying solely on percentages, through 408(b)(2) disclosures. These disclosures must include both direct and indirect compensation, such as commissions, bonuses, overrides, general agent fees, and volume incentives.

As plan sponsors, employers are fiduciaries and are required to assess whether the total dollars paid for their health plans—including broker compensation—are reasonable in light of the services received. This is not a percentage-based test. It is a reasonableness standard grounded in facts, benchmarks, and documentation.

PPE and CPE provide employers with practical, defensible metrics to:

  • Understand what they are truly paying,
  • Compare costs to similarly situated employers, and
  • Demonstrate prudent oversight of their benefits program.

Commission rates may be easy to see, but they rarely tell the full story. Evaluating broker performance and plan value requires looking beyond percentages to the actual dollars being spent.