That is not true. The market makers buying the order flow are bound by the National Best Bid and Offer (NBBO) according to Reg NMS. Which means they cannot fill you at a worse price than the NBBO. However, there is a lot of liquidity on venues that are not part of the National Market System. A good, real broker will find you that price improvement, and pass it through. The MM buying your order flow will not, and will pocket the difference.

So, let's say you are trading 1000 shares. Normally, you might pay around $10 for that with a real broker. Now you execute that same trade at RH (or some other zero-commission broker), and let's say your average price is just 2c worse than what the other broker would get you. Well, now you just paid $20 for your "free" trade. And this gets worse for odd-lot orders (those that are not multiples of 100 shares). Because with those the MM is not bound to the NBBO, and can give you an even worse fill. Given that a lot of these RH accounts are presumably rather small, that likely applies to a decent amount of orders executed.

> the cost basis of trading with you is lower than with trading with the broader market

These are market makers; they don't take directional bets, hence this is irrelevant, as they only trade in a reactive way while trying to maintain a neutral book. What you are presumably talking about is toxic (i.e. informed) vs non-toxic order flow. Having a big player, who knows more than the MM, is what they are afraid off, because they can lose a lot of money by being on the wrong side of the market. They know that retail traders are unlikely to be informed traders, hence their order flow is less risky. However, the volume retail traders are moving is a drop in the bucket compared to what instis do.