Industry battles "upsetting" commission change

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The rule change proposed by the Centers for Medicare and Medicaid Services that would restructure producer compensation schedules for Medicare Advantage plans has met with uproar from independent agents and brokers.

Jason Perry of Medicare Advantage Specialists believes the change from a one-year policy calendar to a pro-rated policy represents more “big government” involvement in the insurance industry, and will be for the worse.

“Do we think it’s going to be a loss in the agent base across the country because of the reduction? Sure,” he said, adding that the rule change will “definitely decrease commission.”

“We just have to plan accordingly,” Perry concluded.

However, some industry thought leaders aren’t quite so prepared to accept the proposed change—at least not without a fight.

John Greene, vice president of congressional affairs at the National Association of Health Underwriters (NAHU), told Insurance Business he is actively campaigning against the changes to broker compensation, along with the proposed cuts to the Medicare Advantage program as a whole.  

“It's a solution looking for a problem. It's upsetting,” Greene said simply. “I think [CMS] is concerned about churning—that agents are signing people up to a new plan every year for the higher commission. I can’t say that it never happens, but I’ll tell you this: beneficiaries change plans for many, many good reasons.”

Greene said NAHU, along with representatives from the Coalition for Affordable Healthcare, have spoken with CMS officials personally on “the role of the agent” and some of the reasons beneficiaries switch plans.

The group’s efforts have also scored the commission issue a hearing before the House Ways and Means Committee.

During the hearing and continuing discussions with CMS, Greene said he plans to emphasize alternative solutions to concerns regarding churning, including requiring agents to have beneficiaries sign a policy replacement form stating why the policyholder is making a modification or change to their plan.

Such a practice would keep quality agents in the Medicare Advantage business while addressing the concerns of CMS officials, he said.

“An agent’s book of business has value and keeping clients happy is of more importance to them than first-year commission,” Greene emphasized. “This really isn’t commission-driven. [CMS] is trying to build a better mousetrap and what they’re doing is going to squeeze broker compensation to the point that it will drive a lot of brokers out.”

However, he believes the outcome is still up in the air.

“They heard us out, but they can’t comment because the rule is still out there [for public comment],” Greene said.

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  • Brian on 3/5/2014 12:55:33 PM

    How about addressing the "constitutionality" of Government dictating corporate pay structures of private sector companies. If CMS is worried about churning, make producers complete a Policy Replacement Form as is already done across the country with all life insurance replacements. In New York, a replacement form must be sent prior to sale and approved by the insurance company and then signed by the insured.

    Unless NAHU, AHIP and the public begin to win some of these "Big Brother" battles, people in all health insurance sales fields should start looking for other ways to make a living.

  • Kathy on 3/5/2014 1:05:45 PM

    I disagree that we want to complete a Policy Replacement Form. Obviously no one at CMS has actually been out in the field selling MA plans. The example in the Federal Register showed an additional $15 per policy by changing carriers. They admitted that $15 by itself wasn't an incentive but an agent that moves 10 more policies it begins to add up. This is ridiculous. The ROI for the time involved doesn't compute. An agent cannot move enough policies for an extra $15 per month to make it worthwhile. Moving a policy is labor intensive.
    CMS admits that calculating commissions is so difficult that insurance companies are struggling to keep up, yet they believe that agents are taking the time to make this renewal calculation on our own and then churning policies to get an extra $15. This cannot be happening at any level to truly constitute a problem. This is a solution to a problem that does not exist.

  • Brian on 3/5/2014 3:10:38 PM

    I agree. No one wants to fill out yet another form. But if its a choice between reducing commissions or filling out a form. I'll take the form.

  • Sandra Malone on 3/5/2014 3:44:35 PM

    If a client already has a Medicare Advantage Plan the agent will get Renewal Commission ONLY regardless of which Insurer they write for. The only way to get 1st year commission is to write someone who never had a Medicare Advantage before. It's not even close to being a problem. CMS has a ludicrous idea of how this works.

  • Robin on 3/6/2014 12:08:08 AM

    I am an agent selling med advantage plans and I resent the comment about churning. If there weren't so many changes each Year I would not have to move my people. I would prefer they stay where they are. So don't make judgment calls like this.

  • Brian on 3/6/2014 11:11:07 AM

    I am a producer for 20 years. No judgments were made. If you read my comment it was referencing CMS's reasoning behind commission reduction, not producers. I won't even comment on you telling me what I should and should not do. You are not my mother.

  • Steve Wendt on 3/6/2014 3:35:03 PM

    Sandra's comment is correct. Replacing a Medicare Advantage with another Medicare Advantage still only pays a renewal commission which is already regulated by CMS. Replacement forms became necessary for Med Supps as an agent gets a new first year commission when moving a customer. That is also why most states went with level renewals for several years so that there was less incentive to churn the block. I find that most people prefer to stay with their current advantage plan unless the company adjusts the copays/coverage/network/premiums in a way that is not to the customer's benefit.

    I deserve to be paid for my 40yrs experience and with a 1000+ advantage customers this cut in renewal commissions would be significant.

  • Kathy on 3/6/2014 5:16:00 PM

    Everyone please go to www.regulations.gov and comment. NAHU and NAIFA have defended agents but we need to add our voices to the Associations'. It doesn't have to be long, in fact most of these comments could be copied and pasted. We need to defend ourselves and educate those standing on the outside looking in about what it is we do as agents.
    Steve - having 1000+ MA customers is fabulous. You did not develop that kind of book by being a poor agent. I think it would be helpful if you let CMS know that churning these policies has never crossed your mind.

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