US health insurers breathed a sigh of relief this week after it appeared the Obama administration’s proposed cuts to the Medicare Advantage program were less than anticipated—hovering around a 4% decline rather than 7%.
However, for producers selling the plans, concern remains heightened. A proposed change to the way agents and brokers are compensated will “definitely decrease commission,” says Jason Perry, national sales and marketing director with Medicare Advantage Specialists.
The rule change was presented last month by the Centers for Medicare and Medicaid Services. Instead of being paid for selling a policy to a first-time buyer for the entire 12 months—beginning on the date of the sale and ending the following year—the compensation schedule will be pro-rated to run to the end of the year.
For example, a producer who sells a first-time Medicare Advantage plan in July will now be pro-rated for six months of coverage—with the policy ending in December—as opposed to receiving a full commission for a July 2014 to July 2015 policy.
Additionally, instead of receiving 50% of the initial year compensation upon renewal, agents and brokers would now receive 35% in commission for a renewed policy.
CMS claims the rule change would “simplify the administration of these payments and reduce incentives for agents and brokers to encourage beneficiaries to enroll in plans without regard to ensuring plan benefits would meet the beneficiaries’ health care needs.”
For Perry, however, it simply means significantly decreased compensation for agents and brokers who are already struggling.
“Medicare Advantage can’t necessarily be a staple for anyone anymore,” Perry said in a conversation with Insurance Business. “[The rule change] will definitely decrease our commission.”
Perry likened the proposed compensation changes to the advent of the Medicare Improvements for Patients and Providers Act (MIPPA) in 2008, which restructured the industry and saw numerous producers exit the market. He expects the same thing to happen if the rule change is approved.
“Do we think it’s going to be a loss in the agent base across the country because of the reduction? Sure,” he said. “We think that it will happen again, but we just have to plan accordingly.”
Part of that planning involves diversifying product offerings—something Medicare Advantage Specialists has done, and something Perry believes all producers will have to do in order to stay relevant as the market structure continues to change.
“The whole industry is diversifying right now,” he said. “Big government is getting involved and trying to regulate again. There are some good things and some bad things in the industry; this is just affecting a part of the good side.”
The proposed rule change is currently in a public comment period until 5 p.m. on March 7. Agents and brokers wishing to comment on the rule can do so on the Federal Register.
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