Here is the actual text of the proposed rule:
422.2274 Broker and agent commissions.
If a Medicare Advantage organization markets through independent brokers or agents—
(a)(1) In paying a commission or other compensation (collectively referred to as ‘‘commission’’) to such agent or representative, the commission the agent would receive for selling or servicing the policy in the first year could not exceed the commission the agent receives for selling or servicing the policy in all subsequent years.
(2) The commission must be the same for all plans and plan product types offered by the MA plan’s parent organization.
If a Medicare Advantage organization markets through independent brokers or agents—
(a)(1) In paying a commission or other compensation (collectively referred to as ‘‘commission’’) to such agent or representative, the commission the agent would receive for selling or servicing the policy in the first year could not exceed the commission the agent receives for selling or servicing the policy in all subsequent years.
(2) The commission must be the same for all plans and plan product types offered by the MA plan’s parent organization.
This rule is one of a number of “marketing” changes which CMS is proposing. CMS is looking at this as a way to curb “churning”, so this proposed commission rule change falls under the Marketing umbrella.
Insurance companies have until July 15th to make suggestions before CMS takes all of the information and promulgates its marketing rules for 2009. This one, in particular, could have a big impact on how Insurance Companies distribute their Medicare Advantage products.
There are a number of issues that are unclear at this point, for example, although the wording appears to apply to external agents, CMS is interpreting this to include a companies inside sales force.
America’s Health Insurance Plans (AHIP) will be drafting an industry response, which should be available on it’s website soon. (When I see it, I’ll post.)
I am a new agent with only 5 months experience. I have been signing up seniors who are turning 65 on various supplements and advantage plans. All except for a few of my leads came from “sales genie” and all of my contacts have been through cold calls. I am scared! I don’t have any avenues for getting new clients now unless I buy leads or strt some direct mail campaign I’m not equipped to do. Thank-you CMS. I guess I’ll be looking for a new job, another unemployed person since you think that helping seniors is endangering them somehow. Maybe at age 80 they get confused and are easily taken advantage of, but at age 65 when I get them, they are pretty sharp. My cold calling may annoy a few people, but I think of dozens of people who wouldn’t have had a clue what was best for them if I hadn’t been there at the crossroads to give them guidance (when they needed it most)!
CMS has no clue what we as agents have to do during their limited enrollment periods. For almost 90 days, we have no life and work endless hours to contact and meet with our clients. PacificCare which in 06 had an awesome plan got bought out by UNHC and totally destroyed the plan. Someone had to help out those members. They way things look to be going with the cold call rules the members will be calling the ads on TV and see only captured agents that will not be objective. On that note, why can’t we help members compare plans and give them the different options available. I have gone into peoples home and seen the stacks of info they have received, half of it from Humana that bombard every senior with mail constantly. They are totally confused and want our help. I do or did make a decent living doing this and enjoy helping people to make an informed decision by being their adviser. I spend tons of time running their drugs through the Medicare website so that they get the right plan and even help them enroll in plans that I don’t represent because it is the right thing to do.
I could go on…this is all going to backfire on CMS and alot of seniors. I have and am going to continue writing to my congressman and senators. I have even started writing a letter to the editor in our local paper, is that against CMS rules? Are they going to take my right to speach next?
CMS is the Gestapo, is this the way healthcare should be run?
Scott – Arkansas
How about all goverment employees go on Medicare. Let them deal with our beneficificaies have to deal with year after year. No, Washington has the sweetest health insurance plans avaliable to anyone.
No incentive to change plans someone wrote. How about keeping your people happy. If not that how about keeping your business!!! Cause if you don’t help them someone else will gladly help them and replace your business, which means you would get no renewals.
I work so hard for my clients, I definitely deserve the commission that I get. If it is “levelized” I lose my major source of income and I am out of a job. Also, I have gotten so many positive responses and have actually made friends with my clients because they are so grateful that I have given them the insight and information that they otherwise would not have gotten. The strict proposals will leave many people out in the cold. What about “cold calling”? I very rarely get negative response to that. Once again, most of my clients are very grateful that they were contacted. More “big brother” trying to control and tell people what to do. Enough is enough!
And how, Michael! The major reason that people change is because their plan benefits change and they can find a better plan. Freedom of democracy! Where are all the other brokers? Sitting around waiting for the rug to get pulled out from under?
Plans that don’t change… Those are called Mediare Supplement plans. If you teach your clients the benefits of a sup, then you don’t have to worry about keeping up with the changes in the MA plans. I choose to limit my exposure with MA plans for that reason, make my life as simple as possible. Yes I won’t make as much up front, but if you consider your time and re-evaluating each client, it makes a difference. Just a thought.
Levelized commissons post year 1 – who receives the commission? The agency directly? The agent directly? What if the agent switches agencies? Does CMS think the new agency wouldn’t “suggest” moving the business to another Plan so they could receive a piece of subsequent commissions? I don’t think you can compare supplements to an MA plan simply due to underwriting.
Is CMS going to give agencies contract wording; i.e., amount of time an agent must be with the agency, % of premium, so their renewals go with them?
Too many unanswered questions and I don’t believe they will fill all of the gaps they are making.
I agree – CMS is causing a lot of the problems. They establish a lock in and then they allow chronic illness plans where all you need is to take an aspirin, Aleve, whatever for arthritis and poof! you have an SEP. What are they thinking?
Mike:
Interestly, CMS will encourage Medicare Beneficiaries to evaluate their plans on a yearly basis. This goes for MA plans as well as stand alone Part D plans.
We saw business move from one PFFS plan to another for a couple years now. Not major moves, but there were definite shifts. However, the plans which were sold were clearly superior to the old plans and it make good sense to make the move. I don’t see any issue with that.
With levelized commission, there is no compensation for changing plans, so there will be little incentive to help a senior find a better plan. Just leave them where they are.
I think there will be some negative results with this, but level commission seemed to have worked OK for Medicare Supplement, so we’ll see what happens.
And as far as churning goes … it’s their rules that create any churning. Who is it that created yearly changes and yearly certifications and yearly … just about everything? What do they expect.
How about a plan that doesn’t change? How about a plan where consumers can choose it and keep it without the plan changing? How about an agent being able to actually SERVICE his clients? How about that? Jeez, is that a new thought to them, or what?
It is not churning to move a client when the product has changed or is not doing what it is intended to do. And that, as we say, is entirely in the hands of the CMS folks.
If they don’t want what they consider churning, perhaps they should make the product work as intended … and the first step would be to get out of the way and stop changing things all the time. If they change things, people will respond by changing. Don’t change things, and most people will be content to leave things as they are.
And that goes for most agents also.
This is another example of government, in the name of consumer protection, accomplishing just the opposite.
If an agent cannot earn a living selling the product, the only one’s selling the product will be huge firms and choice will be limited.
There will be an end to fact finding, insurance counseling that actually benefits the consumer, … and we will be left with, here … buy this.
These people should be required to ACTUALLY WORK in the field selling insurance before they be allowed to make up rules governing it. Maybe, just maybe, they may acquire a little wisdom. As it is now, they apparently have none.
Can anyone think of a single organization that has had as much controversy as the CMS? And that is saying something, with Work Comp (in CA) and the boondoggle more commonly known as MediCaid (Medi-Cal).