I have the link to the full rule here.
Here is my attempt to explain this in laymen’s terms:
All 2009 Medicare enrollments will be paid at the RENEWAL commission. CMS will, retrospectively, look back at the enrollments to determine which ones should have been paid at the first year level (age-ins or those switching from Original Medicare) and tell the Health Plan to release an additional payment to the agent.
So, how do the Health Plans set their “First Year” and Renewal Commissions?
The Health Plans have 2 options for setting their “First Year” or “Initial” 2009 commission. The commission for the years 2-6 “renewal” will have to be EXACTLY 50% of the initial commission (no more, no less).
Option 1: If the Health Plan paid brokers in 2006, they can use their 2006 commission as their “Initial” commission for 2009 and adjust for inflation. The “renewal” commission will be 1/2 of the inflation adjusted 2006 commission. CMS does not require that this method be used.
Option 2: If the Health Plan didn’t pay brokers in 2006, they must use this method. Health Plans who did pay brokers in 2006 have the option of using this method instead of Option 1. Under this Method, the Plan will look at comparable plan’s commissions for the 2006 and 2007 sales years and will set their “Initial” commission level for 2009 at a level “commensurate” with the 2006-7 market rate adjusted by inflation.
Option 2 is much fuzzier than Option 1, however, more companies will likely use Option 2 out of necessity.
I’m trying to wrap my head around “commensurate with the Market rate. . .” CMS could have just as easily said “EQUAL TO the Market rate”. Commensurate adds another dimension to the calculation to adjust for an increased scope of work. Example: your pay should be commensurate with the number of hours you work. The more you work, the more you get paid. Thus, you could argue, that in order to be commensurate with the 2006-7 pay level, the 2009 pay level would have to account for the increases in the responsibilities of the independent broker over the past few years.
Some examples might include:
- More stringent certification requirements. Such as fees charged in 2008-9 to agent for Certification.
- More regulatory requirements, like explaining and collecting the Scope of Appointment forms and/or recording of telephone conversations and maintenance of those records for 10 years.
- Increased marketing costs to comply with additional CMS marketing regs which have been instituted in the past 2 years. A significant % of the gross commission an agent receives is eaten up by these higher costs.
If the goal was to honestly find a “Fair Market Value” for an independent agent’s services, you really can’t look at 2006 at all because there wasn’t a Fair Market. There were only 2 companies who were in the national market for Independent agents, so there was no competition to speak of to even create a market. In 2007 and 2008, as other MA companies saw that their acquisition costs would be MUCH LOWER with independent brokers versus maintaining their own internal sales force, they began using independent agent channel. Why would a company use an independent broker if they cost more?!? The recognition of the value of the Independent Agent sales channel is the reason why commissions have increased in the past couple years. I’d argue that agents were grossly underpaid in 2006 and just recently have commissions been approaching the “Fair Market Value”.
If CMS allows the companies to make a strong argument of what is commensurate with the Market rate of 2006-7, we may end up better off than I initially thought. (Disclaimer: I’m an optimist!)
CMS is requiring that the plans have their commissions filed with them by Monday, November 17th. At that point, CMS will look at the filed commissions and seek additional justification from companies who they consider to be “outliers” (read: commission too high).
Finally, there is a shortened period for comment on the new CMS Interim Final rule of 30 days. I’m looking for an avenue to provide feedback to CMS in a clear way. I would like to use NAHU to this end, but I don’t know if they want to help me take up this fight?
We are in the process of getting set up to bring all independent agents together on a national basis if they are interested so that we can bring thousands of voices to this injustice. Never before in the insurance profession have we been so abused, misjudged, and maligned as we are by CMS today. The post by Jon demonstrates the clear level of discrimination between what the compensation is for these company executives are and what we are told is too much commission when we do all the work. It’s high time we organize and send a clear message to all of these companies we expect a fair and just compensation and that they need to stand with us in this matter. As agents we can make it difficult for companies to recruit agents if they decide to mistreat us, (the people that drive their business) because the internet gives us the ability to quickly get the word out to all independent agents. CMS has accomplished one thing for sure and that is that we are not going to be mistreated anymore by government agencies or insurance companies, there is power in large numbers which we will be if we unite in this cause. I for one have had enough of the character assasination that they apply to each and everyone of us through their does and don’ts. We are dealing with a bunch of office workers in Washington telling us how we can do our business. Maybe we need to start asking the people we talk to who think this is outrageous to call and write to their Congresspersons. We have one of two ways to go as independent agents, we can just accept being the ones everyone can beat up on or we can unite and stop this unfair attack that CMS is waging against us. Here’s a thought for CMS, if you want to fix things right get rid of those who people filed complaints against and allow the rest of us to conduct business in a manner that is helpful to our clients as we have always done. Isn’t it amazing that CMS thinks that all of us are a bunch of deadbeats that need to be told what we should do every step of the way. Hundreds of thousands of people have benefited from our services for a hundred years without their help. I wonder if this fact has ever entered their minds?
This has gone far enough, it’s time we stand tall for what we do and refuse to be the object of attack. Both CMS and the companies need to realize what they have done, a quote from the movie Tora, Tora, Tora says it best, “all they have done is awakened a sleeping giant and filled it with resolve”. Yes, we independent agents have been awakened and we are filled with resolve, never to be abused and mistreated by anyone unjustly no matter who the accusers.
I’m in Pheonix Az and in our market all the plans co pays went up. I figure with the marketing guide lines and lower commisions these mapd plans are going to take it to the seniors. Health net went from no copay for the pcp to $15 and $40 for spec. From $200 inpatient per stay to $250days 1-5. There are more people on health net than any other company in Az. I see how these new guidelines are already really helping. Did you guys see Stark was voted atheist of the year. Congrats Sen stark something to be really proud of.
I have no idea how many days and how many hours other Independants put into this but I start at 8:00 am every mornig after breakfast (no set lunch break period, eat on the fly) supper 7:00pm to 7:30pm. I start on Mondays and try to finish by 6:00pm Fridays.(never happens) I finally get around to my emails at 10:00pm so on average I put in a 14 to 15 hour day. We all have those clients that we can not coordinate with only on weekends. Worked last Saturday and Sunday and will work again this Saturday & Sunday. I figured out that the hours I work in a weeks time turns out to be minimum wage. CMS seems to forget about all the time we spend servicing our clients(appeals, grievences, help with Alternatives to Tiers 2, 3 & 4 and advising and helping our seniors out with their situations, let alone listening to all their medical situations and why so & so son or daughter doesn’t visit and helping them sort thru mail of what to keep and what to toss, more appeals, grievances, more advise and calls to broker support, etc.) I have a personal repure with all my clients and only want the best for them (another item CMS overlooks). The only thing GOLDEN about “Golden Years” and CMS is Urine!
I wonder what a CMS telephone rep would say (off their computer screen) when asked by a Medicare member “Do you understand my situation”? A member would be lucky to get 1 good correct answer instead of 3 different answers. If Seniors Loose or CMS does away with the Independant Agents (are they?, kinda seems like it) you might as well do away with Medicare. PLUS, I don’t even want to talk about captives who push a plan down a Medicare Members throat.
That’s what CMS should do away with “The CAPTIVE BS”! Captive’s seem to forget the details in the “Summary of Benefits” and this is where CMS should be using their microscope!!!!!
Sincerely, Sad and Hurt
Let’s organize
I am wondering, with all this emphasis placed on agent responsibility in marketing when will it also matter on how “we” sell, annuities (fixed & variable), Long-term Care Insurance and Life Insurance ( including variable), Mutual Funds as well as Medicare Suppliment Plans….it seems to me there is much more potentional abuse in these areas. Does anyone only sell Medicare Advantage Plans? I have discussed this situation with fellow members of the SFSP and FPA, and they know anothing and don’t want to hear about it,,,,, so stay away from advantage plans. But, this doesn’t prevent the potentional abuse, that I think CMS is attempting to correct…..Alex
Personally, I think that the main reason for all of the regulatory scrutiny, rules and limitations on commissions is to drive agents out of the business. If the existing doesn’t work, it’s ammunition for the Democrats to say, “See, I told you so! The only solution is to have a National Health Plan, controlled by Congress and our designees.” God help us if these miscreants ever get control of our health coverage. I wonder how many of these so-called servants of the people have ever held a job, run a business or had to meet payroll and governmental regulation.
The level of commitment that each agent has to comply with in order to sell these products takes major time out of the field and costs us. Why isn’t the cost of doing business taken into account when they develop what they feel is adequate compensation. When the Congress authorizes contracts, the general result is cost overruns which they absorb without question.
Other than Craig is there any other group looking out for us. Would love to have a group that could unite us. Doesn’t seem like anyone has stepped up to the plate except Craig!!!
http://www.aishealth.com:80/ManagedCare/CompanyIntel/ExecComp.html
Compensation Of MA Company CEO’s
Stephen Hemsley, President/CEO
UnitedHealth Group
Salary $1,300,000
Stock Options $8,134,691
Other Comp $94,838
Total $ 9,529,529
Michael McCallister, President/CEO
Humana Inc.
Salary $973,558
Stock Options $2,438,685
Bonus $1,950,000
Other $511,321
Total $5,873,564
Source: http://www.aishealth.com:80/ManagedCare/CompanyIntel/ExecComp.html
Just wonder why we’ve heard nothing from NAHU on this matter.