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?
While everyone is waiting to hear about the CMS commissions I have a couple comments all Agents need to think about and perhaps email the companies we write for in respect to commissions. We need to make it clear to the companies that we expect them to consider the extra work we now have to do to meet CMS and company rules. Keep in mind that companies can take advantage of this situation and give us far less commission than what we rightfully should be paid. Let’s face it, if they pay us less by blaming CMS they get to keep more for themselves. Next, have you thought at all about how CMS just took away our rights as US citizens? Since when has anyone been given the right to tell you that you can’t stop to see someone about business. Do rules prohibiting restriction of free trade mean anything or are we singled out and discriminated against because we are insurance agents. No other licensed professionals are restricted like CMS is doing to us. What happened to freedom of speach, I guess CMS thinks it can take that away from us as well by telling us what we can and can’t say along with where and when and how we can do business. Since when in this great country of ours has some government agency like CMS been given the right to restrict citizens from doing lawful business with people in the community by threatening to take away our licenses for doing what others are allowed to do. If ever there was an issue that should cause all of us to unite this is it. No other licensed professional group is restricted as CMS is doing to us. There comes a time to demand under the rights given to us by the Constitution and our civil rights to take a stand. If ever there was a time for agents to form a national power base to give us protection from heavy handed government agencies like CMS and what it thinks it can do to us without giving us our civil rights and the right to do business the time is now. A movement is underway to give us a lobbying group and legal help in this matter. Have you stopped to think about how CMS rules puts us in direct conflict with State Insurance Commissioners rules and regulations which controls our license to do business? Case in point, in my State we are required to do a full and complete comparison of products for our clients but if we follow CMS rules to the letter, we violate our reponsibility to the client as the State requires. This whole situation pits the State regulations against CMS and we are left to the mercy of one or the other. It’s a senario where we as agents can potentially be left to defend an attempt to take our licenses by one or the other government agencies. No other group of licensed professionals are put in this situation. Don’t think for a moment that CMS is not going to come after anyone they wish to and the same maybe said of the State as well. We have no choice but to unite against this threat.
The way I took it is CMS does not have the capabilities to determine if a bendficiary is joining for the first time or has already previously joined a part C plan. So CMS is using 2009 as a base line year and all commissions will be paid the initial first year commissions. I guess not!
I hope you’re right on the 600/300 because the cost of doing business has significantly increased!
You know Craig- Victoria above makes a great point. What are the carriers doing for us????
What is their take on this??? Are they explaining to CMS and the powers at will what are job is and helping to get us fairly compensated?
Does anyone actually realize that an initial appointment can take up to an hour or more. We take care of the problems that pop up all year. We look at their plan each year meet with the client again and do the same thing again. I figure I spend an average of 2-3 hrs per client per year. I care about my clients. And ultimately we earn every dime of what we are paid.
As you know I have an honest agency and the best group of agents we try our best to service clients and keep them on the best plan; regardless of the comp. I guess I have always been a little naive in thinking that these companies would always come through to give us a fair comp. Now to be honest I don’t know. As far as I can see Humana and United Healthcare sold us out and should be punished by the agents- don’t write them. Conversely we should be supporting companies that are joining us in the fight.
On anther note- if these companies could afford to offer us so called $500 level comps and now the comps may be as low as $200. Where does the other $300 go??? Does Stark, Baucus, and CMS honestly think that letting the company keep this money that it will somehow benefit the insured? How? You can’t change the benefits.
I guess I’m stupid or maybe just using common sense.
Socialism at it’s finest. Seems like we heard this during someones campaign- I believe instead of socialism it was called re-distribution of wealth.
The only sane thing to do is what Scarlett O’Hara said; “I’ll think about it tomorrow.”
Friday morning I’ll be on my way to Las Vegas for the weekend. When I return Monday I’ll start to think about all this again.
Rick
$400 level is still better!
Craig,
Clear, concise and understandable explanation. Thank you.
I am in agreement with Joe on $600/$300 as reasonable compensation. If we billed CMS $100 per hour- a legitimate hourly rate – for our time spent studying for certification, meeting with our prospects and clients, explaining the program options, processing enrollment forms and providing ongoing service ….. the above would be a bargain!
Craig – Thanks again for all the communication. I am wondering – are we going to receive “renewal” commissions for anything we write for 2009? Thought this change was to take affect NEXT year? Also, on our EXISTING BLOCK of business, are we to receive renewal commissions as per the revised proposed schedule – 1/2 initial?
You are right on with the statement re the time requirement -for 2009 AEP is probably 3-4 times what it was in 2005 and 2006 (with 1-2 carriers in the market). The PPO/HMO plans add a lot of additional work with confirming the providers are in the network.
And that crazy H with changing their D plans (premium AND formulary), for what $50?? We should just send all these poor clients to their pharmacist for review…..
WHAT ARE OUR CARRIERS DOING FOR US? (Are they attempting to keep the comp level reasonable or planning to allocate all the savings in commissions on advertising – and SENDING OUT ALL THOSE 2 INCH THICK PACKETS)? Save the trees!!
Again I THANK YOU! Vicki
$600/$300 might fit.
IEP and ICEP are challenging customers and do take more time. $300 to service and maintain seems reasonable.
The only problem is so few are IEP and ICEP.
What do others think?
P.S — Craig if you ever need a cheer leader I know where you can find one.
Craig – What you say above is in a clear way. Hit “Forward”.
I think it is one of the clearest explanations I have read in the past few weeks of any of this. You are definitely the man. The reasons are that you care and that you understand. I also have a few markets through you but not all. Given the amount of time and energy you are investing in being the resource/contact person and looking out for the reality of it all vs. the politics of it all, I also feel a debt of gratitude to you. I know at times when you are exhausted and have not had much time off or time with family during this time of the year, it’s gets to be overwhelming but just know that your hard work is being recognized and it will bring many referrals to you for agents looking for markets. I’m not as big a fan of the anonymous blog posts (although sometimes necessary I guess) but I am beginning to feel like a family with many of the named blog posters here and feel that there are alot of good agents out there just trying to do a good job in their local communities and make a decent living for themselves and their families. Thanks again for all that you do.
Craig,
You are excellent. I am contracted through your agency for a few companies and wish I was for all my companies. You are the only person I have seen on the net that has posted a detailed blog and updates like you have sorting through this saga of madness. Thank you.
Mike