Ritter Insurance Marketing, Craig Ritter

Notes on CMS Proposed Rulemaking Impacting 2015 MA and PDP Commissions for Agents

Here are my notes on the proposed CMS rulemaking.  See the original blog post here for background.

Page 28-29 – Executive Summary of the proposed rulemaking, recounts some of the history of the 6 year compensation cycle and describes current 3 tier system and proposes a 2 tier system with an initial amount and a renewal/replacement amount of 35% of the initial year.

Page 78-79 CMS recaps the 1-6 year cycle year compensation which started in 2009.  Since they considered 2009 to be the first renewal year, 2013 was the final year of the 6 year cycle and 2014 begins the 7th year.  Since CMS was silent on what to do in years 7 and beyond, they issued guidance on the Final Call letter on 4/1/13 that said that MA Organizations and Part D sponsors could pay renewal amounts in years 7 and beyond.  (In fact, the vast majority of MA Organizations announced that they would continue paying what they called “Lifetime” renewals.)  CMS indicated that this guidance was intended to be temporary, pending changes to their regulations.

Pages 79-80 recount the complexities of the commission payment in the existing system.  For example, companies can have different commission amounts for every plan year from 2009 – 2014.  Therefore, in order to pay renewal commissions, they have to track the plan year of entry.

Page 80 talks about the incentive for the agent to move a Medicare beneficiary for financial gain.  For example, if the agent sold the beneficiary initially in 2009 when the renewal rate was $200, they could earn an extra $13 by replacing their plan with a plan with a different parent company.

Page 80-81 talks about the difficulties CMS has in monitoring and carriers have in implementing the current commission payment system.

Page 82 begins a description of the new system they are proposing.  CMS proposes to replace the existing system (which they consider a 3 tier system:  initial, years 2-6 and years 7+) with a two tier system which has an initial payment for new enrollments (based on Fair Market Value, FMV) and a renewal payment of 35% of the FMV.  The renewal payment would be annually adjusted and ALL renewal payments (regardless of entry year) would be made at 35% of FMV (unless the carrier chooses to pay at a lower percentage).

Page 83 gives an example of the new system.

Page 83-84 goes into the legal jargon required to amend the CFR (sec 422.2274 and 423.2274) to implement the new rule.

Page 84-85 goes over some of the alternatives CMS had in mind for years 7+, including (1) not permitting residual payments entirely and (2) permitting a 25% residual payment for years 7+.  CMS then states that the 35% residual would be equivalent to the 50% in years 2-6 with a 25% residual in years 7+.

Page 85-86 address the advancing of payments made by plans for mid-year entry business and reiterates the August 14th guidance that plans may not advance agent’s commissions beyond the calendar year.  CMS may add some clarifying language.

Page 86 discusses the timing of AEP commission payments and proposes to forbid companies from paying commissions on any AEP business prior to January 1st of the plan year.  This would be to avoid the situation where a company has to charge back an agent due to a Medicare beneficiary selecting another MA plan subsequent to the initial AEP election.  This is due to the fact that a Medicare beneficiary has the option of making multiple elections during the AEP and the last election is the one that CMS recognizes as the Medicare beneficiary’s choice.

Page 87 addresses the requirement that companies recoup commissions paid on business that is enrolled for 3 months or less, but clarifies that if the disenrollment occurs within the first 3 months and the disenrollment was NOT due to an action of the agent (death, leaving service area, etc.), then the plan would only need to recover commission on the months the Medicare beneficiary was not in the plan and not the entire commission paid (as is the case of a “rapid”).

Page 88 covers finder’s fees or referral fees and proposes to cap referral payments at $100.

Posted by filed under CMS .

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  • Neill

    Can I ask if we should consider this a DONE DEAL?

    Is there Ever pushback on things like this?
    I guess the Insurance Industry benefits from paying us less,
    so they probably dont care, or they even created this initiative.

    but I hope I’m wrong.


    • At this point, this is proposed rulemaking. There is a comment period which closes on 3/7. I’ve prepared my comments in regard to this and I’m finalizing this to give back to CMS. Once the comment period closes, CMS will review comments and make it’s final decision on how to handle commissions 45 days after the closing (late May).

      • Neill

        Who can make comments?

      • Neill

        Who can make comments?
        and How would we submit them?

      • I don’t think there are any restrictions on who can comment.

        Here are the instructions:

        To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on March 7, 2014.
        ADDRESSES: Back to Top

        In commenting, please refer to file code CMS-4159-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

        You may submit comments in one of four ways (please choose only one of the ways listed):

        1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the “Submit a comment” instructions.

        2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4159-P, P.O. Box 8013, Baltimore, MD 21244-8013.

        Please allow sufficient time for mailed comments to be received before the close of the comment period.

        3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4159-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

        4. By hand or courier. Alternatively, you may deliver (by hand or courier) your written comments ONLY to the following addresses prior to the close of the comment period: a. For delivery in Washington, DC—Centers for Medicare & Medicaid Services,Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201.Show citation box

        (Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) b. For delivery in Baltimore, MD—Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

        If you intend to deliver your comments to the Baltimore address, call telephone number (410) 786-9994 in advance to schedule your arrival with one of our staff members.

        Comments erroneously mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

        For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section.

  • Neill

    what is commission going to be for Part D???
    also 35% of a Market Value Premium?
    did they mention the starting Market Value?

    • Neill:

      Part D would work the same way. I’m assuming that the initial fair market value will be close to the current levels: $425 for MAPD and $56 for PDP. So, the renewal/replacement commissions would be $149 and $20 (assuming the current levels).

  • Neill

    is this new commission schedule expected to be RETROACTIVE on business Already Written? so I can expect a 30% Reduction in Commissions that I already earned??? or will this only relate to New Business sold in 2015 and After?

    • Neill:

      How it’s written now, it would be retroactive. The CMS rules would trump our agent contracts (there are clauses in all the contracts which say that nothing in the contract can violate CMS rules). So, even though we all have contracts which state 10 year renewals or lifetime renewals at 50%, this rule change would make those contracts invalid.

  • Anonymous

    My advice: Find a new job for 2015!

  • K

    I think the insurance companies themselves are behind this.

  • Mike Shaffer


    When you first posted this I thought what do they mean by agents having financial incentive for replacing business.That was taken care of in 2009 when they started paying Initial and renewal commissions. Does CMS really think the $13 a year in extra incentive is going to motivate an agent to churn business? C’mon get real. They tweek and tweek and tweek until they ruin it. Reminds me of Roger Goddell and his “vision” for the NFL in London!!! Arrrgh.

  • emcfillin

    CMS is attempting to remove agents from servicing their clients as they will no longer ant to pay appropriate amounts (commissions) in renewal years. This will place Medicare recipients in a position where they are left to make future determinations regarding their health care without the benefit of an advocating agent. This appears to me to be nothing more than the government over reaching again and attempting to gain revenue by reducing an eliminating agent commissions from any future equation. This must be confronted by all to force CMS to stop attempting to control EVERY aspect of the Insurance industry. Again, the government penalizes all for the correction of a few who manipulate the system.

    • JH

      To emcfillin: Could’t agree more and well said….The way to confront this is by voting out liberals, socialists, progressives and big government worshiping types. Voting for the previously mentioned will just give us more of the same and collapse our entire system. I will be damned if I will let someone in the gov’t sitting around in their cushy govmnt job with no real world business experience, tell us how much money we can or should make like conforming socialist robots. Our customers deserve our very best and we work hard for them every day. Never thought I would live to see what is going on in our once great Republic taken over by socialists. do they really think the people at 800 Medicare are going to patiently deal for hours with elderly people and go over a Rx formulary, guide them into the best plan, review providers and so on?

      • Anonymous


        Well said. Let CMS try and enforce their stupid marketing regs also which I have been bending for 7 years. If I had to sell by those stupid rules I’d never make a sale. I treat people right and that’s all that matters. Who cares how I found them. Nobody!


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