Ritter Insurance Marketing, Craig Ritter

Craig’s Comments on CMS Proposed Rulemaking

I filed my comments with CMS regarding their proposed rulemaking which would reduce the renewal commissions from 50% of initial commissions to 35%.  I have comments on the rulemaking with regard to agent’s commissions here and here and comments on the changes to the Part D drug benefit here.

Here is my comment:

These comments are in response to the Proposed Rule Making regarding compensation to external agents and brokers, specifically, the calculation of “Fair Market Value” of Medicare Advantage and Medicare Part D broker compensation.  As noted in the proposed rulemaking, Section 103(b)(1)(B) of MIPPA charges the Secretary with establishing guidelines to “ensure that the use of compensation creates incentives for agents and brokers to enroll individuals in the MA plan that is intended to best meet their health care needs.”  My understanding of CMS’ three primary goals of agent and broker compensation rules are (1) to ensure agents and brokers receive Fair Market Value compensation for the services they provide, (2) to ensure that there are not financial motivations for an agent or broker to “churn” their Medicare beneficiary clients and (3) to simplify the compensation structure to reduce the administrative and regulatory cost of implementing and monitoring the system to provide the maximum value to the Medicare beneficiary.  I appreciate the opportunity to give my comments to assist CMS in achieving these goals.

CMS is proposing to set the replacement and renewal compensation for all years at 35% of the initial compensation rate.  This would change the system from a 3-tiered system to a 2-tiered system which would simplify the administration of commission payment.  Additionally, this would ensure that there are not financial motivations to churn business.  However, the 35% rate for replacement and renewal compensation relative to initial commission rates does not reflect Fair Market Value.  In fact, there is empirical evidence to prove that the 35% rate is below FMV.

By definition, Fair Market Value is the price that a buyer of services is willing to pay (MCO’s) and what sellers of services (agents and brokers) are willing to accept for their services in an efficiently functioning market.  Given the size of the Medicare advantage market with over 100 entities acting as MCO’s and tens of thousands of insurance agents offering services, this market has sufficient competition to believe that the market is efficient and neither the buyer nor seller has monopolistic pricing power.

As noted in the proposed rulemaking, when CMS issued its 2014 Final Call Letter on April 1st, 2013, it addressed broker compensation for years 7+ by giving MCO’s the temporary option to pay renewal amounts for years 7 and beyond.  This action created a window into the Fair Market pricing of agents services.  Of the 15 MCO’s that my organization represents, 13 of the 15 companies set their renewal compensation for years 7+ at 50% of the initial rate.  The other 2 companies set broker compensation at 50% of the initial rate for years 7-10, so even in this minority of cases, the actuarial value would be higher than the 35% CMS is proposing.  For those minority companies that don’t feel it maximizes their efficiency to pay brokers at CMS maximum rates, they, of course, have the option to set their initial compensation at lower rates and even not to use brokers at all.

Additionally, the Affordable Care Act put into effect a Minimum Medical Loss Ratio (MLR) for MCO’s of 85%.  Given the fact that MCO’s are mandated to spend at least 85% of their revenue on the cost of care for Medicare beneficiaries, reducing the compensation to agents would have little or no benefit to the Medicare beneficiary.  In fact, Medicare beneficiaries could be harmed by setting agent compensation too low as agents would have less incentive to service their existing policyholder’s needs as Medicare advantage plans change benefits from one year to the next.

In summary, reducing the agent’s compensation from 50% to 35% does nothing to create incentives for agents and brokers to enroll individuals in the MA plan that is intended to best meet their health care needs.  It is less than the Fair Market Value that the Fair Market of MCO’s and agents dictated as Fair compensation for external agents.  It does nothing to improve the value proposition for Medicare beneficiaries (due to minimum MRL).  It may harm beneficiaries in reducing their access to agents who can assist them in finding plans to meet their needs.  For all of these reasons, I respectfully ask CMS to reconsider reducing broker compensation on renewals to 35% and instead allow MCO’s to pay brokers 50% of their Initial Rates for all years.

Posted by filed under CMS .

  • Teresa cole

    Did CMS pass this ruling on the 35% commission yet or is it still being considering?

    • Teresa,

      Sorry I missed this. CMS issued final guidance a month or so ago. They DID NOT cut the renewal comp to 35%. Instead, they kept comp at 50% for all years of renewal, subject to “in good standing” rules, contract, etc.


      • Teresa cole

        Thanks for clearing that up on 35%. I do not think churning is something that is going on anymore because not many plans are being offered anymore in 1 area. We have 3 in our area and they all are about the same in what they offer. It basically comes down to premium and network when someone is choosing. I read a comment by someone saying the Insurance companies are the ones impacting our decreased commissions because that gives them more money. I really believe this is right. Insurance companies telling CMS to cut agent commissions so that their profit is higher. Sad really. I think most agents like myself stay in this business for the renewals so switching people to other plans for immediate compensation is not logical.

  • Craig thank you very much!

    The logic in your comments on behalf of agents and Medicare members is sound, and I’m guessing a lonely logical voice. Medicare members are overwhelmed and confused by the bombardment of advertisements and information received from MCO’s. As we see more rule changes to Medicare healthcare, seeing and hearing of more denied claims as unnecessary, hospital’s placing people in a observation vs. admitted and the confusion and expense thereto, there is more need for experienced caring agents. Many of us also help with application and advocacy for LIS through community outreach and education. “Who’s going to fill our shoes?” Medicare members will suffer from fewer agents willing to enter this messy and risky business. Few new agents, and even worse many experienced agents, will enter/continue this business with the training/certification requirements, lack of compensation, and complexity of the system. I can’t imagine how any new agent will be able to get started in this market. Please continue fighting for us, and let us know how we can be more supportive and help.

    Wishing all good fortune and health.

  • Anonymous

    This whole business is simply getting ridiculous with the commissions constantly being reduced, endless over regulations, certifications and just plain BS. UHC cut there Med Sup commissions in half! What incentive is there to drive 50 miles to see someone when gas is $3.65 a gallon. What they are trying to do is drive the little fish brokers out of the biz and have people go on line or deal with their 1-800 #’s. Tough to stay in it these days!!!

  • Anonymous

    Thanks again Craig. Your a great advocate for all of us.

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  • Anonymous

    I appreciate your efforts. Agents rightfully feel that this administration truly devalues us as a group. Surely, they have bigger fish to fry for the good of all seniors. Alas, I am sure that the seniors are of less concern to them and the continued devaluation of agents is more. Keep up the good fight! Gary

  • Anonymous

    My comment….CMS has made the process of Certification every year so burdensome, I am personally thinking of hanging it up! A lot of the Companies are requiring AHIP testing and for us older agents it is really tough and tricky! It seems that CMS figures that we are all potential crooks in talking to prospective clients. Having not to be able to approach a potential client during AEP is plain stupid!
    Thanks Craig, for the fine comment to CMS!

  • Ed McFillin

    Thank you Craig for your sound reasoning. I, however, question whether we are banging our heads against this liberal wall with this administration. There is little or no respect from this CMS regarding the amount of preparatory certification time required prior to the AEP each year. Nor is there any identifiable empathy from this government relative to the individual recipient’s needs and annual investigative requirements for each recipients’s provider and formulary inquiries required …not to mention the annual comparison of plans to be able to promote the best plan for each recipient. Only the individual recipients express the gratitude and appreciation for the professional work that is put forth by most agents. I venture to think there would be a loud collective howl from seniors if advocating agents were removed from their decision making process due to lack of adequate compensation.

    If anything …..the renewal compensation should be 15% more rather than 15% less. But your efforts and comments are greatly appreciated.

  • Craig, thank you for your time and effort – it is greatly appreciated.

    Have you commented on the proposed change to delay commission payment for AEP until January? This would be a huge financial burden for agents as the cost of preparation, implementation and execution of AEP is significant.

    • Mary,

      I didn’t comment on this, although it will be very financially painful for me (in the short run) and everybody else.

      I don’t see the timing of payment argument as a winnable fight with CMS, but I felt that there is a very strong empirical case that their commission proposal isn’t FMV. FMV is one of CMS’ stated objectives. Timing of payment is difficult to argue and I couldn’t tie it to legislation nor a stated objective. Harm to beneficiary could be an argument here, but would very likely be trumped by their concern about waste.

      I’ve communicated quite a bit with CMS in the past (I actually got a “heads up” from someone at CMS on this rulemaking), so I feel I understand what they are looking at and how they operate. I was trying to pick a winnable fight here that they might consider. To them, it would be better to have all agents wait until January for commissions as opposed to having a very small minority of agents get paid and charged back without being able to collect. They see this as preventable waste. Not a winnable fight, in my opinion.

      At the end of the day, if we can win on FMV/harm to beneficiaries, I’ll be extraordinarily happy.

      @Renee, CMS does care about their stated objectives, waste/fraud/abuse, legislation and Medicare beneficiaries. That’s what I argued here: FMV and harm to beneficiaries. I completely understand your frustration.

  • It would be nice if CMS actually cared about any of this. I’m beginning to wonder if any of this is really about what’s in the best interest of the client at all . . . . call me cynical, but everything is so complicated for the client, that to do anything that might jeopardize their ability to get services from a knowledgeable agent would be terrible. I’m seeing this every day as I deal with people trying to get through enrollment in the ACA plans, and I’m not sure I will be able to continue to help those people in the future. It may not be worth the trouble.

    Thanks for being so involved Craig. Your comments were eloquently put, and I do hope that they have an impact.

  • Tom Freker

    Good stuff Craig. I posted similar comments about the broker potentially being less willing to service accounts appropriately. There is often a lot of work needed to service an account other than the initial investigation of the clients needs, wants and most importantly meds and networks. I agree with your position 100%. Keep up the good fight

  • Anonymous

    Craig it is great knowing we have you on our side. You are so knowledgeable and passionate I am so happy I have found your Ritter organization. Keep up the great work.

  • Very succinct and well articulated. Clearly the MCOs stated they think FMV should be 50%. Only agencies & agents embracing technology will be able to make money in the future. Ritter IM website is great.

  • tunde

    Craig, thank you for fighting for all agents who don’t have the platform to voice their feelings about this commission changes. You are a general in the Army of all field Agents..

  • Anonymous

    craig i want to thank you very much for what you are doing here. this is exactly why i have placed most all of my business through our organization. i know that there would/could be some financial impact on your company as well if this change in our commission come to pass but i believe you care about us as agents as well and for that again i thank you for all that you are doing.

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