On Friday, June 1st, 2012, two major insurance companies announced that they will be paying “lifetime renewals” on Medicare Advantage and Medicare Part D. Aetna announced this for both products and Cigna for just their Part D plans. In the past, some carriers had extended renewals for up to 10 years, but these are the first carriers to extend renewals for as long as the plan remains in force.
This creates a good deal of certainty for the producer as there has always been a lingering doubt about exactly how long renewals would be paid. When CMS began regulating the compensation agreements between insurance companies and insurance agents, they set up a 6 year renewal cycle. This guidance came out on December 24th, 2008. The first year a Medicare beneficiary enters a Medicare Advantage plan or Medicare Part D plan is called the “initial year” or “cycle year 1″. If a Medicare beneficiary has been in a Medicare Advantage plan or Medicare Part D plan for 1 year or longer, CMS reports the “cycle year” to the insurance company. For example, a Medicare beneficiary may be in cycle year 2, 3, etc.
Now that the compensation rules have been in place for several years, it is possible to write a Medicare advantage this coming AEP for a Medicare beneficiary who is in cycle year 6 (2008, 9, 10, 11, 12 and 13, with 2013 being the 6th cycle year). So this begs the question, if the insurance company is paying commissions on a 6 year cycle (one initial year plus 5 renewal years), how many years of renewal commission can an agent expect to receive, assuming their client stays in the plan. I’ve spoken with insiders and never really got a definitive answer on this question.
By going to a 10 year renewal cycle, some carriers “kicked this can down the road”. Now that we’ve seen 2 major carriers embrace lifetime renewals, this whole question may become a moot point.