How Medicare Commissions work
Medicare commissions are not as straight forward as we might like to assume. Trying to determine how Medicare commissions work takes some attention to detail. The max allowable commissions for selling Medicare Advantage and PDP plans is set by CMS every year. The amounts in a given state are easy to find online and pretty clear. Unfortunately, there are a number of scenarios that determine how much of that commission an agent will receive for the sale. We break that down in this blog.
How Medicare Commissions work: CMS max commissons
CMS sets the max commission for Medicare Advantage and PDP plans every year. They have been going up every year for the last 6 or 7 years. The renewal amount is set every year. The amount is half of the initial commission. The max amount is broken up by state. There are three groups of states. The state groupings are (CA and NJ), (CT, PA and DC), (Puerto Rico and US Virgin Islands) and all the other states are in the “National” bucket. The CA and NJ group pays the highest, follwed by CT,PA and DC, then the national bracket. Puerto Rico and Virgin Islands are by far the lowest.
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How Medicare Commissions work: Initial payment, true up and pro-rata
The max commission for an MAPD sale in CA for an advantage sale is $715 with renewals of $358 per year. So is it that simple? Of course it isn’t. How much of the commission agents receive depends on the situation. Here is a breakdown:
How Medicare commissions work: New to Medicare:
This one is easy. If the person is new to Medicare, the full commission is paid in two payments: the intial payment, then the true up payment. The two will total up to the full amount. The renewal will also be the full amount and will start paying over the course of 12 months starting in January. (Regardless of the effective date of the sale)
New to Medicare Advantage but not new to Medicare:
If the person enrolls into Medicare advantage for the first time the commission will be the same as above but with one big exception. The commission is pro-rated. This simply means the payment amount will be based on the month of the effective date. So if someone is enrolled for a March 1 date, the agent receives 75% of the full commission. (They will be in the plan for 9 out of 12 months.) If the person is enrolled for a July 1 start date, the agent will receive 50% of the commission and so on. The renewal will be the full renewal and will start in January.
Medicare Advantage to Medicare Advantage:
Did the person change from one advantage plan to another? If that is the case, the agent is only getting half of the commission. They will get the initial payment but not the true up so they will get half or the “Renewal amount”. $358 using our CA example. Unfortunately, these are pro-rated too. So if the agent enrolls someone into a different MAPD plan in September, they are going to get a renewal payment only and it will be pro rata of only 3 months of enrollment ($29.84 x 3 is $89.52)
Medicare Advantage Payments during AEP
The commission rules do not change during AEP but when you get the payment does. Any cases agents place during AEP will not pay out on the normal schedule. Agents receive the commissions for AEP in January. Insurance carriers are not allowed to pay them prior to then. Most make the payments sometime in the month of January.
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