Understanding Medicare agency contracting levels can help agents who may want to expand thier business set clear goals for themselves. The contracting process determines the level of authority, commissions, and support that an agency or agent receives when selling Medicare Advantage (Part C), Medicare Supplement (Medigap), and Medicare Part D prescription drug plans. This blog provides some general information about the different levels of Medicare contracts.
Please keep in mind, each carrier has different requirements for contract levels. They may also have different names for contract levels than what we have listed here.
Levels of Medicare Contracting
Medicare sales agencies typically operate under a hierarchical contracting structure. Each level comes with varying degrees of responsibility and commission structure.
Most carriers will pay street level commissions directly to the downline/sub agent with the override paid to the agency. Overrides range from $50.00 to $150 per sale. This varies by company and agency level. Many agents know what the annual street level compensation is and will not work with an agency if they will be taking any part of the street compensation.
Agents
At the entry level, individual agents contract directly with an Medicare agency and in some cases, with the insurance carrier. There are two main types of agent contracts:
- Captive Agents: Work exclusively for one carrier and can only sell that carrier’s Medicare products.
- Independent Agents: Have the flexibility to contract with multiple carriers, allowing them to offer a variety of Medicare plans to clients.
Individual agents can either receive street commissions or be LOA to the agency they work under.
General Agencies (GAs)
General Agencies (GAs) operate as intermediaries between independent agents and higher-level marketing organizations, such as FMOs and NMOs. GAs typically provide agents with carrier access, sales support, and some marketing resources, they may not offer the same level of training and tools an FMO can provide. The GAs recieve an override commission for business their downline agents write.
Managing General Agencies (MGAs)
MGAs function at a higher level than GAs, to be an MGA, you must have a greater number of downline agents than a GA. They may provide additional administrative support and agent oversight. structures. MGAs may have direct contracts with carriers, allowing them to receive greater overrides on downline agent sales than a GA level contract. This may provide them financing to offer agents advanced sales tools and training.
Senior General Agencies (SGAs)
SGAs operate at an even higher level than MGAs, typically overseeing some MGAs and GAs. They have strong carrier relationships, access to exclusive products, and higher commission opportunities. SGAs should provide large-scale support, including compliance oversight, marketing assistance, and leadership training for agencies beneath them.
Field Marketing Organizations (FMOs)
FMOs serve as intermediaries between carriers and independent agents or smaller agencies. They provide training, marketing resources, compliance support, and higher commission opportunities. FMOs typically contract with multiple carriers and offer agents the ability to represent various Medicare plans.
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National Marketing Organizations (NMOs)
NMOs operate at a level above FMOs and work with a broad network of agents, agencies, and FMOs. These organizations have high-level contracts with carriers, allowing them to negotiate competitive commission structures and access exclusive sales resources. NMOs focus on large-scale distribution and typically offer robust technology and compliance support.
Insurance Carriers
At the top level of the hierarchy, insurance carriers (such as UnitedHealthcare, Humana, and Aetna) contract directly with NMOs, FMOs, and, in some cases, GA levels or individual agents. Carriers set the terms of contracts, commission structures, and compliance guidelines that all agents and agencies must follow when selling Medicare plans.
Keep in mind; all agents and agencies must also folow CMS guidelines.
Contracting Considerations
Commission Structure: Higher-level contracts often provide better commission overridess, but require meeting performance thresholds and a specific number of downline/sub agents.
Training and Support: FMOs and NMOs often provide valuable training, lead generation, and compliance assistance.
Carrier Relationships: Access to multiple carriers gives agents flexibility to offer the best plan options for clients.
Compliance Requirements: Medicare sales are highly regulated, and agencies must ensure they follow CMS (Centers for Medicare & Medicaid Services) guidelines.
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Understanding Medicare sales agency contracting levels is crucial for agents and agencies looking to optimize their business. Whether operating as an independent agent, partnering with a GA, MGA, or working under an SGA, FMO, or NMO, choosing the right contracting level can significantly impact commissions, resources, and overall success in the Medicare market. Agents should carefully evaluate their options to align with an organization that best supports their business goals.
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