Medicare commission chargebacks
Medicare commission chargebacks are just a normal part of Medicare sales. If you plan ahead, you can avoid chargebacks turning into a bigger problem.
What is a Chargeback
In Medicare sales, a chargeback is when a portion of an agent’s commission for a sale is lost. This happens when a client’s policy is terminated early. This happens when a client either cancels their plan or passes away. When this happens, the agent must pay back a portion of the commission they received previously.
Many Medicare agents choose to receive commission advances. This means the carrier pays several months of commissions on the sale of a policy up front, before the client pays the premium payments. This is great because you do not have to wait to get the payment, however this is also a potential problem if your client cancels their policy, and you incur a debt to the insurance carrier.
Please note: every insurance carrier has their own payment schedule and chargeback rules.
Be prepared for chargebacks
Because there are things you cannot predict, clients pass away or change their mind on their coverage choice, you need to be prepared for at least a few chargebacks each year. It is a good idea to have money set aside for such situations.
Pay Your Medicare commission chargebacks
This is a no brainer. If you have a bill, you need to pay it. If you neglect to pay it, you may have a Vector hit against you. This is a service insurance companies use to report unpaid debts. This will harm your credit score as well as you chance to sell products with some carriers. Some carriers will not contract brokers with a Vector hit until they pay their debt.
Agents can pay some chargebacks out of the commission the insurance company owes you. If you do not have enough commission coming in to pay the debt, some carriers will allow you to set up a payment plan to clear the debit.
AEP Enrollments can lead to MA OEP Disenrollments
When enrollments occur during AEP (Oct 15 through Dec 7), agents receive half the commission for each sale in Jan and the other half in Feb. Because full MA/MAPD compensation is only paid out once on each enrollee, agents receive renewal commission rates for each beneficiary who enrolls in a plan. Agents receive full commission only if the beneficiary is a first-time MA/MAPD plan enrollee.
When your client decides to either move or drop their MA/MAPD plan during the OEP (Jan 1 through Mar 31), the agent receives a chargeback. Because another agent could talk your client into a plan change during the MA OEP, you may receive a chargeback.
Click here to find out about the MAPD commissions 2024
Medicare commission Chargebacks for Medicare Supplement sales
Luckily chargebacks for Medicare Supplements are a less common occurrence. Usually, carriers pay Medicare Supplement commissions as earned. In other words, your client pays their monthly premium, then you receive commission.
In some cases, agents have the opportunity to receive advanced commission which are normally 3, 6 or even 12 months ahead of schedule. Because many carriers charge a nominal fee for advancing commissions, most agents opt for commission payments on an as-earned basis. If you do get a chargeback for a Medicare Supplement sale, the amount is usually not very large.
Communicate with your clients – avoid Medicare commission chargebacks
It is extremely important to stay in contact with your clients. If they know you are available to answer questions as a trusted and valuable resource, they will call you if they are thinking about a plan change. This may help prevent them from seeking advice from another agent who may contact them. If your clients change plans during AEP, it may be good advice to check to see if they are happy with the new plan afterwords. If they are not, you will be able to enroll them in another plan instead of them going to another agent.
There is no way to predict losing a client due to death or other unforeseen reasons. The best thing to do is let clients know you are available even when they are unhappy. Remember to prepare ahead for a few chargebacks.