Medicare commission payment details
Maximum allowable commissions for MA and PDP is set by CMS every year. It is not as straight forward as you may think however. Medicare commission payment details are important to determine how much you compensation you will actually get for a sale. We go over the details below. This includes Initial vs. True-up, renewal only payment, as earned renewals and pro-rata.
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Medicare commission payment details: CMS max commissons
CMS sets the maximum commission for Medicare Advantage and PDP yearly. The max amounts have been increasing every year for the last 6 years. In addition, the renewal amount is also set every year. The commission amounts are broken down by groups which are: (CA and NJ), (CT, PA and DC), (Puerto Rico and US Virgin Islands). All other states are in the “National” bucket.
Medicare commission payment details: Initial payment, true up and pro-rata
For example, the maximum commission for an MAPD sale in CA is $750 with renewals of $375 per year. That sounds pretty easy and straight forward right? Like most things, it is not nearly that simple. In many cases, you will receive less than the max. Lets break down the examples.
Initial payment: New to Medicare sales receive the full payment ($750 in CA for example) but it is broken down into two payments to the agent. The initial payment is the first half of the payment.
True-up payment: The true-up payment is the second half of the commission and is usually paid about 2 to 3 weeks after the first payment.
New to Medicare sales
The first one is easy. The agent enrolls someone into a Medicare Advantage plan. They are new to Medicare or they have had Medicare but did not have a Medicare Advantage or PDP plan previously. The agent will receive $750 for the sale and the renewal ($375) will start paying “as-earned” in the month of January. The renewal will start in January regardless of the effective date of the sale. (unless it was for a 1-1 effective date)
New to Medicare Advantage but had a PDP (Part D drug plan) in place previously
So the prospect is new to Medicare Advantage but…. they had a part D plan in place previously. Because of the previous PDP plan, the commission will change. Many times in this scenario they also had a Medicare Supplement. Just having a Medicare Supplement does NOT impact the Advantage commission but the PDP does. The commission will still be considered a full payment with an initial and true-up but it will be pro-rated. Pro-rated payments are reduced by the number of months left in the year. If you sell someone a plan for a April 1 effective date, you will receive 8/12th of the payment. If you write someone for a July 1 start date it will be a 50% pro-rated commission.
Medicare Advantage to Medicare Advantage:
This is an enrollment with a person that already has an Advantage plan. The agent changes them from one Advantage plan to another. They will only be receiving a half payment for this case. (California example: $375) The case will also be pro-rated. So if they sell someone for a December 1 effective, they will be getting 1/12th of the half payment. The good news is the renewal will start in January.
Medicare commission payment details during AEP
The commission rules are the same during AEP but when the agent gets the payment changes. Any applications for January 1 start dates will not pay out during the AEP. For example, an agent writes someone on October 20th of AEP for a 1-1 effective date. They will not receive the commission until January at the earliest. Carriers cannot payout AEP cases during the actual AEP. This is not applicable for people you write for a 10-1, 11-1 and 12-1 start date however. Also does not apply to Medicare supplements.