How Do Medicare Commissions Work?
What attracts many agents to Medicare sales is often two-fold. One, they enjoy helping people. And want to work with Medicare beneficiaries to assist them finding the coverage that is right for them and their family. Two, the commissions that can be earned through Medicare insurance sales.
Agents are paid commissions when they sell a Medicare insurance policy to a beneficiary, and often a smaller commission again if that beneficiary re-enrolls next year. Agents are paid directly from the insurance carriers, meaning that, although they are independent and often broker a wide variety of companies and policies, they are being paid for selling a company’s product. This is one of the reasons why transparency is so important for building trust with beneficiaries.
How Much Can I Make?
One of the most common questions asked by new agents is, “how much can I make on commissions?” And the answer is: that depends! Their compensation for Medicare Advantage, Medicare Part D (prescription drug coverage), and Medigap or Supplemental insurance is directly tied to the amount of enrollments and client retention they achieve. The Centers for Medicare and Medicaid Services (CMS) sets the maximum commissions annually. Within those maximum amounts set by CMS, insurers determine what they will pay agents for commissions, which can be different based on which product or contract they are selling.
CMS sets the maximums on a national scale, but they can also differ based on cost-of-living locally and other factors. For example, in 2022, CMS set the national maximum for a first time enrollment as $573 per beneficiary. But in California, where cost of living is significantly higher than in most other parts of the country, the maximum first time commission was $715 per beneficiary. For stand-alone prescription drug coverage plans, or Part D plans, the commission does not vary. The first time enrollment commission is $87 regardless of location.
For renewals, CMS does set their values for commission lower than for first-time enrollment. The same for what are known as switches, which is when beneficiaries choose different plans within the same insurance carrier. For Medigap, or Medicare Supplement plans, the commission amounts are not set by CMS. Rather, they are a percentage of the annual premium of the plan. Often, that percentage is close to 20% of the annual premium of the plan.
While commissions are not the only motivation for an ethical agent, they can certainly help increase an agent’s income with hard work.
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