Unfortunately, chargebacks are sometimes a part of Medicare sales. However if you follow the advice below, you can get some tips to help teach you how to avoid commission chargebacks.
What are chargebacks
When we refer to Medicare sales, an agent receives a chargeback if the client terminates the plan you enroll them in early. When this happens, a portion of an agent’s commission for the sale is lost. This occurs if a client either cancels their plan or passes away. When this happens, the agent must pay back a portion of any advanced commission payments they received.
In many instances agents choose to receive commission advances. In other words, the carrier pays several months of commissions on the sale of a policy up front, before the client makes their premium payments. Most agents like this because they do not have to wait to get the payment. Although, this can cause potential problems if the client cancels their policy. In that case, the agent incurs a debt to the insurance carrier.
Watch a YouTube video on how Medicare commissions pay
It is important to note: each insurance carrier has its own payment schedule and rule for chargebacks.
Don’t be surprised by chargebacks
Because most of us do not own a crystal ball; clients pass away or change their mind on their coverage choice, agents must prepare for a few chargebacks each year. It is helpful to set money aside to take care of any debt you may incur.
Pay your chargebacks
This is obvious. If you have a bill, you need to pay it. Agents who do not pay their debts may end up with a Vector hit against them. Insurance companies use this service to report unpaid debts. This will damage the agent’s credit score and can affect their ability to offer products with some carriers.
In certain situations, there are carriers who will not contract brokers with a Vector hit until the debt is paid.
Agents can pay some chargebacks directly out of their commissions if the insurance company owes them enough money to pay it. If there is not enough commission due to pay the debt, some carriers allow the agent to set up a payment plan to clear the debit.
AEP Enrollments
In some cases, enrollments that take place during AEP, are paid to agents in halves, The first half in January and the other half in February.
When the client either moves or drops their Medicare Advantage plan during the OEP, the agent receives a chargeback. That is a good reason to make sure that you are available to your clients and they do not seek another agent to answer their questions. Another agent could talk your client into a plan change during the MA OEP ending in a chargeback for you.
Find out about the 2025 Medicare commissions
Medicare Supplement chargebacks
Medicare Supplement chargebacks are much less common than MA chargebacks. In many cases, carriers pay Medicare Supplement commissions as earned. This means when the client pays their monthly premium the agent receives their commission. Sometimes agents receive commission advances anywhere from 3-12 months ahead. Because many carriers charge a small fee for advances, most agents decide to receive payments as earned. However when agents receive a chargeback for these plans, it is nominal.
Stay in touch with your clients
It is extremely important for agents to stay in contact with their clients. Agents who build a good relationship with their clients have a much lower chance of losing them to another agent. This ensures they will call you if they are considering a plan change. It is always a good idea to check in and make sure clients are happy with their coverage so you can solve any issues that come up of change their plan if necessary.
Get some tips to maintain your book of business
Some times you can’t predict losing a client due to death or other unforeseen circumstances. The best option is to make sure clients know you are available even when they are unhappy. Remember to be ready for a few chargebacks.
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