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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 after words.  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.

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What is a rapid disenrollment

How to prevent rapid disenrollment

If you follow all the CMS guidelines as well as listen to the client and found a plan that best fit their needs, a disenrollment will be unlikely to occur.   Take a look at a few suggested practices below to help you avoid rapid disenrollment.

Enroll clients in the plan that is best for them

The most successful Medicare agents, enroll clients in the plan that best fit the client’s needs.  They do not base their recommendations on the amount of commission they will receive. When you operate in the best interest of the client, a disenrollment is not likely to happen. If for any reason your client changes their mind about the plan they chose, it is in everyone’s best interest to help them switch to another plan.   This helps them to know you are there to provide them with the best service possible and they can contact you with any questions or concerns.

Check all your Clients’ providers

Most clients do not want to search for new doctors each year especially if they are happy with the care they are receiving.  That means it is imperative that you get an up to date list of their current providers and make sure they are in-network with any plan they are considering.  This is also important for hospitals or any other medical facilities they like to use.  Because paper directories are difficult to update in a timely manor, It is best to check the online provider directory of any plan they are thinking about enrolling in.

Get a list of current medications

These days mediations can cost thousands of dollars for each refill, therefore, it is important to get an updated list of medications from each client annually to provide the best possible coverage options.  When you run a plan quote, always look at where each medication falls on the formulary of each plan they are considering as well as the plan that provides them the best total cost.  This means include the cost of the plan as well as the cost of the medications for a total plan cost. Always include the name of the pharmacy your client uses as that also has an effect on the cost of their medications and the plan they choose.  Whenever possible, clients should use a pharmacy that is considered preferred by their plan.

Explain plan benefits and coverage costs

Be sure you understand the clients coverage needs as well as their budget. Be sure they know the cost of monthly premiums, co-pays, coinsurance and deductibles as well as prescriptions costs will be.  Unexpected costs are one reason people disenroll from a plan.

Always be sure your client understands the benefits of the plan they choose.  When they tell you they want a dental benefit; be sure they understand exactly what it covers and doesn’t. The same goes for any benefit that is important to them.  If the plan they choose does not offer all the benefits they are looking for, be sure they still want that plan. Double check that they know what they are signing up for.  If they do not fully understand the benefits package they may decide later that you did not listen to them and put them into an inferior plan.  Don’t forget there may be other ways for them to have all the coverage they want by adding an affordable ancillary plan.

Please be aware, Medicare beneficiaries often get advice from family or friends saying they have a better plan that is less expensive with more benefits. This may cause them to make a switch.  Be sure you provide the best plan to suite their needs and always be available to answer questions.

Review Outbound Education and Verification calls

Agents need to explain that the client may receive an outbound education and verification (OEV) call from the carrier or the new plan.  Unfortunately some clients disenroll when they get this call because they are not expecting it and get confused.  Make sure they are aware of it and what to expect.

One last thing you can do to avoid the disappointment of a rapid disenrollment

We cannot stress enough that your client needs to understand what they signed up for.  Make sure they understand the plan they chose.  Check back in with them to be sure they do not have any questions and to offer your guidance if they do.  They need to feel comfortable with their choice.  If they are not confident it will only take 1 tv commercial or phone call from a telemarketer to get them to change their plan and you will have a rapid disenrollment.

How they affect the agent

Once a client is considered a rapid disenrollment from a Medicare plan, carriers will recover at least part of the commissions that they paid out.  This is known as a chargeback.

Click here to learn about pro-rated Medicare commissions

Do not go on any shopping sprees until you are sure your clients are happily enrolled in their new plans.

Any rapid disenrollment may bring you to both the carriers attention as well as the attention of CMS.  This is not something you want to happen. Agents with a large number of rapid disenrollments may be investigated for compliance issues.   CMS may need to investigate to be sure you are not enrolling clients into plans under false pretenses just to make a quick buck.  That is why, the client’s best interest has to be your top priority.

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