5 Things Every Medicare Agent Should Know

By Dwane McFerrin, Vice President, Medicare Solutions

  • Originally published September 15, 2010 , last updated January 12, 2016
5 Things Every Medicare Agent Should Know

The Truth About Modernized Plans, Part B Offsets and Commission Advances You Won’t Hear Anywhere Else

If you haven’t heard about the modernization of Medicare Supplement by now, you’re either new to the business or returning from a long vacation.

On June 1, 2010, the landscape changed, and, for the first time since the mid-90s, we see a change in the benefit design of Medicare Supplement plans. Carriers were forced to re-file their plans with refreshed rates and new plan designs. New carriers have entered the market; others re-entered after a five-year or longer wait on the sidelines.

Bottom line: a lot has changed, and what you don’t know can cost you sales or, at a minimum, lost opportunities to save your clients money.

Here are five things we believe every professional insurance agent should know about the modernized plans and the tactics some carriers employ as they compete for your attention.

1. Plan F isn’t the only game in town

What’s the difference between a Plan F and a Plan G? Today, it is only the Part B deductible, valued at $155. So, if the premium difference between an F and a G is greater than $155, many agents are opting to sell the Plan G. You will find some cases where the difference can be $200 - $300 making it a good buy for your client.

Already, we’re seeing Plan F dominance beginning to wane. Last year Plan F represented 70% of our agents’ sales. This year Plan F is only 62% and is expected to go lower. While Plan F should remain the top seller, a good agent will recognize a savings opportunity for their client. With Plan G, the agent no longer has to worry about the doctor accepting Medicare Assignment. Both F and G have identical benefits with the modernized plans, except for the Part B deductible.

2. Plans M and N, déjà vu? 

A Plan N Medicare Supplement plan features $20 co-pays for office visits and the premiums can be 30-40% of a Plan F! Some carriers have made the plan guarantee issue, drawing agent attention to shifting Medicare Advantage customers back to a Medicare Supplement. With Plan N, you have benefits that supplement Original Medicare and with the exception of Part D, superior benefits to most Medicare Advantage plans.

This plan is nicely positioned to attract healthy risks, but some agents may encounter compliance problems. Why? For the same reason Medicare Advantage agents experienced backlash from regulators when it was discovered that many clients didn’t understand the benefits of their plan. Likewise, some Plan N Medicare Supplement agents may cut corners and fail to disclose the co-pays associated with the product.

What good does an agent serve the client by saving them a few hundred dollars in premium if they are visiting the doctor twice a month at $20 per visit? In this case, the client saves $200-$300 in annual premium but pays $480 in additional co-pays.

The other shortfall in Plan N’s coverage is that it does not cover Part B excess charges. Analysis of Part B excess experience shows that 8% to 12% of Medicare Supplement beneficiaries have a Part B excess claim. That percentage is lower in those states that prohibit excess charges: CT, MS, MN, NY, OH, PA, RI and VT). Annual Part B Excess claims average $20 to $40, with 75% of annual Part B Excess claims less than $50, and 90% of annual Part B Excess claims less than $150. That being said, even though only about 1% of the claims are over $1,000, they could range into the hundreds or even thousands.

Compliance risks to an agent go up when selling Plan M. Since it has a 50% co-insurance on the Part A deductible ($550), you need to be sure the premium savings are greater than $550.

What this means is that Medicare eligibles have more choices than ever before and the agent has a vital role in helping the client manage the medical expense risk exposure. If you choose to sell plans M and N, be sure to take the time to educate your clients on the premium and benefit trade-offs.

3. Commission rates can be deceiving.

A typical agent will consider commissions in evaluating what carriers to represent. What many agents don’t know is that some carriers have disguised commission reductions, making it harder to compare plans. For example, one carrier may pay a fixed amount rather than a percentage of premium. Commission rates between carriers for a client turning 65 may prove to be roughly equal but if you are writing an older client, the agent gets paid less under a fixed commission amount.

Table 1 shows an example comparing two carriers: carrier A pays 18% commission and carrier B pays a flat $220. A client turning 65 with an annual premium of $1,200 would earn the agent $216 per year if paid 18% of premium by Carrier A but $220 per year if paid by Carrier B. For a 75-year old client with a $2,200 premium, Carrier A pays $396, while Carrier B still only pays $220!

Table 1
Client Age
Carrier A
(18% Commission)
Carrier B
(Flat commission: $220)
65 years old
(1,200 premium)
$216 in commission
$220 in commission
75 years old
(2,200 premium)
$396 in commission
$220 in commission

4. Part B offset, something that affects your commission.

Many carriers now reduce the agent commission for the Part B deductible premium, meaning $155 of the premium is non-commissionable. In order to promote a higher published commission rate, some of the newer carriers are offsetting the Part B for a higher amount, up to $200!

This $45 difference means that while the numerator (18% commission) remains the same, the denominator (commissionable premium) might vary. This allows a carrier to claim a higher commission rate (which is true), but what they don’t tell you is the commissionable premium is reduced!

Table 2 shows an example comparing two carriers: Carrier C offsets $155 of the $1,200 annual premium for the Part B deductible and then pays 18% commission on the balance of $1,045 ($1,200 minus $155) for a commission of $188.10. Carrier D offsets $200 of the $1,200 annual premium for the Part B deductible and claims to pay 19% commission, a full one point higher. The result? Carrier C at 18% commission rate pays you $188.10 and Carrier D at 19% commission pays $190.00.

Table 2
Part B Offset
Commissionable Premium
Actual Commission
Carrier C
(18% Commission)
Carrier D
(19% Commission)

5. Some advance commissions are really loans.

Nine- and 12-month advance commissions are fairly common in the industry. That makes a lot of sense for a newer agent in the business since renewals are not yet a significant portion of the agent’s monthly income. Beware of some carriers who have a finance charge of up to 1% per month. In this situation, the agent is sacrificing 12% of the commission in order to have a 12-month advance.

Some agents refer to variations in commission formula as tricks or gimmicks, but there is usually a lower premium trade-off for plans that pay using these methods. While Medicare Supplement plan types are standardized, there are no regulations that require all carriers to pay agents using the same formula. The next time you see a really low rate from a carrier you’ve never heard of before, be sure to understand the commission rate, Part B offset and if there is a fee or interest rate charged for advancing commissions! It pays to understand your commission schedules! 

It also pays to understand the differences between plan types. Agents have an opportunity under Medicare Modernization to help a client plan for Medicare-related premiums and benefits. Now, more than ever, your clients need you, the professional insurance agent.