The State of Medicare in 2026: What Agents Need to Know

00:00:00:01 - 00:00:25:08
Unknown
All right. Well good morning everybody. I'm Mark Hunter. I'm the chief distribution officer at SMS. I'm here with the man who needs no introduction. Duane McFerrin, SVP overseeing Medicare for SMBs as well. And we are here to talk about the state of the Medicare industry. So, Duane, I know I haven't seen you around the office a lot lately.

00:00:25:09 - 00:00:43:18
Unknown
Why don't you tell us a little bit about what you've been up to? Well, you know, this has been a very active environment, and so we're going to share a fair amount about the disruption that we're facing. But out of change generally comes opportunity. And so it really depends on how you look at it. So just a little bit about me, for those of you that don't know me.

00:00:43:19 - 00:01:03:15
Unknown
I'm senior VP of Medicare Solutions here at SMS. And here's a little bit of my background. But yeah, I've been in the industry now for 43 years and I've seen change and I've seen cycles, and we're just going through another cycle. Things have a way of working out. I think a lot of it's because of the demographics, right.

00:01:03:16 - 00:01:32:13
Unknown
This the boomer population working its way through. There's still plenty of opportunity, even though as you look at how new plans are coming out, plan exits and all of the turbulence in our environment, there's still opportunity for those that do work the right way. Yeah, absolutely. So we'll get into all the details, everything that's happening across the spectrum from mapped to Medicare Supplement, part D, etc..

00:01:32:15 - 00:01:57:05
Unknown
A little bit about me. So I joined SMS a couple of years ago. I'm the chief distribution officer and I actually oversee both Medicare and ACA. So we're starting to bring together under 65 and over 65 and thinking about a customer journey across the full spectrum of individual health needs. So that's what I've been focused on. Yeah. And there's so much going on in both markets.

00:01:57:07 - 00:02:24:16
Unknown
It's it's a turbulent time in the ACA side as well. So for those of you within scope of this, but we could certainly spend a full hour. Yeah. For those of you that that do ACA and Medicare you've got your hands full. Yeah. And appreciate you doing business with SMS. Absolutely. So we know the industry has endured a lot of ups and downs, you know, for a long time, but especially in the last four years.

00:02:24:17 - 00:02:45:03
Unknown
So tell us a little bit about give us a lay of the land in terms of what's happening with CMS at the government level and the state capitals with state departments of insurance, the carrier level, a little bit about what's happening that's driving. Right. If you hate change, then you're in the wrong market because we've been through so much change in Medicare.

00:02:45:03 - 00:03:20:11
Unknown
So let's just kind of from a timeline standpoint. We've got the midterms looming right. So we're narrowly the Republicans are in power. Democrats of course. Want to grab control. And and with that, we'll have perhaps more dysfunction within our own within our own political environment. But with that, though, we've seen actually regulations eased this year, and it's so wonderful that an agent can do a Medicare workshop and go right into an enrollment as opposed to the past, where you had to have a cooling off period, as if we were somehow upsetting people.

00:03:20:11 - 00:03:45:06
Unknown
So at least a little more realization of the role of the agent. But nevertheless, there's still a ton of change. We've got the premium stabilization demonstration going away, which was really part of the funding that helped offset the adverse effects of the Inflation Reduction Act. With that, you're going to see higher premiums on part D, and it's affecting really the the stability of our market.

00:03:45:06 - 00:04:15:17
Unknown
So I'm anticipating this will be the fourth consecutive year of market contraction. We had 16 years of growth. Go go go every carrier going after market share. But now it seems to be focused on profitability. Politically, I'm expecting that we may have divided Congress, right? We may have either the House or the Senate under Democratic control. And with that, you know, anything that is being pushed by the administration at least will have some pushback.

00:04:15:19 - 00:04:37:12
Unknown
We we're really fighting a battle, not just with Congress on the role of the agent, but there are congressional advisory agencies like Mid-pack and Commonwealth and Paragon. They're providing input to Congress, and they don't really understand the role of the agent. And so we have to tell our story. We have to tell our story better. Why do agents get paid?

00:04:37:12 - 00:05:00:05
Unknown
What is the role of the agent? There's this perception that agents get overpaid. And so, you know, you need advocacy. We need to tell our story. One of the things that I've learned from you recently about some of these advisory agencies is oftentimes they have representation from payers and providers, but no representation from distribution. Exactly. They really don't understand the role of the agent.

00:05:00:06 - 00:05:19:08
Unknown
In some cases they say, why do we even have an agent just do a direct enrollment. And would that really help people? And that's really the end. The end goal is to help people make a good decision. And if they're on their own, then they're going to talk to their neighbor. They're going to ask others that are uninformed what they're doing.

00:05:19:08 - 00:05:41:20
Unknown
And is that really the position that we want to be in? So we have NAB, a Medicare working group that SMBs is in a leadership role with. And we're so proud of the certification course. And many of you may not know that, but actually that was donated by SMS two years ago. And the Medicare working group has improved that year over year.

00:05:41:21 - 00:06:09:17
Unknown
And this year, Aetna announced that they were accepting the NAB certification course. So now all of the national carriers accept it. And we've seen a doubling of the involvement with the certification course. What I like about it is it isn't as confusing and time consuming. You think about those 2 to 3 paragraphs that you'd have to read on the app certification, and then you go to the answer, go now who's Mary, who's Joe, who's Jim?

00:06:09:18 - 00:06:32:07
Unknown
You have to go back and read it over and over. And you do that with 50 questions. It's tiresome. Yeah, I was I heard some feedback from people within SMS who have taken the new certification, and they were really pleased and impressed, and it saved them some time and got the same information out of it that they needed.

00:06:32:10 - 00:06:56:07
Unknown
And it was cheaper. And you got free CE credit and we paid for theirs. So they weren't concerned about it being cheaper. But you know, and also the money that that goes to NAB is used to support the broker, support the agent to support distribution. It's not going to support the carrier. It's going to support those of you that do business with us.

00:06:56:07 - 00:07:21:22
Unknown
So we if you haven't done your certification and you're obviously waiting till the last minute, but if you haven't, I would encourage you to do NAB. And if you haven't done it and you won't, you've already done your general certification, perhaps with with another vendor. Look at it for next year. You'll be pleased. And on the other hand, we're very active with Nyfa and historically has been more on the West side.

00:07:21:22 - 00:07:47:11
Unknown
They've done some long term care work too, but now they've formed a Medicare collective. And Mark and I are founding members of this Medicare collective. And we believe that having multiple associations telling our story is really needed because we're up against a lot of opposition, a lot of consumer groups, a lot of health care systems that would like to undo the very good work that we do.

00:07:47:12 - 00:08:07:21
Unknown
So one of the issues that the Medicare collective has addressed is what are the gold standards for call centers? How should we be performing that? We know that some people only want to buy through the phone. Others want to buy a face to face. So we know that selling by phone or enrolling by phone is part of our future.

00:08:07:21 - 00:08:36:21
Unknown
It's been part of our past for multiple products. But what's the right rules of engagement? What's the way we should be doing business? So far has published their gold standards and Mark will walk you through that in a moment. And also, we've been very active on the birthday rule that has found its way to 22 states and another four that are considering it and and addressing that through the National Association of Insurance Commissioners and trying to make a difference, try to change our industry.

00:08:36:21 - 00:09:00:16
Unknown
And we have a history of doing that. It has some us and and we've made some real inroads. And we'll share that with you a little later. Yeah. And before I jump into the gold standards, because I just want to walk through those so that people know the kind of thing that we're talking about. It's been interesting to be a part of the Medicare collective and just see what, what does advocacy in our industry really mean?

00:09:00:16 - 00:09:38:12
Unknown
And in practical ways? You know, we're asked to comment on the final rule, for example. So the set of regulations that come out from CMS every year helps get us access to CMS to tell our story to to be able to have the perspective of distribution. And in addition to that, you know, we're working to set standards for the industry as well, working with carriers, working with our agents and and within the Medicare collective, some huge percentage of Medicare distribution is represented.

00:09:38:12 - 00:10:00:18
Unknown
So it really does make a difference. And in the end. We're also working with regulators to make sure that we tell our story. But, you know, we're not unified as an industry. We have small carriers attacking large carriers. We have brokers attacking call centers. So if we're not even together as an industry, how can we win against outsiders?

00:10:00:18 - 00:10:29:01
Unknown
That would be opposed to the work that we do. So. So the Medicare collective is really about how do we be better as an industry? How do we work collaboratively with our competition, with various distribution methods, with various carriers, so that we do indeed represent our industry and that we move forward in the right way? Yeah. Great. So yeah, just on those Nafa defined gold standards for call centers.

00:10:29:01 - 00:10:55:19
Unknown
And this is again, something that we know call centers are important part of the distribution. We work with a lot of call centers. And in fact on the Medicare collective call centers are represented and helped to define these gold standards. So really what we're trying to do here is a lot of times if you're sitting inside of your own business, you don't really know what the definition of good is.

00:10:55:19 - 00:11:20:06
Unknown
So we're trying to help define those standards, both for the carriers to help enforce and for the call centers that we work with to understand what that definition of the gold standards they should be striving for. So it really, you know, it starts with the lead vendors that you're working with or how you're generating leads. If you're doing it yourself as a call center.

00:11:20:08 - 00:11:47:10
Unknown
And it goes on from there in terms of how the environment for the agents and, and, and how you handle consumers as well, and both during enrollment as well as post enrollment. Do you have support for consumers? Do you? Do you have a retention team? Those kinds of things that ultimately will drive the kind of quality that the carriers are looking for and consumers are looking for?

00:11:47:10 - 00:12:12:07
Unknown
So making sure that policies that are written actually place because you put them in the right plan and they understand the benefits and that we're improving persistency in plans over time, reducing churn and reducing CTM, reducing complaints to Medicare as well. So all those things are are the outcomes without getting into the details. But that's really what we're trying to achieve here.

00:12:12:09 - 00:12:35:23
Unknown
You know, so much of this, Marcus, do we really want to wait for CMS to regulate us because they really expect the industry to regulate itself. And so with their stepping forward and saying, here's what we think would be the gold standards to operating in the best interest of the client and, and then encouraging carriers to manage accordingly.

00:12:35:23 - 00:13:02:16
Unknown
And we have different carriers using different types of methods to manage quality. And it requires every call center to adapt to each carriers, you know, whim. But we believe that there are certain business models that just make good business sense. And that's what we're doing with the Medicare collective is really looking at what's in the best interest of the consumer, what are good business models that will withstand the test of time?

00:13:02:22 - 00:13:31:14
Unknown
Yeah, absolutely. So do you remember this? Of course I do. Yeah. Joe Namath, you know, I look at the Joe Namath commercials as is really a pivotal time in our industry, because that is where the merchandizing of extra benefits began. It was no longer about the need for your drugs to be covered or out of pocket costs. It seemed to be mass merchandizing, all these extra benefits.

00:13:31:14 - 00:13:53:19
Unknown
And and so we're going through a change now where there's a contraction that's happening for the last four years where it's really returning back to the really the purpose of insurance, which is where we needed to be all along. But, you know, he's in the rearview mirror now. I think he's out, you know, Hawking hearing aids instead of insurance.

00:13:53:19 - 00:14:23:01
Unknown
But but this hell happened during the pandemic, and there was so much money thrown at, at organizations to drive enrollment at this time. And there were so many television commercials, one after another, that were all about merchandizing instead about, you know, that we provide excellent health care. And so it's kind of, to me, a little refreshing that we're back to the purpose of insurance and, and not all of these extra benefits.

00:14:23:02 - 00:14:44:16
Unknown
And I would say that's true both in terms of communication and marketing of the products as well as the products. And the carriers are much more focused on the core insurance. Yeah, absolutely. It was the entire vertical that got caught up in the extra benefits. It wasn't just a distributor or a distributor type. Even the carriers were out promoting all their extra benefits.

00:14:44:18 - 00:14:57:21
Unknown
We really lost sight of where our purpose mission. So that's a positive thing. I think we're we're getting back to focusing on the purpose of what these, these plans are all about.

00:14:57:23 - 00:15:18:07
Unknown
So you want to talk a little bit about call center still and some of the trends in the industry. Yeah, there's been a real shakeout in especially in the call center space with, you know, there was so much money thrown at call centers during the pandemic. It was the way for a consumer to engage with the health care system when many agents and brokers were idled.

00:15:18:07 - 00:15:42:15
Unknown
But over time, we didn't achieve the lifetime value of a customer that was expected. The complaints were still higher, the churn was too high, investors lost confidence. And so we've seen a real change. Those call centers that remain obviously have a stronger business model than those that that left the industry. So together health, which was behind the Joe name with commercials.

00:15:42:15 - 00:16:07:21
Unknown
So they changed their name a couple of times. But together health, they're no longer in the business. The nation's largest call center, Go Health, has filed for bankruptcy and and winding down operations. And a number of the publicly traded call centers, they've seen their stock really beaten down. So whether it was regulation or investor, but it really wasn't working the way that maybe it was projected to work.

00:16:07:22 - 00:16:29:09
Unknown
So with that, I would expect to see less competition in the in the environment. So whether you're a broker or you're a call center or you're a career agent, I would expect that there would be fewer distributors and that should lower the cost to generate a lead. It also probably results in fewer unwanted phone calls to to a consumer.

00:16:29:09 - 00:16:54:10
Unknown
And I really think those call centers that are remaining, they're really under a lot of pressure to make sure they focus on quality, because ultimately the lifetime value of the customer is extremely important and meeting the needs of the customer. So it's not so much a focus on quantity and market share. It's much more on quality and on good claims experience and overall good compliance.

00:16:54:13 - 00:17:22:10
Unknown
So the game has shifted, if you will. So whether you're a broker or you have other some other distribution method, we're in a different environment that we were just a few short years ago. Yeah, absolutely. And I know just working with some of our call center partners, there is a huge emphasis on quality, both from the carrier level, but also just fundamentally for the business itself, ensuring that that quality is where it needs to be.

00:17:22:13 - 00:17:40:00
Unknown
And not everyone wants to buy face to face. In fact, there are a lot of people that would say I'd rather not meet someone at a library or a coffee shop, or have someone come in my home. I would rather purchase through the through the phone. So if you're opposed to call centers, you should realize that there's a place for them.

00:17:40:06 - 00:18:09:06
Unknown
And and so we certainly support multiple distribution models. Absolutely. Okay. So all this starts with the carrier right. So what's happened at the carrier level in terms of maps that's affecting things in distribution world. Yeah reimbursement rates have been a big issue. We've had a couple of years where there was no increase in reimbursement despite double digit medical trend.

00:18:09:07 - 00:18:43:12
Unknown
Then we had about 5% last year and like 2.5% increase in reimbursement still below where inflation is so curious, have to price for that. They have to realize that without the reimbursement rates coming through, and they have about three levers that they can generate revenue from. But if in in combination that they're not enough. That results in plan exits, it results in benefit degradation and and even noncommissioned plans that we've all experienced the last few years.

00:18:43:12 - 00:19:09:16
Unknown
So carriers are trying to make sure that they operate profitably. And with that we've seen the contraction. Now quality stars is also changing the way it's measured. And so now it's more of a focus on outcomes as opposed to just metrics that carriers would submit before. It used to be that a carrier could just notate that this person has these health conditions, and therefore they'd get more reimbursement.

00:19:09:20 - 00:19:39:10
Unknown
Now, in today's world, you have to have evidence of that. You have to document it. And then in tomorrow, the future, the cares actually have to demonstrate an improved outcome. And that totally changes how a carrier looks at the business, how your products work, and the role of the agent. We've also seen a huge amount of of planned terminations last year in the neighborhood of two and a half to 3 million people had to shop for a new plan because their plan was termed.

00:19:39:12 - 00:20:03:14
Unknown
Will probably be in that same neighborhood again this year. And we don't have all the statistics in yet. But just three carriers alone had already gotten us to 1.3 million. So that's not counting regional carriers. So we still have a fair amount of reimbursement or reimbursement fatigue, if you will, where the carrier saying they have to keep pulling back until they can indeed operate profitably.

00:20:03:14 - 00:20:26:11
Unknown
So almost every carrier is contracting with the exception of one. We have one carrier that's actually going after more states. And we really think competition is key. And so thank goodness we do have competition. And and for those carriers that are in the market, we know that ultimately it's the consumer and the ability to provide care to the consumer.

00:20:26:11 - 00:20:53:17
Unknown
And they have to calibrate annually, you know, how to do that and how to do that. Right. So you'll see benefits being degraded in some cases. Maybe back to core dental vision and hearing, but much more focus on the network and on your co-pays and your formularies. There's a lot of moving parts in our space, and the carriers are trying to trying to compete and yet the same time make a profit.

00:20:53:21 - 00:21:23:17
Unknown
Great. And so all those moving parts, plan terminations, changes and benefits, changes in formulary. All the more reason why having a knowledgeable guide, a broker and agent is, is really, really important for consumers and good technology to write. And efficient technology is an absolute must. And we'll talk about that in a little later. Yeah. Yeah, absolutely. So you want to talk a little bit about from your advocacy work, what's happening.

00:21:23:17 - 00:21:49:08
Unknown
Some of the things that have really affected agents over the past couple of cycles. And and what's being done about it. There were so many upset agents last year when you saw so many cascading, if you will, during the AEP of a plan no longer providing commission carriers pulling enrollment methods. And then another carrier would then follow suit, and then another carrier would follow suit.

00:21:49:08 - 00:22:09:21
Unknown
And pretty soon the agent doesn't know what they're going to be recommending to a consumer. And they may have already made a decision with the consumer, but by the time they actually did, the enrollment, that was no longer even an option. So there was a lawsuit by the state of Idaho against a carrier and a number of states.

00:22:10:00 - 00:22:34:09
Unknown
Kind of added to that, saying, we agree with with the state of Idaho, that what's happening in our market with with commissions being pulled and, and enrollment methods being denied as it was really manipulating the market, not just the agent but the consumer. But CMS came in and claimed supremacy, saying this is a federal program. States back off, you have no influence.

00:22:34:09 - 00:23:06:08
Unknown
And that was very concerning because we saw what was happening and we didn't like it. But sure enough, in June of this year, CMS came through and said, we've heard you and carriers, we'd like you to share with us what your compensation plans are for 2027. And I think that's why you've seen the noncommissioned communications coming out that are being additions to a carrier contract is the carriers are trying to play their cards now instead of during AEP.

00:23:06:11 - 00:23:35:10
Unknown
And also CMS was considered more of a shot across the bow said. We would also be concerned about enrollment methods. If you're suppressing enrollment methods, we would consider that something we may sanction a carrier on. We'll be watching. And and so CMS when when Mark and I met with them not that long ago, they were thinking of the carrier enrollment method and Medicare gov.

00:23:35:10 - 00:23:59:07
Unknown
And those two enrollment methods remain available. So they didn't really understand that agents use external enrollment systems that can compare one plan to the other. They really didn't understand that, but once they did understand it, it's really good to see that they've really said we're watching, and we don't like the fact that a carrier would be manipulating enrollment methods.

00:23:59:07 - 00:24:24:05
Unknown
So so there was some good news that came out of it. And the role of the agent, the advocacy, your associations fighting for your business really did make a difference. It just took a little more time to realize what had happened. Yeah, yeah. So we can't guarantee that there will be a zero of that, that kind of behavior this year, but hopefully a lot less of it we see in the past couple years.

00:24:24:06 - 00:24:27:04
Unknown
So great.

00:24:27:06 - 00:24:52:06
Unknown
Okay. So one of the big topics this year has been benefit activation. So the role of the agent doesn't end at enrollment right. It starts to move forward into how does the consumer how does the member actually use the benefits in their plan. So let's talk a little bit about benefit activation and the impact it's having on agents and brokers.

00:24:52:07 - 00:25:20:14
Unknown
You know Mark, when we talk to elected officials and CMS, the perception is that the agent is the producer, the agent is the roller. And the question is, why does an agent get a renewal commission? What does the agent do other than make a one time purchase decision for a consumer? Or is the agent only thinking of their own income by switching people from plan to plan that the agent is the cause of churn.

00:25:20:14 - 00:25:48:23
Unknown
So telling our story has been has been pretty important. And this benefit activation really comes about because the quality of stars is changing to outcome based, and the carriers realizing that they need the agent to be engaged with the consumer after enrollment, that actually they start using the product. And one carrier indicated that they had 1.5 million of their members had not seen a doctor in 18 months.

00:25:48:23 - 00:26:35:03
Unknown
Well, how can you produce an outcome if they won't even answer the phone when the carrier calls? Right? And so too many consumers were blocking those calls, afraid of that 800 number coming through. Was really my insurance company or was it someone else. But the agent has that relationship. So we're really confident that with benefit activation, we also tell our story better to regulators and legislators, saying the agent is necessary in this health insurance vertical to not only help the people, help people make a good decision, but to help them practice good health, to get a doctor to meet with a doctor, to complete a health risk assessment, to start using their benefits, that'll cut

00:26:35:03 - 00:27:08:01
Unknown
down churn, that'll cut down rapid dis enrollments. We think it will cut down complaints and and really stabilize our industry. And we're using that benefit activation as a way of helping tell our story better that the agent indeed is the trusted advisor. The agent has the relationship. And when the agent engages post enrollment. And many brokers already did this, but they weren't getting paid for it, now there will be a fee, and many carriers are now implementing this benefit activation.

00:27:08:01 - 00:27:33:18
Unknown
So you'll hear about this from various carriers. It's been pushed fast into the call center space, and it's finding its way now into the broker space. But benefit activation is something that ultimately is going to be a driver of better outcomes. Yeah. And I really think about it is getting back to the fundamentals of value based care, which is the premise of the Medicare Advantage program.

00:27:33:19 - 00:27:56:05
Unknown
Right? It's about health outcomes. And so this is really the the start of that journey towards a better health outcome. And, and the carriers are going to be rewarded for that. And so we we play an important part in that process. And I believe a lot of these activities can also be completed by a non licensed agent. Because it's not quoting an enrollment that we're talking about.

00:27:56:06 - 00:28:25:20
Unknown
We're talking about the the actual usage of the product. And so there will be various methods applied on how to accomplish the objective without necessarily stealing time away from the agent. Yeah. So I like this because I feel like it's really aligning everybody's incentives, the carriers incentives, the the members incentives and the, the agents incentives in terms of driving quality, like you said, about rapid dis enrollment and persistency and health outcomes.

00:28:25:20 - 00:28:51:14
Unknown
So I really appreciate these programs that are being put in place I agree. Okay. So from a positive trend to maybe something that's a little bit of a challenge right now. So tell us about what's happening in the partnership space. Yeah I think the past few years. Thanks, Mark. By now you would have seen a knock letters going to consumers that would show the premium increases.

00:28:51:18 - 00:29:16:06
Unknown
You know, we had the the Inflation Reduction Act that shifted the burden away from the federal government onto the carriers. Well, the carriers received the Premium Stabilization demonstration, a three year demonstration project, which is the longest a demonstration project can last as maybe a year gambit a couple of years ago. But that program is no longer in existence.

00:29:16:06 - 00:29:57:00
Unknown
And so the full burden is now with the carrier. So what have they done? They've had to make changes in standalone part D, you've seen that in a pretty obvious way. Increase premiums. Some premiums have doubled. And even more we've seen formula changes, tier changes. I do expect that we'll have more people hit the out-of-pocket maximum this year, 2027, than we did in 2026 because of all the changes within the product, in addition to the premium, you know, going back 20 years, when this program started part D, we had 50 carriers in the market, each carrier offering three plan choices.

00:29:57:00 - 00:30:25:14
Unknown
So essentially in a given area you could have 150 choices. Now we're down to five carriers. Not even every carrier offers two plans. And I think they're almost all of them are noncommissioned or they're paying some partial commission. Fortunately, renewals continue for most of the carriers, but with the sticker shock that's coming through this year, you know, we know that part D is indeed I can't describe it any better than a mess.

00:30:25:14 - 00:30:49:01
Unknown
And it's really become a product desert where no new plans are being introduced. So one of the things that we're trying to do is to encourage competition. When part D first came about, we had a risk corridor that gave three years where carrier couldn't lose money. There was like a guarantee from the government that they wanted competition. And and that's where the program began.

00:30:49:02 - 00:31:12:05
Unknown
There's only one lever on reimbursement. It's just money and money out. And so what's the loss ratio? And if the loss ratio is high by things like the impact of the GOP ones or other experimental drugs, other expensive drugs, you know, can that be offset by favored nation status and Trump and some of the other things that are being done?

00:31:12:10 - 00:31:42:01
Unknown
All I can tell you is for 2027, it's a mess. And I know CMS is now proposing an RFI for to improve the environment that we have, but that wouldn't affect us in 2027, maybe in 2028. So, you know, yes, we may see some consumers shift their attention to Medicare Advantage because of affordability. We're seeing some part D premiums as high as the Medicare supplement premiums.

00:31:42:01 - 00:32:11:16
Unknown
So it puts a consumer in a really tough spot. And with the POWs pulling out of rural areas, there may not be other options. So will people go without part D and face a penalty? And now they're paying retail. You know it's a real it's a real shakeout that's happening in the party space. Yeah. We've seen a lot of variation in premiums over the past few years from very low cost, $0 low cost plans to higher cost plans in terms of premiums.

00:32:11:19 - 00:32:38:10
Unknown
We'll see where it all shakes out. We don't know yet. But it's it's one thing that you've educated me on is because the Inflation Reduction Act was an act of Congress, it was legislation. There's only so much CMS can do to affect what's happening in the part D space. So it really is going to require legislation again to to change or reverse some of the impacts of the inflation reduction.

00:32:38:11 - 00:33:21:11
Unknown
And with that it'll be an election year issue in midterms is the affordability of of standalone part D coverage. I would expect that when people start getting their notices and that's happening right now, they're going to be they're going to be concerned. Yeah, absolutely. Okay. So that's the that's the part D space. So one of the things before we leave that mark is one of the things we're encouraging for legislation or regulation is introducing the risk corridor, which is what we had when part D first came about, where you could be guaranteed that you wouldn't have a loss in the first three years to encourage competition.

00:33:21:13 - 00:33:48:16
Unknown
Another thing that we're advocating for is looking looking at the part D program with more than just one lever on reimbursement, perhaps introducing quality stars. So if a carrier does a great job, there's another way for them to to generate revenue. But currently with only one revenue method, we're seeing the effect of the Inflation Reduction Act without the premium stabilization demonstration.

00:33:48:16 - 00:33:57:21
Unknown
And it's a it's a big issue facing agents this year.

00:33:57:23 - 00:34:22:01
Unknown
Okay. So that's part D. Let's let's turn the page and talk a little bit about Medicare supplement. So of course SMS is a big player in medicine distribution where the number one distributor for a number of the large national med carriers were big believers and and Medicare supplement. So what's been going on because there have been some changes in that world as well.

00:34:22:03 - 00:34:46:14
Unknown
They're happening at the state level. So what's been going on there? Well, the birthday rule has been marching its way through not only blue states but red states. And we've had 22 states adopt the birthday rule and another four that are actively considering the birthday rule. And I can see why a consumer group would be advocating for it, because how many people get stuck in a high premium Medicare supplement and they can't afford it any longer?

00:34:46:14 - 00:35:09:19
Unknown
So your heart goes out for those people that that don't have the ability to continue to pay. And every agent has clients that are in that situation if they're in the Medicare supplement market. Yet at the same time, carrier has to make money. And if there's an adverse selection that happens when the birthday rule is applied where people can move without underwriting.

00:35:09:19 - 00:35:32:17
Unknown
And so what does a carrier do if they're in a state with the birthday rule? They don't want to be the lowest rate. If they're the lowest rate, they're going to take all of the loss ratio business. The first year loss ratio business on birthday rule is about 120%. And if a carrier has 120% first year loss ratio, pretty much guaranteed, they'll never be profitable, right?

00:35:32:18 - 00:35:57:04
Unknown
So carriers have a tendency to pull out of states that adopt a birthday rule. They try to raise their rates, they lower commissions, they're all operating in a defensive posture. And that's not encouraging growth. That's actually punishing really the entire electorate within the state that says what the birthday rule, you're just going to pay more and ultimately creates a monopoly.

00:35:57:04 - 00:36:19:03
Unknown
We're already seeing monopoly on the part. D do we really want that in the in the other states. And so who leaves? The first ones to leave are the small carriers, right. And only the large carriers remaining. And that would essentially create a monopoly. So so that's not a good outcome either. And so we've been advocating for change, advocating a couple of ways.

00:36:19:03 - 00:36:43:15
Unknown
And I think our next slide would give us a little more information. So this tells you what states have actually adopted the birthday rule. Quite a few red and blue. And if we go to the next slide it shows you by year, you know what carriers have actually implemented some version of the birthday rule or open enrollment or guarantee issue over time.

00:36:43:17 - 00:37:06:12
Unknown
It's most of the states now are in that in that category. So it's really not supported with carrier just saying, well we'll just focus on another state and we'll just pull out of that and get more and more states that fall under that. Another solution is really needed. And so we go to the next slide. I think we talk about two solutions that that we're looking at.

00:37:06:13 - 00:37:38:19
Unknown
One is the high deductible G. If you're an agent you already have this in your portfolio in every state. And a number of states have ancillary products that you can wrap around that high deductible G. So with high deductible G, consumers facing $2,950 or so for a deductible, that's a that's a lot of exposure for consumer. But using a creative method with ancillary products like hospital indemnity, cancer recovery care, you can cut that essentially in half.

00:37:38:20 - 00:38:05:00
Unknown
And with that, the agent's commission is about the same. The consumer has a product that doesn't have exposure to rate increases anywhere near what a G or an N would have. So historically, high deductible G already has half the rate increase. So if a state has a 15% rate increase on, you'll typically see the filing at 7.5% on the high deductible G.

00:38:05:05 - 00:38:31:07
Unknown
And the answer products historically don't have a rate increase at all. So that's one thing that we're proposing as an agent today. You can do this in many states, right. But we're also advocating to create a unique product in all states that would even those states that don't allow an ancillary product. And we're having success in the work that we're doing with insurance commissioners saying they're open to the idea.

00:38:31:07 - 00:38:55:14
Unknown
So we're currently designing that product, will be presenting it to states and to also insurance carriers for pricing. And and maybe there's a third product choice besides GNN that we can use. And so expect to see that next year. But for today, if you're in a state that allows ancillary sales, look at that high deductible G as a third plan choice.

00:38:55:15 - 00:39:19:07
Unknown
Right. So so agents and brokers can do this today in most states. Right. By by putting it together themselves, we're advocating for something that would be a little bit more formal. And you're working with state departments of insurance carriers and others to try to solidify this would be a standard design, as opposed to every carrier having their own unique ancillary plan would be a standard design.

00:39:19:09 - 00:39:45:15
Unknown
In a perfect world, auto adjudicated like the Medicare high deductible G claim would be auto claim payment. That would be what we're we're striving for. But we're getting a good response. When we met with the Nicey and given insurance commissioners, they're saying, that's interesting. That's something we can do. Yeah. Okay. So we know about the impact of the birthday rule and guaranteed issue on the states.

00:39:45:16 - 00:40:09:13
Unknown
There are a couple of things that we've been advocating for in terms of medicine world. You want to talk a little bit about those. Sure. And in addition to what we're we're advocating for, there's also one thing that many agents can do today is find a way to manufacture a third product choice that's affordable coverage for for your client, especially in rural areas where PPO plans are being removed.

00:40:09:13 - 00:40:44:03
Unknown
And maybe a G and an N is too expensive or people can't afford the rate increases. We've seen 15% rate increases now multiple years in a row. And if you're in a state that's had even more, especially birthday rural states where rate increases have even been higher, it's a real concern. So what we're seeing are agents increasingly using the high deductible G, especially in states where ancillary coverages are available to wrap around the equivalent of a hospital indemnity, perhaps a recovery care in a cancer package with a high deductible G to create affordable coverage.

00:40:44:03 - 00:41:15:05
Unknown
And looking at those plans, a high deductible G typically has half the rate increases, or regular G or an N. Combined with that, these ancillary plans don't have a history of rate increases. So if a consumer is concerned about affordable coverage or cannot absorb rate increases, this is a really good third strategy. We're encouraging agents. They can do that today in most states to to start packaging and finding a creative way to present affordable coverages.

00:41:15:06 - 00:41:55:05
Unknown
On the efficacy side, we're going to states and just return from the nice meeting a couple of weeks ago in Columbus, Ohio, and presented to seven states the idea of creating a unique ancillary product that would take the benefits of those three that I mentioned into one, standardized that product across carriers and introduce that whether you're in a blue state or a red state, is inviting carriers to file rates for supporting a plan like that and taking that high deductible G deductible down from 2950 to something, and result be roughly half of that as another product choice.

00:41:55:06 - 00:42:26:01
Unknown
We're getting good reaction from the states. And so we're currently working with an actuarial consulting firm to design this product and then present it back to carriers, as well as to the doors to say, here's an idea that we can do in short order to give affordable choices. It doesn't require legislation, it doesn't involve CMS. It would be the state saying, we're open to filings of this unique product that would wrap around the Medicare supplement.

00:42:26:01 - 00:42:48:00
Unknown
So it's not an innovative benefit because we know some states won't approve an innovative benefit. It'd be a uniquely designed product that would help draw down that out of pocket exposure. The end result is agents would have a commission that would be roughly equal with what they're currently receiving with a G, but now you've provided an affordable choice to the consumer.

00:42:48:00 - 00:43:11:01
Unknown
And in a perfect world, the ancillary plan would also be auto adjudicated with the claims so that there's no paper claims. And if the Medicare supplement pays, this ancillary product would pay in a perfect world. And that's something that would come as this matures as the product is, is designed and solidified and accepted by by the state regulators.

00:43:11:02 - 00:43:45:10
Unknown
Yes. And the technology that would be really up to the carrier. Can they can they invest on the tech side to auto adjudicate those claims. But that would be very easy to do business with, with the consumer. So we think the idea has got legs and we received a very favorable response. That doesn't mean a definitive response. But just now we go to the next step, file a product, get their feedback, see if the pricing actually works, and it's that all stakeholders win, the carrier wins, the consumer wins and the agent wins.

00:43:45:11 - 00:44:05:21
Unknown
That's what we're trying to do. What I like about it from a consumer standpoint, is both the reduction in total premium, but then importantly, the protection against high rate increases. Yes. And we want the agent to get paid. And so many of these states that have adopted the birthday rule, one of the first things they do is reduce compensation.

00:44:05:21 - 00:44:42:01
Unknown
And if the agent can't make money, then it all kind of falls apart, right? Yeah. The second area that we're emphasizing for advocacy is the state of Minnesota passed legislation that went into effect August 1st. That legislation essentially allows the carrier to levy a surcharge when a consumer exercises the birthday rule. And so we're taking that to other states, saying, here's a blue state that has allowed this type of legislation to allow a carrier to price for the adverse effect of guarantee issue, if you will, the birthday rule.

00:44:42:07 - 00:45:04:10
Unknown
So we're taking that to other states, saying, look at this legislation. Not that there's anything unique about the Minnesota legislation to say carbon copy of that devastate, but the idea that a carrier could levy a surcharge to offset the adverse effects of, you know, guarantee issue is a breakthrough. And so we're encouraging states to look at that as well.

00:45:04:12 - 00:45:36:19
Unknown
Great. Okay. So turbulent times a lot has happened over the past several years that has affected agents, affected consumers, has affected carriers. What's the bowl case. What's the what's the silver lining. What what can we point to in terms of positive things that are happening or what may be around the corner? Well, I guess the good news is you've got a couple of associations that are working hard on the agents and the consumers best interest.

00:45:37:01 - 00:46:04:21
Unknown
And in working more effectively now than perhaps ever before, you have the baby boom generation. That's still the driving force. There are so many people I think will have, what, 4 million people aged into Medicare this year. There's so many people aging in the demographics alone command more attention. And if there's a shakeout, that means fewer agents, fewer producers, but yet a bulging population.

00:46:04:21 - 00:46:29:02
Unknown
So with change comes opportunity. But the demographics try a lot, drive the finances, they drive the demand. And so with that, that's that's really something that an agent should be confident of. The I've also I guess I've been around long enough that I've seen cycles and we're going through another cycle. What you see today isn't necessarily where we'll be a year or two from now.

00:46:29:02 - 00:46:58:09
Unknown
So stay the course knowing that things have a way of repairing or going up and down and also the midterm election. Even if we do have divided government, it's not such a bad thing when it seems to me at least my my own biased perception. Perception is that when one party gets in power, they overplay their hand. And so when we do have divided government, maybe they have to talk to each other and find a middle ground.

00:46:58:09 - 00:47:31:22
Unknown
And so hopefully that's what we have. If we do have divided government after this midterm election, it isn't necessarily a bad thing, at least for the health care system. And then also, I think it's positive that CMS is recognizing what's happening, especially in part D. And they are asking for suggestions. They're asking for information. I think this will be a big issue in midterms, but it's also a big issue for 2028 is if we're going to go through a struggle on standalone part D in 2027, what's the solution?

00:47:31:22 - 00:48:03:20
Unknown
What's going to be the change that we implement for 2028? But I think it's encouraging that CMS is recognizing the issue and whether that requires legislation or just more regulation. I'm not sure, but I think it's healthy that they're asking for input. Yeah, absolutely. And I would add, and I know you've been to some of the carrier rollout meetings, and I have as well, and getting feedback from the team that the curious seem a bit more optimistic going into this EP in terms of plans and plan design.

00:48:03:21 - 00:48:27:19
Unknown
They they've learned some lessons over the past few years, and I think that stability and quality are kind of the focus areas and ensuring that that maybe we will see we won't see quite the ups and downs that we've seen in the last few years. The carriers are definitely on board and striving in that direction as well. And it's important that all of us realize no shortcuts.

00:48:27:21 - 00:48:50:14
Unknown
You know, the applied use of AI will find its way to our our world, where even every recording of a phone call can be submitted to a carrier. Our environment is changing. With that is, we just have to do a really good job of helping people, understanding their needs, giving them solutions that help them, and then service after the sale.

00:48:50:16 - 00:49:18:02
Unknown
Yeah, absolutely. Okay, so with that brief commercial at the end, if you've lasted this long, then if you're not already working with SMS, why why would somebody want to work with SMS? Well, we've been around for 44 years, so I think you could say we withstood the test of time. I've been through a few of those three year cycles, and we have a great reputation and a leadership role within our industry, really working on your behalf.

00:49:18:02 - 00:49:36:00
Unknown
So we would ask you to do business if you're not already. We'd ask you to do business with SMS and to call us and to learn more the service. Maybe it's just the Midwestern work ethic, but the service and the support that you get from SMS is unparalleled. And of course, we're in all we're in all 50 states.

00:49:36:02 - 00:50:01:10
Unknown
Yeah. Our technology. I'll let you talk about it, Mark. But our technology is is really unique. We started investing in technology well before the pandemic, where suddenly you had to use technology just to enroll a customer. We were a leader in technology. We continued to be a leader with our own proprietary software. Yeah. So people who work with us know LA Pro.

00:50:01:10 - 00:50:44:21
Unknown
It's our proprietary best in class quoting and enrollment platform really does a lot more in terms of scope of appointment, helping somebody really manage their agency, manage their business. We continue to invest in LA Pro and we're investing in other areas as well. So we rolled out an enhanced version of the My Ms. website last year, made big improvements this year and and are now exposing really important data for our downline agents and advisors and agencies about their business through through that, as well as being able to access marketing content and things like that as well.

00:50:44:21 - 00:51:09:10
Unknown
So continue to to push on technology and, and the importance of continuing to evolve as the industry evolves as, as consumer expectations are evolving as well. You know, one of the things I love about our technology is with commission issues, especially on part D, saving valuable time. How can an agent afford to spend a lot of time like looking up drugs?

00:51:09:10 - 00:51:31:11
Unknown
And so our self-service feature in LA Pro, where a client can upload their information and the agent can spend the time focusing on solutions as opposed to data collection, is very time saving. And also our self enrollment tools allow an agent to spend their time on products where they make money and not spend their time on products where they don't make money.

00:51:31:11 - 00:51:58:06
Unknown
And if you've been servicing a client for 15 years and all of a sudden you have to say, I don't get paid, so I don't do this. This really a tough conversation, right? And our tools, you can use those tools, if you will, to avoid necessarily having that conversation. And if you use if you use our tools for self enrollment on part D, the agent retained agent of record versus sending them to Medicare.

00:51:58:11 - 00:52:21:06
Unknown
Gov to self agree. Another thing I think that makes us really unique is we're a health and wealth story, not just one or the other. And many agents as they build their book of business at some point, all the transactions they want to slow down and many of them get into annuities, get into life insurance. They don't have to necessarily work with another party.

00:52:21:06 - 00:52:49:16
Unknown
They can still use our technology, still use our our relationships, our service and our carrier contracts to really change their business as they go through. Perhaps they brought a son or daughter into the business. They do the transactions. But yet as you get a little older, maybe you want to focus on on life insurance or annuities. You can do that with SMBs, and you don't find that solution and that opportunity with our competition.

00:52:49:17 - 00:53:04:21
Unknown
Absolutely. All right. Well, with that, I think we'll wrap it up. Good luck to everybody this AEP and and look forward to enabling and seeing all of your success this year. Thank you Mark. Thanks everybody. Thank you for your business.