Key Points:
Medicare Advantage plans often make more money for insurance carriers
This has led to (in most cases) higher commissions for agents and brokers for Medicare Advantage enrollment
Many insurance carriers are removing commissions for standalone Medicare Part D plans, further pushing incentives for Medicare Advantage enrollments
Medicare Advantage is a private alternative to Original Medicare that has been growing at a rapid rate in the last few years. As of 2024, CMS estimates that over 50% of Medicare Enrollees are now in Medicare Advantage plans. This number is projected to rise to 60% by 2030. [1]
Insurance carriers have been able to get these enrollment numbers with aggressive marketing campaigns and by often incentivizing brokers and agents with higher commissions for Medicare Advantage enrollments. Further changes to broker commission structures may push even more people into Medicare Advantage in 2025 and beyond.
In this article, we’ll dive into how the Inflation Reduction Act and changing Medicare market conditions may be leading insurance carriers, brokers, and agents to enroll you into a plan that may not be best for your needs.
Part 1: Medicare Advantage is Often More Profitable for All Parties
While there is no perfect way to track profitability in this industry, data has shown that Medicare Advantage plans have the highest gross margins among any type of health insurance. [2] These numbers show Medicare Advantage has consistently been a huge source of revenue and growth for private health insurance companies.
Because of these high margins, they have been incentivizing brokers and agents to push Medicare Advantage with higher commission rates. [3] With few exceptions, the commission a broker receives for enrolling someone in a Medicare Advantage plan is higher than the commission they receive for enrolling someone in a Medicare Supplement and Medicare Part D plan.
The decision between these two options should always be holistically evaluated based on a Medicare enrollees health needs, not because insurance carriers and brokers can make more money on one of the options. We at NJ Life and Health have always operated on what is best for the client, not what will line our pockets the most.
But a recent court decision could add even more momentum to Medicare Advantage enrollments.
Part 2: The Inflation Reduction Act
The Inflation Reduction Act is a massive piece of legislation passed in 2022 that covers many aspects of our federal budget. When it comes to Medicare, it primarily focuses on prescription drug coverage. We have written about this topic extensively, and for a more fulsome evaluation read our article on the subject: (Link)
For a short summary, the Inflation Reduction Act has a multi-year rollout of changes to Medicare Part D like eliminating the coverage gap or “donut hole”, allowing Medicare to negotiate prescription drug prices, and allowing enrollees to pay their annual prescription costs in monthly installments.
For 2025, the biggest change from the IRA is putting a $2000 cap on prescription costs for Part D enrollees. The brunt of these additional costs will be picked up by insurance carriers. [4] Insurance carriers responded by signaling they would significantly increase the premiums of their standalone Medicare Part D plans. Plans that were $0-$20 a month could now potentially cost $50-$70 a month, if not more.
CMS responded to these increased premiums by creating a $7 billion dollar “premium stabilization” program to try to keep costs low. [5] Insurance carriers by and large still don’t believe this is enough. They decided to take it a step further and sued CMS to remove commissions from many standalone Part D plans. As of the writing of this article, the court decision still stands.
Part 3: Removing Part D Plan Commissions
In late August, Centene, a major Medicare insurance carrier that owns multiple insurance outfits, shook the insurance world. They announced that they would no longer be giving commissions for new standalone Part D enrollments AND would be removing legacy commissions as well. [6] Simply put, there was no incentive for brokers and agents to sign up people for Centene Medicare Part D plans, or keep them enrolled in the ones they currently were in. A few other insurance carriers have stated similar plans, if they weren’t already in effect.
Medicare Part D commissions were already low, often being a break-even or loss proposition for many independent brokerages. But Medicare Part D is often the most confusing part of Medicare, and a yearly evaluation is necessary to help clients not have surprise prescription costs. Taking the wrong Part D plan can lead to massive expenses and potentially not having vital medications covered. It is a process that almost always requires expert guidance.
Moreover, we are entering one of the most confusing years ever for Medicare Part D due to the coming changes implemented by the Inflation Reduction Act. A Part D evaluation from a trusted Medicare broker is incredibly valuable to Medicare enrollees. But it currently looks like brokers will in most cases not get paid for providing this service in 2024. Health Agents for America President and CEO Ronnell Noal has said, “The consumer deserves to choose a professional, if they want, and then the professional deserves to be paid. We shouldn't be asked to work for free”
This will lead many brokers to have to choose between offering a free service that may be best for their client or potentially pushing people into Medicare Advantage to continue to receive commissions. Brokers and agents were already highly incentivized to enroll people into Medicare Advantage, and that incentive is only growing. Many agents and brokers will have to lean towards Medicare Advantage just to keep the lights on.
What can you do?
The biggest thing you can do is read your Annual Notice of Changes and continue to support your independent Medicare broker. The fulsome Part D evaluation brokers provide you is incredibly valuable, and you should be open to potentially paying them a small fee for providing it if there are no commissions. We here are NJ Life and Health will always have your best interest at heart, but we also have to keep the business afloat. We will be updating you with more news as the situation develops.
Sources:
1. Reasons MAPD has more enrollments
2. Gross Marging
3. Commission Structure
4. Insurance Companies Brunt Costs
5. Premium Stabilization
6. Centene
7. NABIP Quotes
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