| Big plans to change the way how the private Medicare sector pays brokers and agents are underway and set to appear in the Federal Register on Friday.
The Centers for Medicare & Medicaid Services (CMS), an arm of the U.S. Department of Health and Human Services (HHS), has included the compensation proposals changes in a batch of regulations that deals with the governing rules of the Medicare wellness program, its incentives and the provisions meant to prevent and attack fraud.
The addendum targets current compensation practices of brokers and agents who sell Medicare Advantage plans -- commercial, CMS-subsidized plans that replace traditional Medicare coverage -- and Medicare Part D prescription drug plans.
A yearly “fair market value” limit for producer compensation is what CMS wants, states the proposed regulations.
In 2014, $400 per year may be considered the fair market value. A plan possibly paying a first year commission that was any amount less than or equal to the fair market value limit, officials say.
Commission increase could reach up to 35 percent of the fair market value limit in the following calendar year and the subsequent years. For instance, if in 2014, a producer sold a plan and collected in commission equal to $400, or collected 100% of fair market value, and if the fair market value for 2015 rose to $500, the 2015 year commission would be $175 or 35% of $500 and not 35% of $400 fair market value of previous year, officials say.
Many current plans pay 50% in renewal commission for the first-year commission during policy years two through seven, followed by a 25% of the first-year commission in the later years
CMS goal is to simplify the commission calculations and level out the playing field. The way to do this is by setting all renewal commission to 35% of the fair market value limit, officials say.
To further even out the field, official want to cap out referrals fees at $100 for producers; which, CMS recommended a $100 cap in a memo in 2011.
This recommendation is due to the different ways carriers handle referrals, officials say.
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Question: Will overhauling the Medicare broker compensation even out the playing field, or will it hurt the industry and discourage top producers from reaching or exceeding their goals?