For years one of the fantastic things about our Medicare Supplemental carrier has been Level Commissions. In other words, you get the same percentage in years 2 and for as long as they keep the plan as you do in year one.
For most business this remains true. There is now one exception. When replacing Medicare Advantage (HMO) Plans the commissions will only be payable for 6 years. This is due to claims exposure (see home office memo explaining this below).
To: All General Agents
From: Chuck Mankamyer
Re: Guaranteed-issue Medicare Advantage Commissions
Date: September 15th, 2010
As you know, we have an excellent opportunity in the coming months to write an extraordinary volume of additional Medicare Supplements due to the imminent disenrollments of Medicare Advantage customers. Involuntary disenrollments from non-network Private-Fee-for-Service MAs and voluntary disenrollments from network MAs are expected to be in the many millions over the next several years, and they will begin very soon.
Due to guaranteed-issue requirements on involuntary disenrollees, we must take these customers regardless of their prior health history. Due to CMS’ guaranteed-issue requirement, during the prior MA/HMO disenrollments in the late 1990s and early 2000s our actuaries found that our Medical Loss Ratios on Med-sups were excessively high. Therefore, in order to maintain our profit margin objectives, we will no longer credit 7th and subsequent year renewals on any guaranteed-issue disenrollment Med-sup business written on or after October 1st, 2010.
For any other Med-sup customers who are NOT guaranteed-issue MA disenrollees, all Medicare Supplement commissions will continue to be credited for 7th and subsequent years, as we normally do.