Why worry about how your Medicare agent is paid? It will help you identify their strengths, whether or not they are reliable or just in it for their check, and how to know you have a good agent.
It’s important to know where your agent is coming from and where their payment is sourced. They will either come from an independent agency, or through an insurance company. This is referred to as “independent” or “captive.”
Captive agents only sell Medicare plans through the insurance company they work for. So, they are unable to give you the full scope of your options. If you are just getting started with Medicare and haven’t settled on a plan yet, it is smarter to avoid captive agents until you can compare all of your options.
Independent agents can work with several Medicare providers in your area. This means, if you are looking for a wider scope comparison, you may benefit more from an independent than a captive agent.
Medicare agents, like all insurance agents, are paid the most when they have a new person sign up for a plan. They will either receive a flat dollar payment or a percentage. For most Medicare agents, a flat dollar amount is standard.
For example, the average 2021 commission for a Medicare Advantage plan is $539 for the initial sale. The good news about a flat payment versus a percentage is that they are less likely to push a more expensive plan.
Rather than receiving a percentage cut of something more expensive that may be out of your needs or price range, they will seek out the real best plan for you, because they get paid almost the same amount either way.
The other type of commission payment is by renewal. During the Annual Enrollment Period (AEP) from October 15th through December 7th, you have the option to change your Medicare coverage if you are dissatisfied.
Medicare agents are incentivized to keep your business by a renewal commission. They receive roughly half of the amount earned from the initial commission — the average Medicare Advantage plan renewal will earn $270.
By receiving money for your renewal, agents are incentivized to keep you happy year after year.
This means that they are also incentivized to provide the highest quality service to keep you coming back. One of the most important parts of an agent’s job, besides finding you the initial plan that fits your needs, is to provide service throughout your policy.