Medicare Sales Scope of Appointment

Medicare’s Annual Election Period (AEP) is just days away. This is a very busy time for insurance sales agents, who are filling their calendars with sales appointments. But before they can sell you a plan, they must secure Scope of Appointment documents from YOU, the consumer.

If you call an insurance company or an insurance agency and request to meet with an agent, they’ll typically offer an appointment in your home, or at a library or coffee shop. But before you meet with a sales agent to discuss your plan options, every one of them will require you to fill out a Scope of Appointment.

The Scope of the Appointment outlines what you specifically want to discuss at the appointment whether it is a Part D plan, a Medicare Advantage Plan, or a Medigap plan. The agent is not allowed to talk to you about products that are not included in the scope of the appointment.
When the agent presents you the Scope of Appointment, typically they’ll want you to agree to discuss ALL plan options, which is usually a good idea. That’s because if you think you’re in the market for an MAPD plan, but it turns out you want a Medicare Supplement (Medigap), there’s a problem.  If you didn’t fill out the Scope of Appointment form to ‘OK’ talking about a Medigap plan, then the agent cannot talk to you about it.

Scope of Appointment Not Always Required

The Scope of Appointment form is not required during sales and marketing seminars. So, if you get invited to and attend a seminar to listen to Medicare options, and decide to buy a product at the end of the seminar, you won’t need one.

Scope of Appointment forms often differ from one health insurance plan to another. The form usually indicates the sales agent does not work for the federal government and may benefit from the sale of the health product (will receive a commission).
The forms also bear the notice that signing the appointment form is not a binding agreement to enroll in any plan. The form does not affect your current or future enrollment status in any Medicare plan.

By law, it is not possible for any insurance sales agent to proceed with an in-person appointment unless the beneficiary or the person seeking information on their behalf has signed and submitted the form to the agent.
During the in-person appointment, the following are the actions that the sales agent is legally allowed to make:
1) They can discuss various plan options with you
2) They can distribute plan materials, including the enrollment kit for the insurance product
3) They can distribute or collect enrollment forms
4) They can advise on how to get plan information, for example through mail, a website or customer service
5) They can also provide educational content

However, the sales agent cannot market non-healthcare related products until at least 48 hours after the original appointment.

The Takeaway:

The Medicare Scope of Appointment is a form you must fill out before an insurance agent can discuss plan options with you.  It’s best to fill it out completely, marking all of the Medicare plan options you may wish to discuss.

Do Commissions Influence Medicare Insurance Agents?

It’s one of the biggest questions many people silently ask themselves: How do I know if my Medicare insurance agent has my best interests in mind, and not influenced by earning the highest possible commissions for themselves when enrolling me in a Medicare plan? Is my insurance agent selling the policy that best fits my needs, or simply selling me a product that pays him/her as much as possible?

Let’s start with the basics. First of all, 99.9% of independent insurance agents are fine, upstanding, moral, high-character people who ALWAYS put the best interests of their customers first. If they’re not, they will soon be found out and kicked out of the business and stripped of their insurance license. But like any industry (financial planning, stock market, etc.) there are always a few bad apples who don’t do the right thing and more often than not, end up on the news.

Independent insurance agents selling Medicare products go to extreme measures to remain compliant with Medicare regulations and laws, must be licensed as an agent and sit through hours of classes for each company they represent to remain “certified” to sell MAPD and PDP plans every single year. They also must take continuing education classes every year to keep their insurance license. Insurance companies have an extremely low tolerance for agents who do not follow the rules and are quick to terminate their ability to sell their products if they suspect any improprieties.

So (very good) odds are, the insurance agent you’re dealing with for your Medicare insurance needs are highly trained, ethical, honest and highly regulated sales professionals who know their business, know the local market and know what plans are (usually) the best for you.

How Much Do Medicare Insurance Agents Make?

Independent insurance agents selling a Prescription Drug Plan (PDP) or a Medicare Advantage plan (MAPD) … ANY MAPD or PDP are paid exactly the same, regardless of the policy they sell you. Around 10 years ago, these commissions were not regulated, and that led to different insurance companies offering some staggeringly high commissions for selling MAPD plans… at times as high as $850 or more per sale. That led to a number of folks complaining to Medicare their agents were inappropriately placing them into a plan based upon those high commissions, and not because it was the best plan for them and their health and financial conditions.

That all changed around 2007, when Medicare stepped in and mandated Medicare insurance companies pay exactly the same commission amounts, and proposed steep penalties for not doing so.

Current MAPD and PDP Commission Rates

For plans that go into effect in 2017, agents selling an MAPD plan are paid $443 for the first year, and $221 every year after that, usually for 6-7 years. That $443 is paid if you’ve recently enrolled in Medicare, or are buying an MAPD for the very first time. If your agent is merely switching you from one MAPD plan into another MAPD, they only get $221 per sale, and get that every year until you choose a different plan. So, if you buy an MAPD from an agent and stick with the same plan for 6 years, the total amount that agent is paid for your enrollment could be around $1,500. Yes, that’s quite a bit of money! But because every MAPD plan is not allowed to pay more than those amounts, it’s hard to argue there’s an incentive for agents to inappropriately steer people to one plan over another. Remember, the vast majority of independent insurance agents are just that: INDEPENDENT. That means they’re independent contractors, with no base salary and no benefits, no car allowance, no gas money and pay taxes on those commissions. Factor in all those costs and $1,500 over 6 or 7 years doesn’t seem quite as high.

For PDP, that commission amount is $71 for the first year, and then half of that amount in the following years, usually stopping around year 6 or 7, depending upon the company. The same logic applies as found in the MAPD scenario above; it’s hard to argue an insurance agent has an incentive to enroll you in one PDP plan over another… because they make the same amount of commission for every plan.

These commissions are not paid by you, nor do they directly influence the cost of your MAPD. Your premium does not go up or down if you buy a policy from an independent Medicare insurance agent. Online, over the phone or in your home on your couch with your insurance agent, the MAPD premium (if there is one) and the PDP premium you’ll pay stays the same regardless of where or how you buy it.The price as they say, is the price.

Medicare Supplement Commissions

The issue of commissions gets a little murky when talking about Medicare Supplements. Unlike MAPD or PDP plans, Medicare supplements are regulated by the states, not the federal government. And unlike MAPD and PDP plans, commissions are not the same and can actually vary quite a bit. For example, Company A might pay $15% sales commission for year 1, and 10% commission for years 2-6. Company B might pay 22% sales commission for year 1, and 15% commission for years 2-10. If one company pays more than the other for the exact same Medicare supplement insurance policy… are you sure your agent is putting you in the product that best fits your needs and budget? Let me remind you, 99.9% of the time that answer is YES. But how do you really know?

How Do I Know If I’ve Got a Trustworthy Agent?

Most independent insurance agents represent multiple Medicare insurance companies. So, if your agent only presents you one option, get suspicious and ask questions. Ask them, “Why this option and not the others?” Be active and challenge them! There’s usually a good reason. Medicare Supplement plan F is the exact same plan, regardless of the company logo. In that case, your agent may be recommending you take one option over another due to lower premiums, for example.  Maybe your doctors and preferred hospitals are in one plan’s network and not the others. The key here is to ASK. Ask them WHY they think this is the best plan for you.

The Best Way to Size Up Your Medicare Insurance Agent

Ask them how much commission they’re making if you enroll in the product they’re selling. If they say they don’t know, or refuse to tell you, end the sales presentation right then and there. If your independent insurance agent won’t disclose their commissions to you, what else are they not telling you? A good insurance agent will have no problem telling you how much commission they make on a sale. Heck, they should be proud to tell you. They’re professionals who know their stuff, work extremely hard and ALWAYS put the needs of their clients FIRST.

The Takeaway

Commissions paid to insurance agents are standard for Medicare Advantage and Medicare Prescription Drug Plans. Commissions paid to insurance agents for Medicare Supplement plans are NOT standard. These commissions do not directly influence the price you pay for your insurance policies and the price you pay is the same regardless of where you purchase your policy; phone, web or agent.

Good, professional insurance agents who specialize in Medicare coverage are all around, but like any profession, there are bad actors. When meeting with an agent for the first time, act like Dan Rather or Charlie Rose and interview them. How many clients do they have? How long have they been doing this? What companies do they represent and why? Finally, how much commission will they make if you buy a policy from them? Use your gut; if they can’t (or won’t) answer those basic questions, it’s best to thank them for their time and find a better agent.