Runners have a financial incentive to encourage enrollment in Medicare Advantage plans because Medicare Advantage fees are higher. Most brokers and insurance agents who advise Medicare beneficiaries say they earn much higher fees for enrolling people in Medicare Advantage plans than for supplementary Medigap policies, with some variations. It's important to understand how insurance brokers work and how they differ from insurance agents. Brokers and agents said that some beneficiaries switched from traditional Medicare to Medicare Advantage because they couldn't afford Medigap premiums.
All of the participating brokers and agents sold Medicare plans at the time and lived across the country, and many sold plans in multiple states. As the number of Medicare plans continues to increase, it will be increasingly important to ensure that beneficiaries have objective information about coverage options and that the financial incentives of brokers and agents are in line with the best interests of the beneficiaries. Brokers and agents said they tend to sell the combination of traditional Medicare with a Medigap policy to people with higher incomes, and Medicare Advantage plans to people with lower incomes. As several brokers and agents have pointed out, beneficiaries are often unaware of the possibility of having Medigap insurers subscribe to them, and the advertising seemed to confuse and mislead beneficiaries into believing that information about coverage options was incorrect.
Some brokers and agents worked in larger agencies and others in smaller stores; others worked independently. It is not clear if the evaluation performed by the brokers and agents is delivered to the beneficiaries' primary care doctors, or if it serves to inform the management of the beneficiaries' care or helps to expedite obtaining additional resources and benefits. In addition, some research has concluded that this comprehensive Medigap coverage also leads to increased spending on Medicare. Therefore, these enrolled individuals must pay a penalty for late enrollment in Part D every month for the rest of their Medicare years and cannot enroll in a Part D plan until next open enrollment period.
However, these plans with lower premiums usually offer low commissions to brokers and agents, since the commissions on Medigap plans are usually a percentage of the plan's premium. Although the commission for independent prescription drug plans was added to the Medigap commission, most brokers and agents said that Medicare Advantage fees were much higher. With some variation by geographic region, most focus group participants said they generally receive higher fees for enrolling people in Medicare Advantage plans compared to traditional Medicare Medigap supplement plans. For example, Medicare Advantage plans often offer benefits not included in traditional Medicare, such as eyeglass coverage, as well as a limit on out-of-pocket costs for medical services.
For help making these decisions, nearly one-third of beneficiaries age 65 and older said they would turn to an insurance broker or agent.
