Common Sense: Why Every Medicare Advantage Plan Should Pay Fair Market Value

MEDICARE COMMISSION PLANNING

By Ryan Dorigan

“A long habit of not thinking a thing wrong gives it a superficial appearance of being right.” —Thomas Paine, Common Sense, 1776

For years, Medicare Advantage organizations have been allowed to decide that certain plans will simply not pay commissions to independent agents. We have become accustomed to it. Agents understand that some plans are commissionable and others are not. We check commission schedules, identify which plans will compensate us, and accept that this is simply part of doing business in Medicare. But the issue has become increasingly difficult to ignore. Sometimes a carrier makes a plan non-commissionable after independent agents have already been writing and servicing that plan—and its members—for years. The plan remains in the market. The beneficiaries remain our clients. Our responsibility to help them evaluate their coverage does not change. The compensation does. And as we look ahead to 2027, this issue may become even more pronounced. In early agent rollout discussions, we are already seeing examples of carriers preparing to introduce new non-commissionable plans alongside commissionable plans in the same market. Think about what that means for an independent agent. The same carrier. The same market. The same beneficiary. Two Medicare Advantage plans that the agent may need to evaluate side by side. One recommendation results in Fair Market Value compensation. The other results in zero. If the purpose of CMS’s compensation rules is to prevent financial incentives from influencing which plan an agent recommends, it is difficult to imagine a clearer example of the problem.

Just because we have grown accustomed to something does not mean it makes sense. CMS has repeatedly expressed concern that financial incentives can influence the recommendations agents and brokers make to Medicare beneficiaries. CMS has specifically said that many Medicare beneficiaries rely on agents and brokers to navigate complex choices and that compensation arrangements can result in beneficiaries being steered based on an agent or broker’s financial interests rather than the beneficiary’s healthcare needs.[1] I agree with CMS. A Medicare beneficiary should be able to sit across the table from an independent Medicare agent and trust that the recommendation they receive is based on their doctors, prescriptions, hospitals, financial circumstances, and healthcare needs—not on which insurance company happens to pay the agent the most. That’s common sense. But if we truly believe that principle, then we need to take a long look at the way non-commissionable Medicare Advantage plans are treated today. CMS is concerned that an agent might be influenced because one Medicare Advantage plan pays more than another. Yet a Medicare Advantage organization can offer one plan that compensates an independent agent while offering another plan in the very same market that pays that agent nothing. If a difference in compensation creates the potential for an improper financial incentive, how can the difference between Fair Market Value compensation and zero compensation possibly be acceptable?

This is ultimately about the beneficiary

It would be easy to characterize this as an argument about broker commissions. It isn’t. It is an argument about preserving meaningful access to independent Medicare advice. Independent agents can compare competing insurance companies precisely because they are not employees of any one carrier. That independence has value to Medicare beneficiaries. But independence must also be economically sustainable. If carriers can selectively determine which recommendations result in compensation and which result in no compensation, then the carrier’s financial priorities have been inserted into a process that Congress and CMS have said should remain focused on the beneficiary’s healthcare needs.

The broker’s responsibility doesn’t disappear

CMS itself recognizes the important role agents and brokers play in the Medicare marketplace. CMS states that “many individuals with Medicare rely on agents and brokers to help navigate complex Medicare choices as they comparison shop for coverage options.” That acknowledgment matters. Medicare is complicated. A responsible independent Medicare agent must evaluate provider networks, prescription drug formularies, premiums, copayments, coinsurance, maximum out-of-pocket exposure, hospital networks, pharmacy networks, prior authorization requirements, and supplemental benefits. CMS requires agents and brokers to be licensed in the states where they do business, complete annual Medicare training and testing, follow Medicare marketing rules, and operate under plan oversight. Those responsibilities do not disappear because a carrier declares a particular plan non-commissionable.

Imagine a beneficiary walks into an independent agent’s office. She takes several prescription medications. She wants to keep her primary care physician and cardiologist. She has a preferred hospital. She is concerned about her maximum out-of-pocket exposure and wants to understand the additional benefits available to her. Her agent evaluates the Medicare Advantage plans available to her. After reviewing her doctors, prescriptions, and healthcare needs, the agent determines that Plan C is the best fit. There is only one problem. Plan A compensates the agent. Plan B compensates the agent. Plan C does not. What is the agent supposed to do? Ignore Plan C? Of course not. The agent should recommend the plan that best meets the beneficiary’s needs. The carrier’s decision not to compensate independent agents did not make Plan C disappear from the market. It did not make the beneficiary’s doctors less important. It did not eliminate the need to research the formulary. It did not eliminate the professional work required to evaluate the plan. And it certainly did not eliminate the agent’s responsibility to put the beneficiary’s healthcare needs at the center of the recommendation. It eliminated only one thing: the agent’s compensation. Where is the common sense in that?

What Congress actually said

This discussion becomes even more compelling when we look beyond what seems fair to brokers and examine what Congress has said that Medicare’s agent compensation rules are supposed to accomplish. The statutory language is remarkably clear: “Such guidelines shall ensure that the use of compensation creates incentives for agents and brokers to enroll individuals in the Medicare Advantage plan that is intended to best meet their healthcare needs.” That language appears directly in the Medicare statute. Congress specifically connected the use of agent compensation with an extraordinarily important objective: helping beneficiaries enroll in the Medicare Advantage plan intended to best meet their healthcare needs. CMS has repeatedly reinforced that principle. In explaining its Contract Year 2025 Medicare Advantage and Part D Final Rule, CMS said excessive compensation and other bonus arrangements can result in beneficiaries being steered toward plans based upon an agent or broker’s financial interests rather than the prospective enrollee’s healthcare needs. On that principle, CMS and independent agents should be in complete agreement. Compensation should not determine the recommendation.

But that leads to an important question. Why should we be concerned about the financial influence created when one plan pays an agent more than another while continuing to permit the greatest compensation disparity possible? Fair Market Value versus zero. Zero is still a financial incentive. In my view, this exposes a fundamental contradiction within the current Medicare Advantage compensation framework. Congress directed that CMS’s compensation guidelines “ensure that the use of compensation creates incentives for agents and brokers to enroll individuals in the Medicare Advantage plan that is intended to best meet their healthcare needs.” CMS has reinforced that principle, expressing concern that compensation arrangements can cause beneficiaries to be steered toward plans based upon an agent or broker’s financial interests rather than the beneficiary’s healthcare needs. Yet an MA organization can create the greatest compensation disparity possible:

• Fair Market Value versus zero

A decision to pay zero is still a compensation decision. And when that decision depends upon which plan the beneficiary selects, it creates a financial consequence tied directly to the outcome of the broker’s recommendation.

• This creates the very financial incentive CMS’s compensation protections are designed to prohibit.

If CMS believes that paying an agent more for Plan A than Plan B can improperly influence a recommendation, it cannot logically treat paying an agent for Plan A and nothing for Plan B as anything different. Zero is not the absence of a financial incentive. Zero may be the strongest financial incentive of all. The issue is larger than whether the broker gets paid. The issue is that a carrier’s compensation decision has introduced a financial consequence tied directly to the outcome of an independent professional’s recommendation.

CMS has seen this before

This would not be the first time CMS has confronted the consequences of an insurance carrier reducing or eliminating broker compensation. In June 2022, CMS addressed a practice in the individual health insurance market in which some issuers paid reduced—or no—agent and broker commissions for enrollments during Special Enrollment Periods while paying higher compensation for Open Enrollment Period enrollments during the same benefit year. CMS’s answer was clear: those arrangements violated the Affordable Care Act’s guaranteed-availability requirements. The legal framework governing the ACA individual market is different from the laws governing Medicare Advantage, and that distinction is important. But CMS’s reasoning is remarkably relevant. CMS wrote: “The way an issuer structures its compensation to agents and brokers influences the marketing to, as well as enrollment and retention of, individual market consumers.” CMS went on to explain that reducing or eliminating commissions discourages agents and brokers from marketing to and enrolling eligible consumers. The insurance product remained available. The consumer remained eligible to enroll. But eliminating broker compensation still mattered because CMS understood that compensation affects the behavior of the distribution channel through which many consumers obtain coverage. That principle is not suddenly irrelevant when the insurance product is Medicare Advantage.

In one market, CMS has already recognized that reducing compensation to zero can discourage agents and brokers from facilitating enrollment. In Medicare Advantage, CMS has separately recognized that financial incentives can steer agents and brokers toward certain plans based upon their own financial interests rather than the beneficiary’s healthcare needs. Those are two expressions of the same basic economic reality: broker compensation influences broker behavior. If that is true—and CMS has explicitly recognized that it is—then a Medicare Advantage plan’s decision to eliminate commissions cannot reasonably be treated as economically neutral. Zero meant something in the individual market. It should mean the exact same thing in Medicare Advantage.

The beneficiary chooses the agent

Consider what happens in the real world. A Medicare Advantage organization voluntarily decides to offer a plan in a particular market. A Medicare beneficiary voluntarily decides to seek professional assistance from an independent Medicare agent. The agent researches the beneficiary’s doctors, prescriptions, hospitals, costs, and healthcare needs. The agent evaluates the available options and determines that the carrier’s plan is the best choice. The beneficiary agrees and enrolls. At that point, what exactly justifies paying the agent nothing? We often hear the explanation: “The carrier has chosen not to use independent agents for that plan.” But the carrier isn’t the only party whose choice matters. The carrier chose to offer the product. But the beneficiary chose the agent. The beneficiary chose to seek independent professional guidance.

Independent Medicare Agent Compensation

The agent performed the professional service. And the carrier received the enrollment and was paid by CMS for the enrollment. The carrier’s decision not to compensate independent agents does not make its plan disappear from the marketplace. It does not eliminate the work necessary to evaluate the plan. And it should not create a financial penalty for an independent agent who determines that the carrier’s plan is the one that best meets the beneficiary’s healthcare needs.

When a Medicare Advantage organization chooses to offer a plan in a market, it should accept that beneficiaries in that market may choose to access that product through a properly licensed, certified, and appointed independent Medicare agent. When that recognized sales channel generates an enrollment, the plan should pay the applicable Fair Market Value compensation. The carrier gets to decide whether to offer the plan. The beneficiary gets to decide whether to use an independent agent. What the carrier should NOT get to decide is whether that independent professional deserves to be compensated after the beneficiary’s choice results in an enrollment in its product.

Fair Market Value

The concept of Fair Market Value in Medicare agent compensation is not something agents invented. CMS has used an FMV framework in regulating Medicare agent and broker compensation for years. In 2008, CMS specified that agent and broker compensation should reflect fair-market value based on commissions for similar products in the same geographic area. Those principles make sense. Similar professional services should carry similar economic value.

CMS continues to publish plan-level compensation information identifying, among other things, whether a company uses independent agents for a particular plan and the amount paid to those agents. I believe CMS should take the next logical step. Every Medicare Advantage plan offered within a market should be commissionable when an enrollment is generated by a properly licensed, certified, and appointed independent Medicare agent, and that enrollment should be compensated at the applicable CMS Fair Market Value. That would remove the carrier’s compensation decision from the agent’s recommendation.

The principle is straightforward: Broker-generated enrollment = fair market value compensation. More importantly, the amount should not depend upon which Medicare Advantage plan the agent ultimately recommends. If every MA plan pays the same applicable FMV, compensation ceases to distinguish one plan from another. Then the competition returns to where it belongs: Which plan includes the beneficiary’s doctors? Which plan covers the beneficiary’s prescriptions? Which hospitals are in network? What are the costs? What benefits matter to that individual? Which plan best meets the beneficiary’s healthcare needs? That is the standard Congress established.

The Cost of Independent Distribution

Medicare Advantage organizations may reasonably argue that requiring FMV compensation on every broker-generated enrollment would increase the cost of offering certain plans. It may. Independent distribution has a cost, just as other methods of acquiring and serving members have costs. The question is who should bear that cost when a beneficiary chooses to use an independent Medicare agent.

Today, a carrier can offer a plan, receive an enrollment generated through an independent professional, and then arbitrarily decide to shift the entire cost of that professional service onto the broker. That is neither fair nor sustainable. If a Medicare Advantage organization chooses to file a plan in a market, it should account for the legitimate costs associated with beneficiaries choosing that product—including the Fair Market Value of independent professional services when the beneficiary chooses to access the product through that channel. If the economics of a Medicare Advantage plan cannot support that legitimate distribution expense, then perhaps that cost needs to be considered before the organization determines it can afford to offer the plan in that market. The answer should not be to expect the independent agent to absorb the cost.

Common Sense

We have accepted non-commissionable Medicare Advantage plans as simply part of the business for long enough that we have stopped asking whether the policy makes sense. CMS says compensation should not improperly influence which Medicare Advantage plan an independent agent recommends. We agree. Congress says the compensation framework should create incentives for agents and brokers to enroll beneficiaries in the plan intended to best meet their healthcare needs. We agree. CMS recognizes that beneficiaries rely on agents and brokers to help navigate complex Medicare choices. We agree. CMS has even recognized in another health insurance market that eliminating broker compensation can influence marketing and enrollment behavior. We agree with that, too.

Our Medicare Advantage compensation system should reflect those principles. If a carrier chooses to offer a Medicare Advantage plan in a market, and a beneficiary chooses a properly licensed and certified independent Medicare agent to help navigate that market, the agent should be compensated at Fair Market Value when that work results in an enrollment. Same professional standards. Same regulatory responsibilities. Same obligation to put the beneficiary’s needs first.

Same Fair Market Value Compensation

Then let Medicare Advantage plans compete on the things that should determine the recommendation: doctors, hospitals, prescriptions, benefits, costs, and the individual healthcare needs of the beneficiary. Not the commission. Not the carrier’s distribution preference. The beneficiary. That’s not a radical proposition. It’s common sense.

Just because we have grown accustomed to something does not mean it makes sense.

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Campbell, California | Josie Melo Independent Insurance Agent

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