HEALTH COMMISSIONS 101
By Phil Calhoun, President & CEO, Integrity Advisors
Given all of the changes recently with health insurance commissions, this information is
designed to educate subscribers and help build a knowledge base from which one can then take a deeper dive to learn more about carriers and changes in commissions, and look at the article Carriers: Friends or Foes? and review what our panel of experts have to say about recent commission events and what health insurance professionals need to do now.
But first please review this article which provides some background information as we cover KEY Questions about our industry and commissions. Although we focus specifically on California, these general points are applicable Nationwide.
Where does the money come from for carriers to pay commissions?
We need to remember that consumers of health care services, employers, employees, and individuals pay premiums for health insurance coverage. Most often, a health insurance professional licensed in California provides information about the medical plan options available. Medicare pays MAPD plans monthly for each member that enrolls in their plan. Carriers are paid by Medicare/CMS, and the carrier pays the health care providers a flat dollar amount each month—called capitation—for each member who is enrolled.
How do Employers, employees and individuals know which health plans are better for them?
Health insurance professionals who are licensed in the state where their client, an individual, or employer resides, or the employer is domiciled, educate their clients about the insurance plan coverages, provider networks, how to access doctors, tests and treatments, and what the pharmacy options and coverage includes. To assist clients throughout the year, health insurance professionals advocate on behalf of their clients to make sure the health plan coverages “promised” work as outlined, and they can access the medical care from providers.
KEY POINT #1
Nearly All people residing in California who have health insurance through Medicare, their employer, or an individual plan, work with an insurance professional who holds an active license in that state, are contracted and often certified with the insurance carrier they are either a member of or a policy holder.
KEY POINT #2
Carriers pay commission to contracted health insurance professionals—to get more members and policyholders, more premiums, and to retain members and premiums.
Carriers may need reminders about:
How Brokers earn commissions. Health insurance professionals spend time and money marketing to find new clients, work to build referral systems to get leads, spend hours to serve their clients to make sure the health plan and care providers honor the plan coverage, and join professional associations to network with colleagues and learn tips on the business. Let’s go back to the basics on why carriers pay commissions.
Summary: Why Carriers Pay Commissions
Health insurance professionals need to communicate consistent messages to remind insurance carriers of the value they get when they pay competitive commissions, including:
- New client acquisition at a lower cost
- Motivates independent agents to sell and service policies
- Significantly increases retention and profitability
- Provides consumers with expert local guidance
- Builds wide distribution without internal hiring costs from salaries to benefits
- Aligns incentives with long-term business growth
How Employers, Employees, and Individuals Know Which Health Plans Are Better for Them?
Health insurance professionals who are licensed in the state where their client, an individual or employer, resides (or the employer is domiciled) educate their clients about the insurance plan coverages, provider networks, how to access doctors, tests, and treatments, and what the pharmacy options and coverage include. They also inform about the insured’s costs under various medical situations. To assist clients throughout the year, health insurance professionals advocate for their clients to make sure the health plan coverages “promised” work as outlined and their client can access the medical care from providers they want at a price the health plan promises.
Next We Focus On How Carriers Pay Commissions
Producers and carriers work with Producer Agreements, which are legal contracts between the insurance carrier and the licensed agent and broker, and they define the commission amounts paid when a producer enrolls a new member. In California, most commissions are a percentage of the premium paid for employer group benefits cases and for Medicare supplements. Recently, some carriers have moved to pay a flat dollar amount; some pay only for a defined period, and other carriers have stopped paying commissions on select plans. For Medicare Advantage plans, in most cases, carriers pay the mandated commissions which are defined by CMS. For select MAPD plans, commissions can be higher or lower, often based on standard versus special needs plans.
“ Debate is active on how carriers change commissions, and health insurance professionals need to join in this discussion.”
We need to educate our representatives, CMS, and the DOI to support health insurance professionals in developing a policy for carriers to include the following in the producer agreements:
- Vested renewals.
- Advanced notice of proposed compensation change.
- Mutual consent to change compensation of an in-force producer agreement.
- Advanced notice of coverage and provider changes.
Moving forward, when new health insurance business is written, health insurance professionals need to consider the long haul. Possibly in the past, little effort was placed to view the future commission payments from a carrier. In the current carrier environment, it is smart to apply a commission payout filter when placing the time and effort into working with clients to show them health plan options available to them and which plans you represent and can support them as their advocate.
Who would show a product or service brand if they were not paid to represent the brand as an independent sales professional? In all industries, independent representatives would only represent those brands they were paid to represent. To do the opposite would be a career-ending move.
When carriers change commissions. When commissions are eliminated or reduced, health insurance professionals need to know that, with no action, it is possible more health commissions are at risk of changing. Learn how the carriers you choose to represent have acted in the past. Discover what plans they have for the future. Get involved in local and state meetings and content on this subject and make a professional decision on which carriers you represent.
“ A carrier can change commissions even with a written agreement if the contract gives them the right to make changes, and most do. ”
Use this filter – A carrier cannot change commissions when:
- Renewals are vested.
- The contract or producer agreement prohibits changes without mutual consent.
- CMS regulations restrict changes.
- State law requires specific compensation for certain lines of insurance.
What Is NEXT?
Health insurance professionals need to have both initial success and long-term protection of commissions. Client education is the place to start.
As an industry, there is a need for health insurance professionals to educate consumers about what our role in the industry is and explain how we are not employed by the carrier, but we work for and protect them.
Health insurance professionals need to hold CMS and state Departments of Insurance to a standard to protect clients against plan coverage changes, provider changes, and when they block health insurance professionals from enrolling clients in a plan. The health insurance professional’s role and fiduciary responsibility is to work for their client. This is your role, and it is critical to consumers. This is why the agent or broker does this client-centered work and is why they are compensated.
What Can Brokers Do About These Carrier Moves?
All health insurance agents, including those with life and health licenses, must pay attention to what is happening with the carrier moves to limit or end commissions for the sale of the carrier’s insurance products.
Insurance carrier owners and management have one agenda: make sure revenues exceed claims.
Commissions are not just a sales reward — they are a foundational pillar of the insurance ecosystem.
How Insurance Brokers Are Paid
Let your clients know that when they work with you—a licensed insurance broker—they get professional guidance at no additional cost. Here’s how and why.
Share This Information
Understanding How Your Insurance Broker Is Paid
Clear, Transparent Information for Clients
Top Carriers With Recent Commission Changes
UHC, Centene, Aetna, Elevance, Blue Shield, and CIGNA have recently made changes.
2026 Blue Shield letter on Med Supp Commission changes.
“ All carriers still must honor the birthday rule, so look to work with carrier partners who honor your commitment as a broker advocate and pay you fairly. ”
Why These Moves Are Problematic for Brokers
- Eroded revenue streams: Losing commissions (especially on new enrollments) makes it much harder for brokers to justify time and effort in selling certain plans.
- Increased risk: When carriers change commission structures mid-year or eliminate commissions for new business, brokers take on more risk and can no longer act on their fiduciary responsibility.
- Reduced plan access: With some plans being decommissioned for brokers, their ability to offer a full suite of options to clients is limited.
- Strategic pressure: These cuts often appear driven by carriers’ financial stress or risk management, not by broker performance — meaning brokers are being squeezed as a lever rather than being rewarded, and carriers are seeking a pure profit move.
- The future value of your hard-earned commissions are at risk. Buyers pay for the residual value of commissions. If carriers cease payments, the value to a buyer is gone. Moving clients sold to a new carrier may work for some but not all situations.
- ” How many want to retire without the ability to sell hard-earned commissions for value? “
- Regulatory tension: Broker associations (like NABIP and NAIFA) are pushing back, and these decisions could lead to more regulatory scrutiny or demands for broker protections. Support these associations with your membership and get involved.
When a Carrier Can Change Commissions
Commission agreements always include clauses that allow the carrier to change compensation under certain circumstances. These clauses vary, but the following conditions are the most common and legally enforceable. Be aware of these points when you review your carrier producer agreements.
If the Contract Contains a “Right to Amend” Clause
Most carrier contracts give the carrier the right to change commissions at any time with advance notice.
Typical language includes:
- “Carrier may amend compensation schedules at any time with written notice.”
- “Commissions may be modified for new or renewal business upon 30-60 days’ notice.”
This is the #1 reason carriers can legally adjust commissions.
If Commissions Apply Only to New Business
Many agreements specify that commission changes apply only to:
- New enrollments after the effective date.
- New plan years.
- New products.
If the contract is structured this way, carriers can change future commissions but must honor past ones.
If State or Federal Regulations Require Commission Changes
Laws can override private contracts. Examples:
- ACA (Affordable Care Act) changes. States or CMS may impose compensation rules for certain health plans.
- Medicare Advantage / Part D. CMS sets maximum commissions annually. Carriers must update compensation when CMS changes the rules.
If regulation changes, the contract must change.
If the Broker Loses Eligibility (Licensing / Appointment Issues)
If a broker:
- Lets their license expire.
- Fails to maintain E&O insurance.
- Loses a carrier appointment.
- Fails training requirements (e.g., AHIP for Medicare).
…the carrier can immediately stop commissions for the above, and these reasons are typically spelled out in the agreement.
If the Contract Is Terminated
If either party terminates the contract (per the contract terms), commissions may stop on:
- New business.
- Existing business (unless vested).
Whether renewals continue depends on vesting.
If Renewal Commissions Are NOT Vested
Most agreements specify whether renewal commissions are:
- Vested (guaranteed even after termination).
- Non-vested (can be stopped when the relationship ends).
If renewals are non-vested, the carrier can stop paying after termination regardless of history.
If the Product Line or Book of Business Changes
Carriers may legally change commissions if they:
- Close a product line.
- Move a block of business.
- Convert plans to new versions.
- Withdraw from a market.
This is allowed because the original product no longer exists as sold.
If the Agreement Is “At-Will”
Some carrier agreements are written as at-will contracts. This allows either party to:
- Amend.
- Suspend.
- Terminate.
…with proper notice.
When a Carrier Cannot Change Commissions
There are limits. A carrier cannot:
- Reduce commissions retroactively on policies already issued unless the contract explicitly allows it.
- Reduce vested renewals.
- Change Medicare commissions outside CMS rules.
Withhold earned commissions without legal cause.
If a contract promises vested commissions or a guaranteed schedule, the carrier must honor that schedule for existing business.
Please get educated and involved. We pledge to help inform our subscribers as news and events are added to our California Broker eCalendar.
Summary
This article is an educational piece designed to build your understanding of the role you play as a health insurance professional, explain how the Medicare carriers operate in the industry, and arm you with information. With the amount of commission changes over the past two years and the shift of moving the focus off “business” at this time of year, we hope these resources will help you take action in 2026. Knowing more about how and why some carriers have decided to impact consumers with the changes to the key distribution system for health plans, health insurance professionals, is important. Equally important is actively joining the conversation by joining your local professional association’s meetings and participating in discussions to stay involved. For about $50 a month, you can join NABIP, and, for about the same amount, you can join NAIFA.
If you make New Year’s resolutions for your business, check out the links below to learn more about how to get involved.
More Resources to Review!
The 2027 Final Rule and Medicare MAPD by Calvin Bagley
NABIP Calls on State Regulators to Protect Fair Competition and Consumer Access
Phil Calhoun is the owner and publisher of California Broker Media, and he owns Integrity Advisors, a health insurance agency. Phil started Commission Solutions to provide coaching for health insurance professionals on how to protect, grow and sell health commissions. Phil is an active member of several insurance associations including the California Association of Health Insurance Professionals (CAHIP) and local chapters in Orange County, Los Angeles, San Diego and Inland Empire Health Insurance Professionals. He serves on board for the Exit Planning Institute.
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