Atlanta-based insurance broker Charlotte Lyons has seen more agents selling Medicare Supplement policies in recent years and suspects she knows why.
The population is aging and it’s easier than ever for agents to find information on 65-year-olds. Once people buy Medicare Supplement, or Medigap insurance, they tend to stick with it and renew, which is good for commissions.
“A lot of agents we work with are used to working in the senior market have picked up Medicare Supplement and once you get someone on Med Supp, a lot of times they just stay,” said Lyons, senior vice president of operations for World Insurance Association.
“So, yes, we’re seeing a shift,” she said.
About 58 million people were enrolled in Medicare at the end of last year and more than 75 million people are expected to be enrolled in the program by 2027, according to CSG Actuarial’s market projections.
Large and Growing Market
The Medigap market is large – about 14 million Medigap policies were in-force last year – according to CSG Actuarial.
As Medigap enrollment continues to grow at rates exceeding overall Medicare enrollment growth over the next decade, that will mean more opportunity for insurers, agent and marketing organizations, CSG Actuarial’s projections show.
Medigap is private health insurance that covers out-of-pocket costs such as deductibles, co-payments and co-insurance – or gaps in the base Medicare Part A and Medicare Part B policy – and there are 10 different Medigap contracts.
Agents collect a commission on the sale of a Medigap contract and a commission every time someone renews a Medigap contract, which is sold by many brand-name companies.
When people turn 65, they are eligible for Medicare and sign up directly with the Centers for Medicare and Medicaid Services. No commissions are paid by the government for singing up for Medicare Part A & B.
Medigap is different from Medicare Advantage, which is a Medicare policy issued by a private insurer and on which agents also earn a commission. About 20 million Medicare Advantage policies were in-force last year.
Commissions on Medicare products like Medigap recur for many years or even decades, which means agents can – eventually – build an attractive book of business, said Elie Harriett, co-owner of Classic Insurance and Financial Services in Mansfield, Ohio.
“Commission payments on Medicare have a very long tail to it,” Harriett said. “You make very little the first year, but that money keeps coming to you for a number of years so if you get a decent quantity of clients you’ve got yourself a good business.”
For agents who have solicited long-term care insurance (LTCi) business, there’s a “logical progression” to products like Medigap. Their clients age, leave employer-sponsored plans and turn their attention to health insurance as they become Medicare eligible at 65, Harriett explained.
LTCi has “nowhere near” the renewal commission that Medigap or other Medicare products have, he said.
“That's the appeal,” Harriett said. “There’s no immediate satisfaction but much delayed gratification in terms of compensation.”
A Feeling of 'Exodus'
Some agents are simply put off by Medicare requirements and steer clear, but others are drawn to the Medigap segment.
LTCi agent Nicole Gurley said about three or four years ago she began to notice “an exodus or refocus” on the Medigap market by many LTCi brokers.
It wasn’t much different from healthcare insurance brokers moving to Medicare supplement sales, said Gurley, owner of Gurley LTCi in Cave Creek, Ariz., north of Phoenix. “Producers go where they can make a living.”
Many factors have encouraged LTCi producers to hunt for leads elsewhere as millions age, Gurley said.
Fewer companies selling traditional LTCi, tighter underwriting standards, premium increases, the move to asset-based products, which have limited renewal commission activity, have conspired to make LTCi an expensive and difficult sale, she said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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