The Challenges of Choosing Medicare Coverage: Views from Insurance Brokers and Agents

Medicare beneficiaries must weigh several trade-offs when deciding among their coverage options, whether they choose a private Medicare Advantage plan or traditional Medicare with supplemental coverage.

For example, Medicare Advantage plans typically provide benefits not included in traditional Medicare, such as eyeglass coverage, as well as a limit on out-of-pocket expenses for medical services. Traditional Medicare, on the other hand, allows beneficiaries to go to any doctor, hospital, or other provider that accepts Medicare, without the need for prior approval. For help in making these decisions, nearly one-third of beneficiaries age 65 and older said they turn to an insurance broker or agent.

Beneficiaries lack information, however, about how brokers and agents winnow down plan options and what role financial incentives might play in the advice they give. Given the wide use of brokers and agents and the potential impact of their guidance on beneficiaries’ coverage choices, the Commonwealth Fund partnered with the public opinion research firm PerryUndem to learn their perspectives on the state of coverage choices, the challenges their clients face in choosing an option, and the ways in which their financial incentives align or conflict with beneficiaries’ interests. In September 2022, PerryUndem held four focus groups with more than two dozen brokers and agents who sell Medicare Advantage plans, Medigap supplemental coverage plans, and Part D prescription drug plans. The participants were diverse with respect to age, gender, race, and ethnicity; the states in which they operated; and the number of years they had been selling Medicare private plans. (For focus group details, see “How We Conducted This Study.”) Below we present key themes and findings from the focus group discussions.

Focus Group Findings

Alignment of Financial Incentives with Beneficiaries’ Interests

How brokers and agents are compensated for their services varies, and can be complex. Commonly, they contract with multiple insurance carriers that pay commissions based on beneficiary enrollment in the Medicare Advantage, Medigap, or Part D plans they sell. Brokers and agents are not required to contract with all available plans in an area, nor are they required to offer all plans to beneficiaries. Beginning in 2022, brokers and agents who don’t offer all plans in an area are required to disclose that fact to their clients, though they are not required to disclose what proportion of plans in the area they sell, or how their compensation differs across plans. In addition to commissions, there are often opportunities for supplemental compensation for meeting enrollment benchmarks or carrying out other activities for plans, such as beneficiary health risk assessments.

Most brokers and agents said they are paid more to enroll people in Medicare Advantage plans than in traditional Medicare. With some variation by geographic region, most focus group participants said, in general, they receive higher commissions for enrolling people in Medicare Advantage plans compared to Medigap supplemental plans for traditional Medicare. One broker recalled getting paid three times more to sell a Medicare Advantage plan. Even with the commission for stand-alone prescription drug plans added to the Medigap commission, most brokers and agents said Medicare Advantage commissions were much higher. Brokers and agents also said relative commissions differ for new enrollments versus renewals, with some reporting that the latter can be higher, and more reliable, for Medigap.

According to brokers and agents, the commission structure of Medigap plans incentivizes the sale of plans charging high premiums. Most beneficiaries with Medigap plans choose higher-premium plans that provide comprehensive coverage, such as plans G or F. That’s because they value the peace of mind knowing that nearly all of traditional Medicare’s cost sharing will be covered. But for beneficiaries on a tight budget, it may make more sense to have Medigap coverage, like plans K or L, that feature high cost sharing but low premiums and limits on out-of-pocket payments.

Such lower-premium plans, however, usually provide low fees for brokers and agents, since commissions for Medigap plans are often a percentage of the plan premium. As one broker said, “If I was to [enroll in Medicare] today . . . I might be inclined to take a Medicare supplement — but one that I offer rarely to my clients, which is a high-deductible plan.” The commission structure thus may result in some beneficiaries paying more than they need to. Moreover, some research has concluded that this comprehensive Medigap coverage also leads to higher Medicare spending.

Commissions for stand-alone Part D plans were viewed as too low and not worth the time — creating some problems for beneficiaries. While the federal Centers for Medicare and Medicaid Services (CMS) sets a maximum for Part D commissions, it doesn’t set a minimum, leading some brokers to believe they’re not being fairly compensated. “A lot of these carriers don’t compensate you at all to do a prescription drug plan now,” one broker said. Low commissions don’t incentivize brokers and agents to help people in traditional Medicare reevaluate their Part D plan each year, even though a plan’s coverage can change from year to year.

Some brokers described clients coming to them without a Part D plan or other drug coverage, despite being on Medicare for years, because their previous broker had never enrolled them in a Part D plan. These enrollees consequently have to pay a Part D late-enrollment penalty each month for the remainder of their years on Medicare and cannot enroll in a Part D plan until the next open enrollment period.

Brokers and agents can earn extra income from conducting beneficiary health risk assessments during the Medicare Advantage enrollment process. All focus group participants who sold Medicare Advantage plans said they got paid to complete health risk assessments when their clients enrolled in a new Medicare Advantage plan. Many characterized the assessments as easy ways to earn extra money, as they take only around five minutes to complete. It’s unclear if the assessment completed by brokers and agents is provided to beneficiaries’ primary care physicians, or whether it informs beneficiaries’ care management or helps to expedite additional resources and benefits to them.

Insurers commonly provide bonus payments for reaching enrollment benchmarks. Brokers and agents said some Medigap and Medicare Advantage insurers provide “substantial” bonus commissions when enrollment targets are met. Describing one insurer’s bonus program, a focus group participant said, “I think it was 20 policies within a three-month period. That bonus was actually a hundred bucks a policy.” Bonuses could create an incentive for a broker or agent to steer clients to a plan regardless of whether it’s the best one for their clients.

Selection of Medicare Coverage

With 40 or more Medicare Advantage plans, 60 Part D plans, and many Medigap plans to choose from, brokers and agents help their Medicare clients winnow down their coverage options. However, what guides this process may not be transparent to beneficiaries.

Brokers don’t sell all plans in their geographic area; they said they choose which plans to offer based on how quickly insurers answer their questions, on feedback from clients, and, sometimes, on plan benefits. Brokers and agents decide which plans will fill their portfolios, even if that sometimes limits their clients’ options. They are not required to search a minimum number of plans or to disclose the names of the plans they search. “I work with companies that are easy for me to work with,” one broker said. According to another, “I try to keep it simple . . . I mean, you really only need to have a few companies that you’re comfortable with.” One study found that online broker websites provide access to about two of five Medicare Advantage plans and two of three Part D plans available in an area.

Brokers and agents said they tend to sell the combination of traditional Medicare with a Medigap policy to higher-income people, and Medicare Advantage plans to lower-income people. Overall, the consensus across the focus groups was that traditional Medicare with Medigap provided coverage with fewer hassles, as long as beneficiaries can afford the Medigap plan premium. There was largely agreement that “over time, [costs] tend to average out.”

Some brokers and agents said clients have trouble getting Medigap plans when trying to switch from Medicare Advantage to traditional Medicare. According to agents and brokers, finding their clients the right coverage the first time is important because switching coverage can be hard. They cited extensive underwriting as a barrier to purchasing a Medigap plan for beneficiaries switching from Medicare Advantage during a period when they lack “guaranteed issue” rights. Beneficiaries who are older or sicker can be denied coverage or forced to pay higher rates. One broker said ads sometimes mislead clients into believing “they can just switch to a Medicare supplement anytime that they want.” Another broker noted that, in his state, only one plan allows switching without underwriting. “The rest of the carriers — you have to complete five pages [of health information].” Most focus group participants said there are few options for these clients, and brokers and agents said they often enroll these beneficiaries in a Medicare Advantage PPO, which offers more provider choice.

All brokers and agents who have served people dually eligible for Medicare and Medicaid said they enroll them in Special Needs Plans only. People with low incomes who have serious illnesses or disabilities are often eligible for both Medicare and Medicaid. Their coverage options include Medicare Advantage Special Needs Plans designed for dual eligibles, known as D-SNPs, as well as other Medicare Advantage plans, traditional Medicare, PACE plans, and Medicare–Medicaid plans. All the brokers and agents we spoke with said that D-SNPs were the best option for their dually eligible clients. Highlighting the many supplemental benefits these plans offer, one broker stated that “the D-SNP covers everything” and “basically have zero out-of-pocket costs.”

Most brokers and agents personally would choose traditional Medicare and Medigap over a Medicare Advantage plan. When asked, most said that they believe traditional Medicare, with the addition of Medigap supplemental plans, offers better health care coverage and choices, particularly as people age. One broker explained their choice, “If I ever have a medical issue, I’d want to be able to go to any physician I want.” A few participants, however, thought Medicare Advantage plans would be fine for their needs.

Reasons for Growing Enrollment in Medicare Advantage

Despite many brokers’ and agents’ personal preference for traditional Medicare supplemented by a Medigap plan, the share of beneficiaries choosing Medicare Advantage continues to grow. Focus group participants offered their opinions about why Medicare Advantage enrollment is growing.

According to brokers and agents, rising Medigap premiums are driving some beneficiaries to choose Medicare Advantage. Brokers and agents said that some beneficiaries switched from traditional Medicare to Medicare Advantage because they couldn’t afford to pay the Medigap premiums. They said Medigap plan premiums have increased more in recent years than they had historically, putting them out of reach for their clients. “We used to see smaller increases coming along,” said one broker who had been in business for 15 years, “but now we’re starting to see bigger jumps.”

Some brokers and agents said that, based on relative commission rates and information from CMS, it seemed to them as if the federal government wants more people to be in Medicare Advantage. This observation, while not made in all the focus groups, was raised by several brokers without prompting, with some other participants expressing agreement. A few said that it was “obvious” to them that the government wants more people in Medicare Advantage plans.

Marketing efforts have led to beneficiary confusion and helped drive enrollment in Medicare Advantage, according to brokers and agents. Focus group participants characterized advertising for Medicare plans as “relentless,” “overwhelming,” and even “misleading,” particularly Medicare Advantage commercials. They said that ads led some of their clients to enroll in plans that excluded their doctors from the provider network and other clients to unknowingly change plans. “I’ve had clients call me up in tears not realizing that their plan had been switched,” said one broker. Some brokers said that their clients are made to think certain plans or benefits are available to them that are not. Brokers and agents said Medicare plan advertising requires them to spend a lot of time resetting client expectations. In some cases, they even lose clients who don’t believe them or want everything the ads promise.

Discussion

In our focus groups, insurance brokers and agents spoke about misaligned incentives and about what many view as a flawed Medicare coverage selection process in need of improvement. It is unclear how, or if, brokers’ and agents’ individualized process of winnowing plans affects their clients’ choices. They also spoke about how the higher commissions they earn for Medicare Advantage enrollment have incentivized increasing enrollment in that program — despite many having a personal preference for traditional Medicare with supplemental coverage.

Another theme we heard was that a beneficiary’s income often dictates whether people enroll in traditional Medicare with a Medigap plan or in a Medicare Advantage plan. Similarly, the enrollment of all dually eligible people in D-SNPs raises questions about the other coverage options available to dually eligible people, a population with diverse and significant health needs. For example, are brokers and agents offered similar commissions and financial incentives for other coverage options that might be a better fit for certain dually eligible beneficiaries? Do brokers and agents have information about the advantages and disadvantages of different coverage options for dual-eligible individuals?

Lastly, the focus groups provided more evidence that, when it comes to learning about coverage options, marketing is not a substitute for education that informs people about their options and the trade-offs inherent in different choices. As noted by a number of brokers and agents, beneficiaries are often unaware of potential underwriting from Medigap insurers, and advertising seemed to confuse and mislead beneficiaries into believing incorrect information about coverage options. More support for tools such as the Medicare.gov plan finder, which allows beneficiaries to see the totality of plans available, and for one-on-one help from the State Health Insurance Assistance Program could help to make beneficiaries more informed. As the number of plans in Medicare continues to grow, it will become ever more critical to ensure that beneficiaries have objective information about coverage options and that brokers’ and agents’ financial incentives are aligned with beneficiaries’ best interests.