How Your Health & Medicare Agent Gets Paid (and Why It Matters to You!)
When you buy health or Medicare insurance, you rely on an agent to guide you through a confusing, complex process. But have you ever stopped to wonder how that agent gets paid? And, more importantly, does their paycheck impact the advice they give you?
I’m here to pull back the curtain on agent compensation. My goal is simple: transparency.
I didn't start my career as the informed independent broker I am today. I started eager for a new career and sought out what I thought was the necessary path: a captive agency.
My Journey from Captive to Independent
My first stop was a large, well-known agency. For about a year, I worked hard, but I quickly realized I wasn't getting the training and team support I needed. While they provided leads, they required constant cold-calling—which simply wasn't my cup of tea.
Seeking better guidance, I moved to a second captive agency. I’ll be honest: at the time, I didn't even realize I had independent options. I truly believed this was "how it's done"—you had to align with a group that promised to train and guide you.
Unfortunately, this second move was a terrible experience. This agency took a whopping 75% of my commissions and misled me into believing I could eventually earn ownership of my book of business. They provided some leads, but I was required to purchase half the cost. The worst part? They were paid by the carrier for my sales, and then they would pay me my small portion—but they often just didn't pay, leaving me working for free. Every client I signed up was their asset, not mine.
I didn't make it a full year there. I had found my passion for helping people with insurance, but I knew I was not aligned with the right people.
Finding True Independence
This experience drove me to do extensive research. I learned the truth: I did not have to be captive. I could become an independent broker and receive 100% of my commissions, working with an FMO (Field Marketing Organization) that only kept an override that didn't affect my pay.
After interviewing several general agencies and FMOs, I landed where I am today. It was the best decision I’ve ever made. I am happy to report I now have top-notch training, excellent support, and am able to offer great help to my clients while being compensated fairly.
I am an independent broker aligned with a wonderful team:
TLC Insurance Group: Our Independent Marketing Organization (IMO).
Senior Health Services: Our local Field Marketing Organization (FMO) based out of Houston, TX.
Kral Insurance Group: My immediate General Agency (GA) support team.
Now, let's break down the system and explain what these agencies are, how agents get paid, and why this structure ultimately benefits you, the consumer.
🌎 Understanding the Ecosystem: IMO, FMO, and Independent Support
To understand how this new carrier trend impacts you, the consumer, you first have to understand the vast support system that powers an independent agent like me. When I was a captive agent, I worked directly for the carrier; now, as an independent broker, I contract with multiple carriers through a robust network designed to support me so I can support you.
This tiered structure is essential because it allows an independent broker (like me) to access dozens of carriers and plans while still receiving top-tier training and compliance guidance.
Why I Support the Override (And Why You Should, Too)
When a carrier pays a commission, the independent broker receives 100% of the maximum allowed commission. The IMO/FMO/GA receive a small administrative payment, known as an override, which does NOT come out of my commission or your premium.
The Override Pays For:
Top-Notch Training: Keeping me up-to-date on regulatory changes (like the IRA) and plan changes.
Compliance: Ensuring every interaction follows CMS rules to protect you.
Technology: Providing sophisticated quoting tools that save you time and ensure accuracy.
Back-Office Support: Handling administrative burdens so I can focus on client service.
The override compensates the upline agencies for the infrastructure that allows me to offer unbiased, multi-carrier advice.
How Agents Are Paid: A Commission Comparison
The primary difference between agent types is who owns the client relationship and how much of the carrier’s compensation they receive. This structure directly informs the level of service and plan choice you receive.
Commission Rates for Independent Brokers (Average/Maximum)
Commissions for health and Medicare products are set by the carrier and/or capped by the Centers for Medicare & Medicaid Services (CMS). As an Independent Broker (aligned with an FMO/IMO), I receive the maximum allowable rate, which is typically:
The Captive Agent Difference: A Sharp Cut
As you heard in my introduction, when an agent is Captive (working directly for a carrier or agency), they often receive 50% to 75% less than these standard independent rates.
My past captive agency, for example, kept 75% of the compensation the carrier paid for my sale. They received the full $611 (or equivalent) for an MA plan, and I received a small fraction. This structure means the captive agent has a limited incentive to stay in the business long-term or provide service beyond the initial sale, as they don't own the client's renewal income.
The Real Cost of Service: Agent Compensation is NOT Pure Profit
A common misconception is that the compensation an independent broker receives is pure profit. It is not. My full commission is what allows me to operate a compliant, ethical, and service-focused practice.
As an independent, I am a small business owner. My compensation must cover all the essential costs required to serve you year-round:
When you factor in these significant costs, the compensation I receive simply funds the professional infrastructure needed to provide you with expert, compliant, local advice at no extra charge to you.
The Alarming New Trend: Carrier Profit Over Client Choice
This brings us to the most urgent topic facing Medicare and ACA beneficiaries and agents today: the growing trend of carriers reducing or eliminating agent commissions on certain plans.
As carriers face new financial pressures, driven by factors like the Inflation Reduction Act (IRA) and rising utilization costs, they are grasping to remain profitable. Starting last year with one major carrier, this trend is growing, with others following suit this year.
The Problem: Limited Access and Steering
As an independent agent, this affects my ability to serve you by:
Removing Access to ALL Options: When a carrier removes a commission for a specific plan or product, my FMO is often instructed to remove that plan from our proprietary quoting tools. Our tools are infinitely more user-friendly and comprehensive than the government's site, but when plans are removed, I can no longer show you that option side-by-side with others.
Forced Steering: I am then essentially instructed to guide clients to those carriers' websites or to Medicare.gov to enroll. This is a form of passive steering away from what might truly be your best plan. I always show clients all their options, even ones I'm not compensated on if I can access the data, but when the data is restricted, so is your choice.
Customer Service Crisis: My customer base, while small, is already reporting the inevitable: they can't reach the carrier, they face long hold times, and online enrollments are not going through correctly. I always follow an enrollment for my clients to correct problems immediately and ensure coverage starts properly—a service that vanishes when you go direct.
The Commission Myth: Do You Save Money Going Direct?
The answer is a definitive NO.
Agent commissions are calculated and built into the premium regardless of whether an agent assists in the enrollment. When you enroll directly, the carrier does NOT pass that commission back to you as a discount. They simply absorb it as increased profit or reallocate it internally.
In essence, you pay for the agent service, whether you receive it or not.
When a carrier removes the commission, they are not helping you save money; they are removing a crucial service layer, forcing you into a frustrating enrollment process, and limiting your access to the unbiased, multi-carrier comparison that an independent broker provides.
How Health Commissions Differ from P&C (And Why Both Are Essential)
I often get asked if the commission structure I follow is unique to health and Medicare. The short answer is no—all lines of insurance rely on agents for distribution.
The Key Similarity: The Built-In Commission
The most crucial similarity is this: Property & Casualty (P&C) commissions are also built into the premium.
For an auto or home insurance policy, if the premium is $2,000, a portion of that is already earmarked for agent compensation (typically 10% to 20% for an independent P&C agent). If you buy a policy directly from a major carrier’s website, you do not save money. The carrier simply retains that commission portion as profit.
The service of finding the right P&C plan across multiple carriers is so vital that it is expected to be funded by the premium, just as it is in health insurance.
The Key Difference: Scrutiny and Structure
The main difference lies in the structure and regulatory scrutiny applied to compensation:
The fact that health and Medicare compensation is constantly under the microscope—resulting in the trend of carrier commission removals—highlights the intense pressure on agents in this sector, even though the core business principle (commissions fund expert service at no extra cost to the consumer) is the same across the entire insurance industry.
The Essential Role of Your Local, Independent Broker
My journey from a captive agent to an independent broker has taught me the fundamental truth of this industry: transparency and unbiased advice are the ultimate value.
The new carrier trend of removing commissions is a dangerous path. It is not about saving you money; it is about steering you into a limited, direct-enrollment pathway where:
Your choice is restricted because not all plans show up in the quoting tools.
Your support disappears, leaving you alone to deal with long hold times and enrollment errors.
Your local, licensed advocate is removed from the equation.
Local independent brokers are the consumer's best defense against confusion and bad-fit plans. We are licensed experts who have invested our own time and money into the infrastructure necessary to be your year-round resource—all compensated by the premium that you were going to pay anyway.
We are essential because we put your needs, not a single carrier’s bottom line, first.
Final Call to Action
If you are navigating the complex world of health or Medicare insurance, don't sacrifice your choices and your service for a phantom savings. Seek out a trusted, local, independent broker who will show you all your options and support you long after the enrollment is complete.
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