People often talk about Medicare as if it were one product. But the truth is that the three types of Medicare products that agents are able to sell — Medicare supplement, Medicare Advantage (MA), and Medicare Part D — are three very different products with different market expectations and unique challenges.
In our first-ever Medicare Market Study, conducted by Agent Media* in partnership with the American Association for Medicare Supplement Insurance, we explored each market segment separately, surveying more than 350 agents who sell Medicare products about the issues they face each and every day when working with senior clients. The results give exclusive insight into the Medicare market, and help us to better differentiate each of the Medicare markets as separate entities. We’ll explore the results of the study by market, then follow with an examination of those areas of the study that affect the Medicare industry as a whole.
Prospecting for a better future
Despite the changes that have come to the market, the majority of agents expected their Medicare supplement sales to increase in the next 12 months; a full 58 percent of producers anticipated seeing an increase in Med supp sales, and only 8 percent predicted a decrease in their sales. This comes despite the fact that only 38 percent of agents reported that their Med supp sales increased in the past 12 months.
So why do agents think they will be even more successful in the next year? Many producers attributed the predicted change to the lack of availability of private fee-for-service plans and other deficiencies in the Medicare Advantage model. One agent who specializes in selling Medicare supplements said, “People are now realizing that Medicare Advantage plans are not what they thought they were, and are going back to Med supp plans.”
But the rosy outlook for Med supp doesn’t mean that agents aren’t faced with their share of challenges. In fact, the biggest problem for producers involved in selling Medicare supplements is prospecting for new business (70 percent), followed by clients thinking the options are confusing (55 percent), and staying compliant with laws and regulations (33 percent). (Chart 1)
Medicare Advantage and CMS:
A bleak outlook
The future doesn’t look very bright for Medicare Advantage: More than one-quarter (29 percent) of respondents reported that they expect their MA sales to decrease in the next year, although nearly half (49 percent) said that their Medicare Advantage sales had increased in the past 12 months — a higher percent increase than for any other Medicare product.
So if sales were increasing last year, why do so many agents anticipate a decrease next year? One agent from Orange, TX mirrored many other producers’ concerns when he pinpointed the Centers for Medicare and Medicaid Services (CMS) as a cause for concern.
“[The new] CMS regulations, in reality, prevent agents from contacting and educating Medicare beneficiaries,” he said.
In fact, 52 percent of agents said that the issue they find the most challenging in the Medicare Advantage market was that the new CMS marketing and sales regulations are too strict. Another 26 percent of agents said that the new CMS regulations were too confusing, and 37 percent said they thought the commissions (which are regulated by CMS) were too low.
Aside from CMS, prospecting is an issue for agents specializing in MA sales: Exactly half the agents said it was their biggest challenge. Forty-three percent said they were most challenged by finding a plan with the right mix of doctors and benefits for their clients, and 42 percent said that clients thought the options were confusing. (Chart 2)
Medicare Part D: A confusing
and ever-changing market
Of all the Medicare markets, Part D remains the most constant in terms of agent sales performance and optimism for the future. In the past 12 months, 34 percent of agents said they saw their Part D sales increase, and 22 percent said they saw a decrease in their sales. For the most part, producers expect things to remain steady for the next year: Thirty-eight percent expect their sales to increase in the next 12 months, while 18 percent believe they’ll see a decrease, and the remainder anticipate their sales to remain constant.
The main challenge for agents in the Part D market, cited by 54 percent of respondents, is that the pricing and formularies change too much from year to year. Another issue, possibly arising from the constantly changing formularies, is that clients think the options are confusing (39 percent). Prospecting for new business is also a challenge (37 percent), and 33 percent of agents think the new marketing and sales guidelines for Part D are too strict. (Chart 3)
Finding the best prospects
According to our study, a much higher percentage of agents are selling to first-time buyers of Medicare than to beneficiaries converting from other carriers. In fact, 45 percent of agents selling Part D and Med supp and 37 percent of agents selling Medicare Advantage said that more than half of their sales were made to first-time buyers.
Part of this is very likely wrapped up in the fact that the baby boomer generation is rapidly aging and reaching eligibility for the first time. Indeed, several agents that we surveyed cited the aging population as the exact reason for their increased sales in the past 12 months, and many more believe that the continued aging of the population will only help them in the years to come. One agent who has been working in the Medicare Advantage market for just five years has already seen the effect that the baby boomers have had on her business.
“The increase [in business] will come simply because I have more referrals, and more people are turning 65 each year,” she said. But often, the best clients can be found within your own book of business. Across all three products, referrals were named as the No. 1 place to turn for new customers, with selling to existing clients named second. (Chart 4)
New rules, new president, new outlook
With all of the changes happening to the Medicare market, many agents are finding their practices transforming in front of them. In fact, one agent from Southfield, MI said she “decided to spend less time on [Medicare] due to an inability to make it a profitable product line.”
Indeed, the changes to the marketing and sales regulations have been the biggest blow of all. However, not all agents think that the Centers for Medicare and Medicaid Services were in the wrong.
One agent from Evans, GA said, “The rules and regulations were needed to stop the nonsense that has been going on. Now, they need to be enforced. Companies need to police agents and get rid of the bad ones. High production doesn’t mean an agent is qualified to be on the street.”
But another producer isn’t as optimistic that the rules will weed out only the unethical agents.
“The rules hinder agents who are doing their job ethically,” she said. “Those agents who are unethical will always find a way around the rules.”
Many more agents agree, including one from Southern California.
“It is good to protect seniors, but CMS has gone too far the other way,” he said.
Another concern for many agents is the new president and what a Democratic Congress may mean for the future of Medicare. Seventy percent of agents, for example, believe that Obama’s plans to cut MA payments to insurers will likely cause them to sell fewer MA plans in the next year.
If you are going to be successful in any of the Medicare markets, you must first understand the individual challenges that particular market faces. Then, take a step back and look at the Medicare industry overall. Where is it headed? With more and more boomers reaching qualifying age and a Democratic government in control, there are sure to be changes coming. Are you going to be prepared for them when they arrive?
Heather Trese is the associate editor of the Agent’s Sales Journal. She can be reached at [email protected] or 800-933-9449 ext. 225.