Medicare Advantage grows into a $10B-plus opportunity for go-getter brokers selling plans for private insurers

Third-party marketers selling Medicare Advantage plans to healthcare consumers tend to make more on renewals than they do on new enrollments. 

That’s because these brokers earn commissions from their insurer clients not only upon initial signups but also every time “their” enrollees renew without changing plans.

As of 2022, some 70% of Advantage beneficiaries did just that. 

As a result, automatic payouts accounted for almost three-quarters, 74%, of all commissions paid by private carriers to industrious brokers. 

The findings are from a study conducted at the Brown University School of Public Health and published in JAMA Internal Medicine May 18. 

For the research, David Meyers, PhD, and colleagues obtained data through a Freedom of Information Act (FOIA) request. 

The team states their study is the first they know of to tally Medicare Advantage beneficiaries who were enrolled by brokers. 

With these headcounts they calculated fees paid to these third-party Advantage marketers. 

Broker payouts skyrocket 159% over eight years 

Other notable findings reported by Meyers and co-authors:

• The amount spent on brokers increased from $3.9 billion in 2014 to $10.1 billion in 2022.
   
• In 2022, 73.6% of broker spending was for renewal enrollments. 
   
• There were 22 million new and 112 million renewal enrollments in the MA from 2014 to 2022. 
   
• The proportion of new MA enrollees who were referred by a broker increased from 35.8% in 2014 to 43.7% in 2022. 
   
• The proportion of enrollees remaining in their plan who generated a renewal fee increased from 50.1% in 2014 to 69.4% in 2022.

The researchers note that their pending estimates are based on the mean broker payment rate during the period, with spending data inflation-adjusted to 2025 dollars.

‘Largest driver of increase in broker spending over time’

In 2022, 25.9 million Medicare Advantage beneficiaries generated a broker fee for either enrolling in their plan or maintaining enrollment in their plan, with these payments totaling over $10 billion, the authors underscore in their discussion section. 

“This use of brokers has increased over time and most of this spending is for brokers who kept members enrolled in the same plan,” they add. “This increase in renewal fees is the largest driver of the increase in broker spending over time, rather than changes in the fee per enrollment.”

Among the limitations they acknowledge in their study design, the researchers note blindness to the exact amounts paid to each broker by each plan. 

“[W]hile we may overestimate broker fees if plans paid certain brokers lower than the maximum rate, our numbers may also be a substantial undercount of the spending as we also cannot capture the potentially large bonus payments made to brokers for meeting enrollment targets,” they write. 

Who’s beholden to whom?    

Meyers and colleagues mention CMS’s 2024 attempt to tighten guardrails around broker payments, noting that the agency’s proposed rule ended up getting struck down in federal court. 

“More evidence is needed to understand if these enrollments lead to better outcomes or satisfaction,” they state, “or if the spending on brokers could alternatively be directed to State Health Insurance Programs [that] are underfunded and provide a potential alternative source of information to beneficiaries.”

In coverage of the research by Brown University’s news division, Meyers emphasizes that the party ultimately footing the bill for commissions paid by insurers to brokers is—who else?—U.S. taxpayers. 

“While insurance companies are spending a ton of money on brokers, we don’t know if it’s actually in the beneficiary’s best interest, since brokers are beholden to the companies,” Meyers says. 

“This study doesn’t answer every question, but it’s a first step in better understanding the role brokers are playing, how many people are being enrolled through brokers and how much money is flowing into this market.”

Study posted here, university coverage here.