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California Carriers May Pay Health Agents PMPM Commissions Instead of on a Percentage Basis

by John Hansen

There are two main ways California carriers pay their health agents. Either they pay on a percentage basis or a Per Member Per Month (PMPM) basis. Anthem Blue Cross has gone to paying medical insurance brokers on a PMPM basis for individual sales, and Blue Shield of California is considering following suite.

PMPM Commissions Allow California Carriers to Remove the Conflict of Interest

With PMPM, California health insurance plans pay their medical insurance brokers a set dollar amount for each enrollee every month. This way no matter what health plan the consumer purchases, the health agent gets paid the same amount. Thus, there is no conflict of interest causing brokers to steer clients away from low cost bronze plans toward more expensive platinum plans.

Historically, health agent commissions have been paid out by California carriers on a commission basis. Before the implementation of the Affordable Care Act (ACA), often medical insurance broker commissions ranged from 10-20%. When Health Care Reform came into play, Medical Loss Ratios (MLR) had to insure that 80% of premiums went directly toward medical services. This put pressure on California carriers and caused commissions for health agents to drop down to around 5%.