Certified Covered California insurance agents are not paid by Covered California. We are paid a commission when we enroll an individual or family into a health plan. The customer service representatives who answer questions and assist with completing the Covered California application are not insurance agents. The customer service agents are employees of Covered California.
Covered California Does Not Pay Health Insurance Agents
When you call Covered California at 800-300-1506 with questions or assistance with enrollment into a health plan, you are talking to an employee of Covered California. They are paid to answer questions, make changes to your consumer applications, and enroll you into a health plan or Medi-Cal. They are nice people. Because they are not licensed insurance agents, they technically can not give guidance on whether one health plan may be better than another one being offered to you.
Insurance Agent Commission Models
Covered California certified insurance agents are licensed to transact insurance business. Health insurance agents are paid by the carriers or health plans they enroll individuals into. The payments of enrollment commissions are usually calculated on a monthly basis. There are two commission models that the carriers use. The commission model employed by the carrier is the same whether the individual enrolls through Covered California or off-exchange direct with the carrier.
Per Member Per Month. Under the per member per month (pmpm) commission structure the agent is paid a flat fee for each individual enrolled into the health plan regardless of age or the health insurance premium rate. Most of the carriers use the pmpm commission structure. For the 2023, my experience is that the average pmpm is approximately $17, some carriers pay more, some less. The pmpm can also vary by when the individual first enrolled. The pmpm fee has changed over the years. Some carriers may also pay a lower pmpm for renewals.
For example, an agent enrolls Darcy and David, a married couple, into a health plan where the pmpm commission is $17. The agent would be paid $34 for each month the couple is enrolled. Health insurance is a month-to-month contract. No commission is paid until the plan members make a premium payment. The agent won’t get paid a commission if the plan member forgets to make their monthly premium payment. When the family brings their account current with the health plan, the carrier will pay the agent for all the months the health plan was active and current.
Agents are not paid any commission when an individual or family is eligible for Medi-Cal. In this example, Ben and Bradley are married and have a son. Ben are Bradley are eligible for a private health plan through Covered California. Because of their income, their son is eligible for Medi-Cal. The pmpm of the health plan is $17. The agent is paid $34 per month for the family. Agents are paid no fee or commission for family members eligible for Medi-Cal.
Percentage Commissions
The other commission model that a few of the carriers still use is the percentage model. The agent is paid a percentage of the total health insurance premium for the enrolled members. The percentage can be as low as 1 percent or has high as 4 percent depending on the carrier and type of health plan. The total premium is irrespective of any Covered California subsidy the individual or family may be receiving.
In this situation, we have a family of 4, two adults and two children. The total monthly premium for each adult is $587 and $300 for each child based on age and enrollment in a Silver plan. The total monthly premium for the family is $1,774. With an agent commission percentage of 2.5 percent, the agent is paid $44.35 for each month the family is enrolled in the health plan.
If the children were Medi-Cal eligible and only the adults were enrolled in the health plan, the total premium would be $1,174. At the 2.5 percent commission percent, the agent would be paid $29.35 each month. The obvious advantage for the carriers using a percentage commission structure is that the agent commission is much lower for younger individuals. The flip side is that older individuals have comparatively high health insurance rates relative to younger individuals.
For dental and vision plans, agents are usually paid a percentage commission averaging 10 percent. A family of 4 enrolled in a PPO dental plan at $50 per person, would yield the agent a commission of $20 ($200 x 10%.) Similar to the health plan agent commissions, dental and vision plan commissions are the same whether the family enrolls through Covered California or off-exchange directly with the carrier.
Thirteen Different Agent Compensation Structures
There are 13 carriers who offer individual and family plans in California. All the carriers offer health plans through Covered California except for Sutter Health Plus. Sutter health plans are only off-exchange. Some of the carriers like Blue Shield and Kaiser also offer health plans off-exchange not available through Covered California. Those off-exchange health plan enrollments are subject to the same commission model of the carrier.
Each carrier has their own commission structure, which means there are 13 different commission structures. While the carriers are consistent in applying their commission structure across the health plans they offer, some carriers will change the commission based on whether the health plan is a PPO or HMO. Some agents must split their commissions with an agency, further reducing their health insurance revenue.
Because I am agent who works throughout the state, I experience all the different commission structures and percentages. I don’t attempt to analyze my commissions based on carrier, pmpm, percentage, or region of the state. Some agents may only work in one region of the state or only with a few carriers. For instance, an agent may only represent Kaiser Permanente. In that situation, it is easier to quantify their income based on one carrier’s commission model.
Health insurance agents work with different lines of health insurance. We also represent small employer group plans that pay a commission percentage of approximately 4 percent. There is also the Medicare environment where Medicare Advantage plans can pay $700 per new enrollment (one half for renewals) and Medicare Supplements that have an average commission percentage of 10 percent. A Plan G Medicare Supplement for an individual turning 65 is around $150 per month. All the commissions get put into the big bucket of monthly income.
In addition to not tracking or analyzing commissions to optimize my income, I don’t track my time assisting clients. Health insurance agents can spend as much time helping a family eligible for a Covered California health plan as they do for the family that is eligible for Medi-Cal. The former will pay the agent a monthly commission, the latter will not. However, if you only focus on optimizing your revenue, you miss the bigger picture and parts of our community who benefit greatly from a Medi-Cal eligibility determination.
