The Medicare Advantage program is undergoing its biggest shifts in more than two decades. Payers can take steps now to mount a strategic, agile response as the changes unfold.
Brokers are vital to the Medicare Advantage (MA) ecosystem, representing 70 percent of MA distribution. Today, though, brokers need to rethink their strategy as they sort through some of the biggest shifts in the MA market in the past two decades. At a time when payers are pulling back on benefits to navigate profitability challenges, brokers find themselves at the forefront of dealing with evolving beneficiary preferences, payers’ strategic shifts, and potential regulatory scrutiny.
These shifts are consolidating the brokerage industry. For example, changes in MA benefits heading into 2025 are leaving many seniors uncertain about their best options, leading to increased switching. This member churn means that, as brokers scramble during the annual enrollment period, customer acquisition costs are soaring. This pressure is pushing some brokers out of the market while sending others looking for acquirers. As acquirers expand, they can demand larger volume-based administrative payments, further cementing their advantage.
Is it game over for smaller brokers? Not quite. But to remain competitive, brokers must pursue new strategies to succeed. This article examines dominant trends among beneficiaries, payers, and regulatory environments and outlines a response that can help brokers.
In recent years, churn among MA members has reached unprecedented rates (up about 70 percent since 2017). With members increasingly shopping and switching, brokers need to strategize to remain the agent of record for the beneficiaries they support and prove their value to payers. Brokers now need to keep in mind that even beneficiaries who are satisfied with their current plans are exhibiting a shopper’s mentality and seeking the latest benefit changes. This is largely due to supplemental benefits becoming increasingly generous, with an array of financial, health, and wellness offerings. All of this adds complexity heading into 2025, where some plans have increased product richness while many others have retrenched or exited entirely.
As baby boomers age, it is unclear if this trend of increasing churn will persist. Historically, older MA members have churned less frequently (7 to 8 percent for those 75 years and over versus 11 to 15 percent for those 65 to 74 years). However, the newest generation of seniors has “aged in” amid this period of substantial supplemental benefit growth.
Given rising churn and the possibility of sustained switching behaviors, brokers should focus on longitudinal member engagement. They should expand client interactions and ensure year-round member engagement to ensure client satisfaction and improve renewal success. More broadly, they will need to be attuned to their clients’ needs to personalize guidance based on evolving health needs. But for that, they would need to rigorously track engagement, which could also help them prove their value to payers and, in turn, make higher compensation viable. This approach enhances the member experience and positions brokers as trusted advisers committed to their clients’ long-term health and well-being.
But not all brokers are created equally when it comes to beneficiary churn. While e-brokers drive high volumes, they are known for enrolling a larger proportion of members into special needs plans (SNPs) and dual-eligible special needs plans (D-SNPs), resulting in higher churn rates. The other type of broker—field marketing organizations (FMOs), or field brokers—generally deliver a smaller proportion of D-SNPs but stronger retention. E-brokers and FMOs are both caught in the disconnect between the need for retention and payers’ imperatives to grow the D-SNP cohort, which provides superior margin performance for payers.
But this market has evolved in recent years. E-brokers now enroll more members than either FMOs or payers—more than 40 percent of beneficiaries that enroll annually—according to McKinsey analysis that shows this increase from pre-COVID-19 to 2023. However, FMOs are larger operations than e-brokers and remain crucial partners to MA payers. In recent years, though, the FMO space has experienced a number of rollups. As a result, the brokerage landscape overall is now led by a small subset of large institutions, mirroring the consolidation and growth of the largest payers.
Potential for rules that set compensation guardrails may necessitate new approaches
Less oriented around membership growth, many payers leaned into a proposed rule from the US Centers for Medicare & Medicaid Services (CMS) that would have reformed historical models of broker compensation. That rule is now stayed, but considering payers continue to face margin pressures that could strain sustainability, broker compensation has become a strategic question: Will payers adjust or reduce historical broker commission levels as a means of reducing administrative costs? Recently, many payers have taken steps toward this, indicating that they will not pay commissions for new products that may be unprofitable. Payers choose to keep these products to retain legacy membership and mitigate disruption, but they eschew paying further commissions that drive growth in select unprofitable products.
Stepping back: in the 2025 Medicare Final Rule, CMS proposed a redefinition of brokers’ compensation. This rule, stayed by a Texas district court in July 2024, highlights the scrutiny on broker channels and aligns with recent governmental actions to crack down on bad actors. Historically, broker compensation entailed CMS-regulated enrollment and renewal commissions to the agent plus a bundled fee to the brokerage for all services provided during enrollment. These administrative fees, also known as overrides, are paid on a per-enrollment basis and are based on the fair market value (FMV) of those services. The proposal aimed to restrict overrides by eliminating fees for enrollment-related services, though leaving opportunity for other, non-enrollment-related services to be compensated at an FMV.
If pursued again and successfully implemented, these changes may require brokerages to separate enrollment-related services from others such as compliance, marketing, and commissions management. Furthermore, longitudinal engagement—a critical part of brokers’ adjustment to beneficiary churn—would also fall outside of enrollment.
Amid uncertainty about potential regulation, brokers can explore other approaches. This could include vending out marketing and sales or enrollment technology to payers, monetizing actionable information learned during the sales process (like drug, doctor, benefit preferences), and lump-sum payments for lead generation. Brokerages also have an opportunity to equip their agents with a full product portfolio inclusive of life insurance, final expense, Affordable Care Act plans, and more.