Government Regulation. Oh What a Tangled Web

Will you step into my parlor?

At the risk of preaching to the choir I’d like to take some time and discuss the dangers of Government intervention in the free market.  My chosen method for this will be actual examples from my personal experience. How am I privy to such things? Glad you asked. When Medicare Part D was created it was turned over to private companies for administration.  I work for one of those companies, hereafter known as Company X, and due to our connection with Medicare we are under the rules and regulations of CMS (Center for Medicaid and Medicare Services). Due to the astounding quantity of asinine regulations I will not be able to cover them all but this could perhaps become a regular feature. Without further ado this is an actual rule, procedure, or regulation from the Federal Government only translated into something resembling plain English:

You Work For The State Now. Pay Is Unimportant!
We employ sale’s agents to sell our policies and oddly enough they expect to be paid so we pay them a sale’s commission. The Federal Government chipped in their bit of genius in July of 2008 with the MIPPA Regulations and now this is how we pay:

An agent is paid $400 per sale and $200 per year for 5 years if and when the member remains insured with Company X. Under CMS regulations the agent will receive only $200 of their $400 commission and CMS shall review each sale to determine rather the additional $200 is due (totaling the full $400). CMS shall release periodic reports to Company X granting clearance for the commissioned sale’s agent to receive the remaining $200 of their commission. If CMS determines that the agent is not due the additional $200 in commission than no further correspondence shall be sent from CMS to Company X regarding the sale.

Clear as mud huh? You should see it in the legislative language we got it in, that paragraph was 11 pages. Not even kidding. Here is the breakdown; even though the commission is $400 we are only allowed to pay the agent half of that or $200, the Federal Government in their infinite wisdom will then review each sale and will give us permission to pay our employee the remaining half of their pay. Now tell me how motivated would you be to go to work at half of your salary?

To make things more complicated there is no communication from CMS notifying us if they are not going to pay an agent the other half so we are unable to give our agents clarification on their pay. Now you might be asking yourself exactly how long does it take the government to give us permission to pay that other half? Well, that unfortunately is part of the mystery. We are told it can take up to 6 months we have no one we can call within CMS or the Federal Government to check on the status of these reports so when we get them it is an unexpected treat. As of today the government has only given us reports on sales through the end of May 2009 so if you sold something in April then you are still waiting to get the other half of your paycheck.

How to Kill a Business Without Even Trying
It goes without saying that financially penalizing sales agents in this way has a ripple effect on the company and here is a breakdown on some of the impact it has had on us:

• In the 2007- 2008 selling season we had 1016 Agents and Brokers selling our policies across 5 states. For the 2008- 2009 selling season we had 303 leading to a greater than 70% drop in new member enrollments.
• As of the second quarter in 2008 Company X was the fastest growing insurance carrier in America and had to open two new offices for our corporate headquarters and 13 satellite offices across our five state coverage area, we were employing 400+ fulltime employees not including our 1016 Agents and Brokers. Heading into the close of 2009 we now stand around 150 employees and 303 Agents or Brokers. Our company has closed 10 of it’s 13 satellite offices and one of it’s corporate headquarters.
• Since we are unable to predict when we will receive the CMS reports telling us to release the remaining commission to agents we are unable to properly forecast expenditures for the coming quarter and as such have had difficulty meeting all of our financial obligations when a report unexpectedly arrives. With the tightening of the credit market we have not been able to borrow this money as easily as we once could so Agents often find themselves having to wait an additional several weeks before receiving their remaining commission and as you can imagine this leads to a great amount of frustration from our Agents and makes it difficult for us to retain quality Agents.

Naturally this is not a full list of the consequences and obviously more regulations have played into this rapid decline but it all goes to show why the Government should not be directly involved in the free market.

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