Do I Need to Use a Medicare Agent?

It’s common for people looking for a new health insurance plan to go through an insurance agent, but is this necessary when it comes to Medicare? The situation will vary depending on the type of Medicare you want. If you do choose to go with an agent, the details can still make the process differ widely. We’ll go through all of the distinctions here, so you can know what to expect when you deal with an insurance agent for Medicare.

Medicare options that can use insurance agent services

If you’re just planning to enroll in Original Medicare (Medicare Parts A and B), then you won’t need to use an insurance agent. In fact, you won’t be able to use an insurance agent -- this type of Medicare is only available from the federal government. Insurance agents will never come into the picture.

Part D prescription drug coverage

If you have Original Medicare and are also enrolling in a prescription drug plan (PDP), then this plan may be available to purchase through an insurance agent. This is because Part D plans are sold by private insurance companies.

Part C: Medicare Advantage

Medicare Advantage is by far the most common type of Medicare insurance that is sold through insurance agents. Medicare Advantage plans, also known as Part C plans, are basically a way of getting your healthcare coverage through a private plan. Part C will cover the same things that Medicare Part A and Part B cover.

Some Part C plans come with prescription drug plans bundled with them, and some don’t. If yours does not come with a PDP, then it can be possible to get Part C from one company and Part D from another, while working with two separate agents for each plan.

Medicare Supplement Insurance

Medicare Supplement plans, also known as Medigap plans, are plans that cover out-of-pocket costs under Medicare. Unlike health plans, these plans offer help paying things like your coinsurance fees and deductibles. These plans are also sold by private insurance companies, which means that insurance agents will be able to sell them to you.

Captive vs. independent Medicare insurance agents: The key criteria

When it comes to Medicare insurance agents, there are generally two types: captive and independent. Both can be licensed to sell Medicare.

Although “captive” has a very negative connotation, it is just used to refer to agents who work for only one company, rather than agents who can work with a variety of insurance companies. As you’ll see below, the difference between captive and independent agents is very large and will make a big difference to your end result.

Sales representatives vs. brokers

The basic way that you can think of captive versus independent agents is that captive agents are sales representatives who are contracted to sell a specific insurance product. Independent agents, on the other hand, are more like insurance brokers, meaning that they can sell you any type of insurance product, and aren’t limited to one company.

Captive agents work for a specific company to sell that company’s insurance. In this way, you can think of them as analogous to a car salesperson; they sell one type of product for one company, and most likely are paid via commission.

Independent agents are simply people who sell insurance-related products. They can sell an insurance plan from Company A to one person and Company B to another, which is something captive agents simply can’t do. The plan options will be much broader when working with independent agents.

As you can imagine, there is a much greater level of freedom that comes with working with an independent insurance agent rather than a captive one. Independent agents can look at all of the insurance products they have access to and try to find the one that works best for you, while captive agents can only sell you one specific thing, which may not be a good fit.

The key here is that if a captive agent’s plan isn’t a good fit for you, they’re very unlikely to tell you this, and will try to sell it to you anyway: it’s their only option. Independent agents can just find another plan that fits your needs better.

Why would anyone choose a captive agent?

Based on the above, independent agents seem clearly superior to captive agents. You may be wondering why anyone would ever choose a captive agent. There are only two main reasons for this.

First, a person may have already done their research and knows which plan they want and which price they want to pay. If a captive agent can provide them with that plan, or if that insurance company only works with captive agents, then it won’t make much of a difference to a person in this scenario.

Second, most people simply don’t know this distinction. We’re used to thinking of insurance agents as people who can sell us insurance plans, and if a captive agent calls themselves an insurance agent, your average person may not be able to tell the difference or understand the consequences. Understanding this key difference can be very empowering for you as a consumer.

Is insurance from captive agents bad?

As you can see, working with independent insurance agents will be better for almost everybody. But, does this mean that the insurance from captive agents is bad?

Not necessarily. Some insurance companies will only work with captive agents, and they may have some insurance plans that are a perfect fit for some people. Working with a captive agent out of necessity can be a suitable plan for people who can thoroughly do their research and understand exactly what they want.

However, if you want to be able to get multiple quotes from different companies, don’t know exactly which plan may be the best fit for you, and, in short, aren’t 100 percent settled on a plan already, then you should seek out an independent agent.

When to look for an agent

If you know that you want a Medicare plan that will be available through an agent -- like a Part C or Part D plan -- then you should start looking for an agent as soon as possible. Many insurance agents become overwhelmed during and shortly before major enrollment periods, like the Open Enrollment Period. If you can use their services outside of this period, it may be a bit easier.

If you’ve already decided that you want Part C and/or Part D insurance before your Initial Enrollment Period, then you should seek out an insurance agent during that time. Because Initial Enrollment varies from person to person, it’s more likely that they will be available to devote more time to your needs.

In conclusion: Go independent

Although it’s usually hard to give concrete recommendations when it comes to insurance due to the variety of people’s needs, choosing an independent insurance agent over a captive one is a no-brainer for every Medicare beneficiary. Independent agents are much more likely to be Medicare specialists who understand what is on the market and what works for different people, rather than salespeople pushing a specific product.

Although not every independent agent will be a perfect fit for you, almost no captive agents will be due to the inherent limitations on what they can do. If you want a Part C plan, Part D plan, or Medigap plan, seek out an independent agent.