When Are Agent and Broker Insurance Commissions Paid?

If you’re new to health insurance sales, you may be wondering when you can expect your new business commissions and added sales rewards to be paid?

The easy answer is, “it depends.” A lot of factors influence the timing of your commission and bonus rewards pay-outs:

carrier
target market (Individual & Family Plan (IFP) or Group)
product (Health, Dental, Vision, Life, Supplemental, etc.)
commission agreement and schedule
effective date of sold cases
sales reward qualification period

Payment on Base Premium Only

Commissions on IFP and small business plans are typically paid on base premium only. That excludes applicable taxes and charges, including but not limited to Affordable Care Act taxes and fees.

Paid as Earned for Ongoing Contracts

Commissions are usually paid as dues/premiums are earned, received, and processed by the carrier or administrator (if applicable).

The exceptions are for new IFP and Small Group policies. Commissions will not be paid on new policies until the contract is in effect and premiums are paid (and processed).

To receive commissions, the producer must be licensed in the state where the sale takes place; must have a current license on the effective date of coverage; and must be the broker of record for the employer. Producers must also be in good standing with a current carrier appointment on the date the commission is paid.

IFP Coverage: For most carriers, commissions for all years of a contract are calculated as a percentage of the first year’s dues/premiums received and allocated by the carrier. First-year dues/premiums are defined as the dues/premiums in the month of the insured’s initial contract enrollment. Commissions for renewal business will be tied to the rate tables in use when the contract first becomes effective; in most cases, IFP commissions will not increase over time as dues/premiums increase.

If a member changes plans, the renewal commission will be based on the member’s current age and calculated as a percentage of the new plan’s rate tables in effect at the time of original enrollment. If a plan was not available at the time of original enrollment, the first available rate table will be used to determine commissions.

IFP Term Life, Dental, and Vision Plans: For most carriers, commissions for all years of a contract are calculated as a percentage of the first year’s dues/premiums received and allocated by the carrier. First-year dues/premiums are defined as the dues/premiums in the month of the insured’s initial contract enrollment. Commissions for renewal business will be tied to the rate tables in use when the contract first becomes effective; for most business, IFP commissions will not increase over time as dues/premiums increase.

Small Business Plans: Commissions for small business Medical plans (groups in California of up to 100 eligible employees and Nevada groups of up to 50 eligible employees) will be based on the first-year schedule and/or renewal schedule(s) published by the carrier. Vision, Dental, and Life Insurance plans have separate schedules. Commissions vary by year or may be flat for all years; they may also be tiered by premium; always refer to the carrier schedule(s) for details.

Large Group Plans: Commissions for Large Group business Medical plans (101+ eligible employees in California and Nevada groups of 51+ eligible employees) will be based on the first-year schedule and/or renewal schedule(s) published by the carrier. Vision, Dental, and Life Insurance plans have separate schedules. Commissions vary; for some products, they may be tiered by paid premium; always refer to the carrier schedule(s) for details.

Downloadable Forms

You can download and print Word & Brown’s summaries of commissions by clicking on the market- and state-specific links below:

Carrier-specific commission summaries are also available for California sales:

Additional carrier-specific information for California and Nevada is available in the Word & Brown online Insurance Forms Library. You can search by title, carrier, market segment, and coverage type.

IRS Reporting

Commissions paid will be reported to the Internal Revenue Service (IRS) on Forms 1099 and 5500, and as otherwise required by law, including reporting to the California Franchise Tax Board, Nevada Department of Taxation, or other authorities.

Bonuses and Rewards

Bonuses and sales rewards are sometimes offered in addition to a producer’s regular sales commission. These are typically paid within weeks following the close of the sales reward period. For example, if a carrier offered a reward during the fourth quarter of 2022, from October 1 through December 31, 2022, the bonus would typically be paid by the end of the first quarter of 2023 – on or before March 31, 2023.

Answering Your Questions

If you work with Word & Brown and you have questions about commissions or getting appointed with a new carrier, you can ask your Word & Brown representative. If you qualify for enhanced account management services (ask your rep for details), you may also be able to get your questions answered through our Client Experience team.

If you are not already doing business with us, it’s easy to get started. Register using our online form.

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