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Are you feeding the beast that will one day consume your business?

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Are you feeding the beast that will one day consume your business?

I saw the post today of yet another huge FMO in the Medicare space selling to the massive conglomerate that has been devouring the industry for the past few years. It made me think. What are the exposures to regular agents and agencies in these acquisitions? What is the end game in all this? Is the purchasing of these large FMO types a good investment for the venture capitalist involved?




Many agents I speak to have no idea how the distribution channels are set up in the “independent” agent Medicare world.


The system is set up as a traditional MLM (multi-level marketing) system. Not all systems are the same with every carrier, but the description below is very close to many of them.


FMO / IMO (top level)

SGA (second to the top level)

MGA (third to the top level)

GA (fourth to the top level)

Agent / Solicitor (street level)

There are commission levels paid independently to each level involved in the recruiting of the level below it. If a level is missing it is paid up to the level above it. The agent level gets the lion share of the commissions paid. An override is paid out at each level above it. (Example: MAPD pays $450 to an agent, $50 to the GA, $25 to the MGA, $25 to the SGA, $15 to the FMO)


To make a lot of money with this the manager levels must recruit and get producers to sell. Renewal commissions are half of the amounts above.


Latest trends:


Over the past several years, I have witnessed FMO’s giving “free” Medicare quoting and enrollment systems. When I attended a conference on this by one of the large national vendors of such systems I learned that FMO’s were using these systems to keep the agent in their hierarchy. Agents could only quote and enroll what they were contracted with the FMO to use as well. In 2019, when placed a firewall into their quoting system it made the use of this tool for agents obsolete. FMO systems had to start allowing agents to see plans outside of what the agent were contracted with them for. There has also been the rise of the “call center” in Medicare sales. TV ads, radio, social media, cold calls from overseas, et al never stop and makes for a real challenge to the agents in the field. One thing agents do not fully realize yet is the large FMO’s own and operate “call centers” that directly compete against their own sub-agents. They may hide them from you. They may tell you it does not compete against you…. but it does.


Did you ever stop to think….


The same FMO that gives you a “free” Medicare quoting and enrollment system has you electronically sign a USER AGREEMENT” giving them (and the data vendor) ownership of your data and the use of it.


I have heard many agents say “I wonder how they got my clients name and number to call?” “They are on the DO NOT CALL LIST” (LOL)


Are YOU feeding the BEAST?


So you’re are using the “free” system (& CRM) given to you by the FMO who owns (or is connected through acquisition to) a call center. You keep putting client data in the system. Ever ask to get the data out of the system? See what they tell you. They may say no. They may say “we’ll get back to you on how to do that.” They may say ok, but remember, your data is still in their system and always will be. How? You signed a USER AGREEMENT allowing it.


Could the BEAST one day turn on you?


What does all this have to do with the acquisitions of FMO’s by a conglomerate?


A 1.6 billion investment was given to this conglomerate to go out and buy up the Medicare FMO’s.


To date they have acquired almost every significant Medicare FMO plus, a National Medicare data vendor and the largest call center in the USA.

Eventually, those investors are going to want a significant return on that investment. How will that be done? If you look at the hierarchy above and add the numbers up for all levels there is a lot of commission for the FMO if they can exclude all of the hierarchies in the selling process. Is that possible? Yes! If you use a call center to contact clients and place them in a plan and exclude all the in between entities.


Think about it. You could pay someone $20 or $30 and hour and require them to be certified to sell Medicare plans. Once it is sold, that is pennies to acquire a piece of business as opposed to agents and upline.


Better yet, if the conglomerate (owning all the FMO’s) has the agents using the “free” system entering in future clients for the call center to role. The conglomerate gets paid either way, but you (the agent) helped all along.


It may also be possible that the conglomerate’s call center will also market to your clients directly in an attempt to establish a relationship so to be familiar when they contact them to move them into another plan without your involvement.


Why not? You told them in the USER AGREEMENT they could do that. Not to mention, there is a huge market for the data vendors to resell your clients information to all buyers too!


There has to be a reason…


There has to be a big reason why any entity would give 1.6 billion dollars of money to any company to buy up so much of a market. Investment capital people need a return on their investment. Both quickly and substantial from what they invested.


What can you do to protect your business


In 1998, I was a single father of three kids (7, 5, 18 months). I was working with an FMO and the long and short of it was he took my book of business in a dispute. That is all the money we had to live on. I was devastated and it changed me forever. I built Search & Save to help protect Medicare agents and agency’s from what I just described to you. We do not own a call center to compete against you. You own your data and the use of it with Search & Save.


My suggestion is that you stop using any “free” Medicare quoting system from your upline especially if they have been acquired by this huge conglomerate. Use Search & Save. It is less than $1 per day per user and well worth it when considering your protecting what you worked so hard to build.

-Scott Nichols

Amber Lutes
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