An insurer pays its New York producers a substantial commission on Medicare supplement sales in the year of sale, but pays no commission in any renewal year. Under New York's permitted compensation arrangements, this arrangement is:

Why D is correct

Under New York's permitted compensation arrangements for Medicare supplement insurance, the commission or other compensation provided in renewal years must be the same as that provided in the second year and must be provided for no fewer than five renewal years. An arrangement that pays a substantial commission at sale and nothing thereafter is prohibited because it rewards one-time selling and encourages producers to move on to the next sale rather than service the existing policyholder, a pattern that fuels churning of senior coverage.

Why the other options are wrong

• A) Producer compensation on Medicare supplement sales is regulated in New York; it is not purely a private contract matter between issuer and producer.
• B) The rules restrict more than bonuses and prizes; they also govern the structure and duration of commission payments.
• C) The commission structure rules apply to every Medicare supplement sale, not only to replacement transactions.

Memory hook

Medigap renewal commissions: level and lasting, not first-year-and-done.