State RegulationsPA specificDifficulty 2/5
Under the Medicare Supplement compensation rules of 31 Pa. Code 89.782, which compensation arrangement is consistent with Pennsylvania law?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Pennsylvania's compensation rule for Medicare supplement insurance, 31 Pa. Code 89.782, permits compensation arrangements so long as they do not act as an incentive to replace existing Medicare supplement coverage. The rule closes the loop with the appropriateness standard of 31 Pa. Code 89.787: if sales practices may not produce needless churn, neither may pay structures. The Pennsylvania Insurance Department examines compensation design when it reviews Med-supp market conduct, because a replacement bonus quietly re-creates the incentive the appropriateness rule removes.
Why the other options are wrong
- B) A replacement-only bonus is precisely the incentive the compensation rule forbids, because it pays for churn rather than for coverage the consumer needs.
- C) The Pennsylvania Insurance Department enforces the framework; it does not set commission rates for Medicare supplement sales each year.
- D) Commissions are paid by the insurer out of premium economics, never siphoned from the applicant's federal Medicare benefits.
Memory hook
Pay for protection, not for churning: no replacement bonuses in Med-supp pay plans.