Charles Baker, VP, Compliance Solutions
The issue of Medicare Advantage (MA) plans paying administrative fees to field marketing organizations (FMOs) and agents is a hot topic. This is particularly true in light of recent congressional oversight hearings and the newly released 2025 Medicare Advantage Part D proposed rule, which is aimed at enhancing guardrails for agent and broker compensation.
Congressional Oversight Hearings on Medicare Advantage Marketing
On October 18, 2023, the Senate Finance Committee conducted a hearing focused on marketing practices within the MA program, with emphasis on deceptive plans and broker behaviors that could impede beneficiaries’ decision-making and access to appropriate care. Key concerns included aggressive and misleading marketing tactics and the impact of these practices on beneficiaries, particularly those with low income and limited health literacy, who are more likely to be influenced by advertised extra benefits of MA plans.
Historical Background and Ongoing Reforms in Medicare Advantage
Since the establishment of compensation guidelines in 2008, CMS has adapted its approach to regulate agent and broker compensation. These regulations initially addressed concerns that financial incentives were driving agents to prioritize certain plans, potentially misaligning with beneficiaries’ needs. However, with the industry’s evolution, including greater consolidation among large MA plans, new financial incentives have emerged. These include administrative payments, which, in some cases, have exceeded regulatory limits and could distort enrollment decisions, leading to increased complaints about marketing practices and beneficiary confusion.
Recent Developments and the 2025 Proposed Rule
On November 6, 2023, CMS announced a landmark proposed rule for CY2025, focused on revamping the compensation structure for agents and brokers. This proposal is a decisive response to growing concerns about anti-competitive practices and the alignment of agent and broker incentives with beneficiary needs.
The cornerstone of the proposal is the redefinition of “compensation” for agents and brokers. CMS plans to set a uniform compensation rate of $642 for all Medicare Advantage enrollments, replacing the previous cap of $611 and the existing variable compensation structures. This fixed rate aims to eliminate the loopholes that have allowed for inflated and inconsistent payments, which often led to biases in plan recommendations. By standardizing compensation, CMS seeks to ensure that agents and brokers are incentivized to prioritize the healthcare needs of beneficiaries over potential financial gains.
Additionally, the rule addresses the problematic relationship between MA organizations and marketing intermediaries, such as FMOs. These entities have historically played a significant role in the enrollment process but have also been implicated in practices that may unduly influence agent and broker behavior. The proposed rule aims to prohibit contract terms that result in volume-based bonuses or other incentives tied to enrolling beneficiaries in specific plans. This is particularly crucial considering increased consolidation in the MA market among a few large national parent organizations, which have greater resources to offer lucrative incentives to agents and brokers.
The CMS proposal also tackles the issue of administrative payments, which have been used to circumvent the established compensation caps. These payments, often presented as bonuses or incentives for enrollment, have been characterized as “administrative” rather than “compensation,” thereby skirting regulatory limits. The new rule seeks to redefine these payments, bringing them under the umbrella of compensation and subject to the same regulatory scrutiny and limits.
Furthermore, the CMS rule proposes to directly address marketing practices that have led to beneficiary confusion and dissatisfaction. By reining in aggressive marketing tactics and the misleading information that have been prevalent in the industry, the rule aims to create a more transparent and beneficiary-focused MA marketplace. This includes addressing high-pressure tactics used by agents and brokers, driven by the financial incentives of administrative payments, which have resulted in a significant increase in marketing complaints to CMS.
Importance of the Proposed Rule to Medicare Advantage Plans
The proposed rule for MA plans in 2025 is crucial for several reasons:
- Enhancing Beneficiary Protection: By setting clear and fixed compensation rates for agents and brokers, the rule helps ensure that beneficiaries are guided towards plans that best meet their healthcare needs, rather than plans that offer the highest commissions to brokers
- Promoting Fair Competition: The rule aims to level the playing field among MA plans by regulating compensation structures, which is especially significant for smaller, regional plans that struggle to compete with larger plans offering higher broker commissions
- Reducing Misleading Marketing: The proposed changes seek to curb misleading and aggressive marketing practices that can lead to beneficiaries enrolling in plans that do not adequately serve their needs
- Cost Effectiveness: By regulating the payments to agents and brokers, the rule also addresses concerns about the efficient use of taxpayer dollars in funding these plans
- Aligning with Policy Goals: The proposed changes align with broader policy goals of promoting competitive markets and ensuring informed choices among health insurance options
The proposed rule addresses critical issues surrounding the marketing and selling of MA plans. This move towards greater transparency and fairness in the MA marketplace is a significant step in enhancing the overall efficiency and effectiveness of the Medicare program.
ATTAC Consulting Group, an industry leader with more than 20 years of compliance consulting expertise, stands ready to help your plan develop strategies tailored to meet 2024 goals. We partner with our clients in a shared journey toward better healthcare for all. The changes may be new, the challenges imposing, but the opportunity to make a difference remains as promising as ever.
