• Proposed Medicare Advantage Marketing Rules Present New Challenges, Costs and Complexities for Medicare Advantage Plans
  • July 28, 2008 | Author: Michael A. Dowell
  • Law Firm: Theodora Oringher Miller & Richman PC - Los Angeles Office
  • Over the past few months, the Centers for Medicare and Medicaid Services ("CMS") has issued several proposed marketing rules that address (a) state insurance commissioner oversight of Medicare private plan marketing by agents, brokers and producers (collectively, "brokers"), (b) broker activities, compensation, and training, and (c) promotional items for beneficiaries. The proposed marketing rules would limit the type of products brokers are allowed to discuss with prospects during marketing appointments, prohibit unsolicited contacts with beneficiaries, and eliminate meals as "promotional items of nominal value" that sponsors of Medicare private plans may offer beneficiaries. The comment period on the proposed marketing rules closes July 15.

    Prohibited Marketing Activities. The proposed rule would expand the list of prohibited activities to include any "unsolicited" direct contact with a Medicare beneficiary, including door-to-door solicitation (which already is prohibited), as well as "calling a beneficiary without the beneficiary initiating the contact." This expansion would prohibit certain activities, such as outbound telemarketing calls, approaching beneficiaries in parking lots or other public areas that currently are permissible under the Medicare Marketing Guidelines.

    Plans as well as their agents and brokers also would be obligated to document in advance the scope of any meeting agreed to by a prospective enrollee and would be prohibited from marketing activities during the appointment that go beyond the agreed upon scope. Cross-selling of any non-health care related products during an appointment with a prospective enrollee is also prohibited.

    Other prohibited marketing activities include sales presentations at health education events, such as health fairs, sales presentations and distribution of enrollment applications "in provider offices or other places where health care is delivered," and offering meals as well as other gifts to potential enrollees, regardless of the value of the meal. Refreshments may be served at presentations, however, and gifts of "nominal" value remain permissible.

    Limits on Promotional Gifts. Promotional gifts that do not exceed nominal value must be offered to all eligible beneficiaries "without discrimination, and [must] not [be] in the form of cash or other monetary rebates." The proposed rules would prohibit sponsors of Medicare private plans from providing meals for beneficiaries, "regardless of value." "Nominal value" would be defined by CMS in guidance, which currently sets the maximum at $15 in the aggregate per beneficiary at each sales or educational event attended.

    Limits on Broker Compensation Structures. CMS proposed to ban compensation arrangements that create incentives for brokers "to encourage beneficiaries to enroll in products that may not meet the beneficiaries' health needs but pay the [brokers] the highest commission." The proposed marketing rules would prohibit sponsors of Medicare Advantage plans or of Medicare prescription drug plans from varying commissions by type or value of Medicare product a broker sells. Medicare Advantage Plans would have to pay brokers a single, flat commission (percentage commissions would not be allowed) for any type of Medicare Advantage plan sold (whether with or without prescription drug coverage) and for any type of Medicare prescription drug only plan sold.

    CMS also wants to eliminate broker incentives to "churn" – getting beneficiaries to change Medicare products each year to generate more commissions. The proposed marketing rules accordingly would require that "the commission the [broker] would receive for selling or servicing the policy in the first year could not exceed the commission the [broker] receives for selling or servicing the policy in all subsequent years."

    State Regulation of Medicare Private Plan Marketing by Brokers. The proposed marketing rules indicate that CMS will encourage state insurance commissioners to take an active role in the regulation and oversight of broker marketing of Medicare private plans. The proposed marketing rules would require sponsors of Medicare private plans to appoint brokers in accordance with any applicable state agent-appointment laws. The proposed marketing rules would also require sponsors of Medicare private plans to "comply with state requests for information about the performance of a licensed [broker] as part of a state investigation into the [broker's] conduct." The licensing and agent-appointment requirements would apply only to sales and marketing personnel who attempt to "steer" beneficiaries to a particular Medicare private plan.

    Broker Education, Training and Testing. Sponsors of Medicare private plans would be required to ensure that their brokers are trained with respect to all of the Medicare rules relevant to the Medicare products they sell. The proposed marketing rules would require brokers to "pass a written test to demonstrate their knowledge of the Medicare program and the plan specific products they intend to sell." CMS "expect[s]" sponsors of Medicare private plans to develop "training modules and written or electronic tests based on CMS guidelines" for broker training.

    Implications of the Proposed Marketing Rules. Medicare Advantage Plans will need to be even more active in monitoring, training and enforcing their employees, agents and brokers' compliance with Medicare marketing requirements. New Medicare Marketing policies and procedures need to be developed quickly since 2009 marketing begins on October 1, and CMS publication of the final Medicare Marketing Rules is not expected until August 15 or later. Plans should consider reviewing and revising their broker training programs now to ensure they address or can accommodate the proposed new restrictions on broker sales activities and include written testing to verify broker knowledge and understanding of both the sponsor's Medicare products and the rules governing their marketing.

    Medicare Advantage Plans should also reexamine their broker compensation structures and begin exploring commission arrangements that would conform to the proposed restrictions on broker compensation for selling, while still encouraging brokers to sell the Plan's Medicare products. In addition, Plans should verify that their arrangements with brokers are in compliance with all applicable agent-appointment laws in the states in which they operate their Medicare private plans.

    Plans should review and revise written broker contract or amendment standard form agreements that would, among other things, (a) require their brokers to comply with the various Medicare marketing requirements, including those of the proposed marketing rules, (b) impose training and testing obligations on brokers consistent with the proposed marketing rules and the training obligations that already exist under CMS guidance and become requirements of the Medicare Advantage and Prescription Drug Rules effective January 1, 2009 under the rule amendments CMS adopted on December 5, 2007, and (c) establish a compensation structure for their Medicare products consistent with the proposed marketing rules.

    The consequences for violating any of the new marketing rules are substantial, as CMS can levy penalties of up to $25,000 for each enrollee affected, or likely to be affected, by any violation.