Medicare Tightens Compensation Rules for Selling
Medicare Advantage, Drug Plans
Industry spokesperson commends CMS on guidelines
for agent and broker commissions
Nov. 11, 2008 - Still trying to cure the problems
in the marketing of the private company Medicare Advantage plans, the
Centers for Medicare & Medicaid Services (CMS) yesterday issued revised
requirements limiting compensation for sales agents and brokers who sell
MAs and prescription drug benefit plan options to people with Medicare.
“The steps we are taking should help to make sure
that brokers and agents are selling health or drug plans that best meet
beneficiaries’ needs when open enrollment begins on November 15,” said
CMS Acting Administrator Kerry Weems. “The rule we are issuing will
help to resolve any confusion about how the private plans should
implement compensation structures to meet those needs.”
"We commend CMS for taking this important step to
provide guidelines for agent and broker commissions,” said industry
spokesperson Karen Ignagni, President and CEO of America's Health
Insurance Plans (AHIP).
“It is vital that seniors receive the information
they need during open enrollment, that brokers receive reasonable
compensation for the valuable services they provide, and that there are
clear standards in place.”
She added, “Establishing guidelines in this area is
an important regulatory responsibility. We are committed to working with
CMS and key stakeholders to protect beneficiaries."
This CMS interim final rule with comment period
modifies regulations issued on Sept. 18, 2008. Those regulations
established how health and drug plans should structure the compensation
for agents and brokers by reducing existing financial incentives to
enroll a beneficiary in a new plan based on the agent’s or broker’s
financial interests rather than the beneficiary’s health care needs.
The Sept. 18 regulations required that compensation
be paid on a six-year cycle, comprised of an initial enrollment year and
five renewal years, and that the renewal rate be paid for a beneficiary
changing plans during the renewal years. Compensation includes
commissions and bonuses as well as other incentives, such as sales
awards.
The rule issued today revises the Sept. 18
regulations by:
● Specifying that all compensation paid to
agents and brokers reflect fair-market value based on the commissions
paid in the past, adjusted for inflation for similar products in the
same geographic area.
● Requiring that renewal compensation be no
more, or no less, than half of the compensation paid for that
beneficiary in the initial year of the six-year compensation cycle
established in the Sept. 18 rule.
● Imposing similar limits on payments to
organizations such as Field Marketing Organizations (FMOs). These
entities are local or national companies that play an important role in
helping plans market and sell their Medicare products by using agents
and brokers. FMOs also train agents and brokers and help provide other
services.
● Requiring plans to submit to CMS their
compensation structures for the previous three years plus the
compensation structure they are implementing for 2009. That information
must also be provided to agents, brokers, and other third parties under
contract to sell their plans. Those rates or structures cannot be
changed without prior CMS approval.
To prevent churning CMS is still requiring that
plans initially pay renewal rate compensation in 2009 rather than the
initial year compensation amounts for all plan changes. Once CMS
identifies an initial commission was warranted, plans are to
retrospectively pay agents and brokers an additional amount for a total
payment of the initial compensation rate as filed with CMS.
Other rules from the Sept. 18, 2008, regulations
still apply.
The interim final rule with comment period,
Medicare Program; Medicare Advantage & Prescription Drug Programs:
Clarification of Compensation Plans (CMS 4138-IFC2), is effective today,
November 10, 2008. It will be was published in the Federal Register on
November 14, 2008. Comments must be submitted by 5:00 p.m. Eastern
Standard Time on December 15, 2008. The rule may be viewed at
http://www.cms.hhs.gov/HealthPlansGenInfo/
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Nov. 11, 2008 - Still trying to cure the problems
in the marketing of the private company Medicare Advantage plans, the
Centers for Medicare & Medicaid Services (CMS) yesterday issued revised
requirements limiting compensation for sales agents and brokers who sell
MAs and prescription drug benefit plan options to people with Medicare.
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