On November 14, the Centers for Medicare and Medicaid Services (“CMS”) issued revised compensation final regulations for independent agents and brokers who sell Medicare Advantage and Part D prescription drug plans (“plans”) to Medicare beneficiaries. These revised rules affect organizations using independent agents and brokers to market their plans during the current open enrollment period. Organizations must comply with the new compensation requirements by November 15.1
The rule modifies provisions in CMS’ September 18 final rule addressing independent agent and broker compensation.2 CMS expressed concern that the September 18 rule did not sufficiently explain compensation requirements and so clarified that rule’s compensation provisions in the November 14 interim final rule. The other marketing provisions in the September 18 rule remain in effect. Although final and effective upon issuance, the November 14 interim final rule also includes a comment period, which will remain open until December 15.
This Update summarizes the November 14 and September 18 final rules’ marketing requirements applicable to plan organizations during this open enrollment season and highlights how they differ from CMS’ proposed requirements.3
- The November 14 compensation regulations apply only to organizations using independent agents or brokers to market their plans; they do not apply to organizations using employees to market their plans.
- The rule sets permissible compensation levels based upon whether the enrollment is initial (enrolling a beneficiary into a new plan) or a renewal (reenrolling a beneficiary into the same plan) and based upon the year of enrollment.
- The rule creates a six-year compensation cycle with one initial and five renewal compensation years.
For 2009 initial enrollments, organizations may pay agents/brokers either:
- the 2006 compensation for that plan type, adjusted by the average change in Medicare Advantage (“MA”) or Part D plan rates, as published in the plan rate announcements, or
- an amount equivalent to the market compensation rate for initial enrollments paid by organizations offering plans in the geographic area for the plan type in question during 2006 and 2007, adjusted by the average change in MA or Part D plan rates, as published in the plan rate announcements.
For 2010 and subsequent initial enrollments, organizations may pay agents/brokers the prior year’s initial compensation adjusted by the change in MA or Part D plan rates, as published in the plan rate announcements.
- Organizations may pay renewal compensation for each of the next five years that an enrollee remains in a plan in an amount equal to the fair market value of the work performed and no more or less than 50 percent of the aggregate initial year compensation amount (including commissions, bonuses, etc.).
To reduce an agent/broker’s financial incentive to move a beneficiary in a renewal cycle to a new plan that may be contrary to his or her health care needs, CMS is initially deeming all 2009 enrolling beneficiaries to be in the first renewal year (the second year) of the six-year cycle.
- Organizations will first pay agents/brokers renewal compensation for those enrollments and then later, when applicable, adjust the compensation to the amount that would have been paid for an initial enrollment.
- However, if a prospective enrollee is in his or her Initial Coverage Election Period (MA plans) or Initial Enrollment Period (Part D plans) when he or she enrolls, agents/brokers must first be paid for an initial enrollment to compensate them for the additional work involved in these sales presentations and enrollments. If the plan organization contracts with a third-party entity (such as a field marketing organization) to sell its products or perform services, the amount it pays the third party must be fair market value and must not exceed the amount it paid a third party for similar services during each of the previous two years.
CMS’ new compensation requirements are more prescriptive than its May 2008 proposed compensation requirements, which required that the broker/agent’s commission for selling the policy in the first year could not exceed the broker/agent’s commission for selling/servicing the policy in all subsequent years. It also required that commissions be the same for all plans and plan product types offered by the plan’s parent organization.
CMS Review of Marketing Materials
- The September 18 rule prohibits plan organizations from distributing marketing materials unless they submitted the materials to CMS for review at least 45 days previously and did not receive disapproval.
- If organizations use CMS model marketing language without modification, they may use marketing materials ten days after submitting them to CMS without receiving disapproval.
- The organization may distribute certain designated types of materials five days after submission to CMS if it certifies that it followed all applicable marketing guidelines and, if applicable, used model CMS language without modification.
- CMS may review an organization’s marketing materials to ensure they are not inaccurate or misleading and do not misrepresent the plan organization, its marketing representatives, or CMS.
- If CMS has not disapproved an organization’s distribution in a geographic area, it is deemed not to have disapproved the distribution in all other areas covered by the plan and organization, except with regard to any portion of the material that is specific to that particular area.
- These provisions are the same as in the May 2008 proposed rule.
Marketing Activities — Appointments and Interaction with Prospective Enrollees
- Organizations may not solicit door to door for Medicare beneficiaries or through other means of direct contact, including calling a beneficiary without the beneficiary initiating the contact.
- Organizations may not engage in activities that could mislead or confuse Medicare beneficiaries or misrepresent the organization. They cannot claim to be recommended or endorsed by CMS or Medicare but can explain that they are approved for participation in Medicare.
- Organizations may not “cross-sell” non-health care related products to prospective enrollees during sales activities or presentations. They also may not market any health care related product during a marketing appointment beyond the scope agreed to by the beneficiary and documented by the plan prior to the appointment.
- In addition to the marketing activities prohibited above, the proposed rule prohibited an additional activity that is no longer proscribed by the September 18 final rule; it prohibited plans from marketing additional health-related lines of plan business not identified prior to an in-home appointment without a separate appointment that may not be scheduled until 48 hours after the initial appointment.
Gifts to Potential Enrollees
- Both the proposed and final rules prohibit organizations from providing cash or monetary rebates to potential enrollees as inducement for enrollment or otherwise. They also prohibit giving gifts to potential enrollees unless the gifts are of nominal value (defined in CMS marketing guidelines as $15.00 or less), are offered to all eligible members without discrimination, and are not in the form of cash or other monetary rebates.
- Organizations also may not provide meals to potential enrollees, regardless of value. They may provide snacks and refreshments, but they must ensure that the items provided could not reasonably be considered a meal and that multiple items are not being “bundled” and provided as if a meal. Acceptable snacks identified by CMS include fruit, raw vegetables, pastries, cookies, and crackers.
Locations of Enrollment Activities
- The proposed rule prohibited organizations from conducting sales presentations or distributing and accepting plan applications in provider offices or other places where health care is delivered. The final rule restated this prohibition, but made an exception in cases where activities are conducted in common areas in health care settings.
- Both the proposed and final rules prohibit conducting sales presentations or distributing and accepting plan applications at educational events.
MA Organization Marketing Activities — General Practices
- The final rule prohibits organizations from using providers, provider groups, or pharmacies to distribute comparative plan benefit information unless the providers, provider groups, or pharmacies display materials from all plans with which the providers contract. The proposed rule would have prohibited using providers, provider groups, or pharmacies to distribute printed information unless all plans involved agreed on the materials.
- The proposed and final rules both prohibit organizations from employing plan names that suggest a plan is not available to all Medicare beneficiaries. This restriction does not apply to MA plan names in effect on July 31, 2000.
- The proposed and final rules both require organizations to demonstrate to CMS’ satisfaction that marketing resources are allocated to marketing plans to the disabled Medicare beneficiary population as well as to beneficiaries over 65.
- The proposed and final rules stipulate that organizations may not engage in any discriminatory activity such as attempts to recruit Medicare beneficiaries from higher income areas without making comparable efforts to enroll Medicare beneficiaries from lower income areas.
- The proposed and final rules require organizations to establish and maintain systems to confirm that enrolled beneficiaries have in fact enrolled in an MA plan and understand applicable rules.
- The proposed and final rules require organizations to employ as marketing representatives only people who are licensed by each state to conduct marketing activities in that state. They also require the organization to inform each state that it has appointed those representatives, consistent with the appointment process set out under state law.
- Organizations must submit their compensation structures for the previous three years to CMS, plus the compensation structure they are implementing for 2009. For 2009, rates must be submitted by November 15, 2008.
- Organizations must also submit this information to agents, brokers, and other third parties under contract to sell their plans.
- Compensation rates and structures may not be changed without prior CMS approval.