The Centers for Medicare and Medicaid Services (CMS) recently released its final Medicare Marketing Guidelines (“Guidelines”) for Medicare managed care plans: Medicare Advantage (MA) Organizations, Prescription Drug Plan (PDP) sponsors, Section 1876 cost-based contractors, demonstration plans, and employer and union-sponsored group plans, including employer/union-only group waiver plans. The final Guidelines have been significantly reorganized from the 2006 version, and include clarifications and additions to the draft guidelines released by CMS on May 18, 2009, on which CMS received 1,730 comments from 94 entities. The final Guidelines will be issued as Chapter 3 of the Medicare Managed Care Manual and Chapter 2 of the Prescription Drug Benefit Manual. The guidelines became effective upon issue and will apply to this year’s enrollment season.

The final Guidelines make changes and add language to a number of key areas that will affect the behavior of Medicare managed care plans in marketing and sales activities. Affected provisions include the following:

  • Outbound calling rules: Calling rules that previously applied only to private fee-for-service plans now apply to all plans. The Guidelines require three documented attempts to contact an applicant within ten calendar days of receiving the applicant’s application.
  • Standardization of plan names: By January 1, 2010, all plan sponsors must include the plan type in each plan’s name, using CMS’ standard terminology. However, there are several exceptions to this rule, including verbal communication with applicants.
  • Product Endorsements and Testimonials: Endorsements and testimonials “cannot use quotes, anonymous or fictitious quotes by physicians, health care providers, and/or by Medicare beneficiaries not enrolled in the plan” and cannot use negative testimonials about other plans.
  • Marketing multiple lines of business: Plans do not need enrollee authorization before sending non-Medicare related direct marketing materials. Plan sponsors must comply with HIPAA rules requiring sponsors to obtain authorization from enrollees prior to using or disclosing protected health information for marketing that does not fall within the HIPAA Privacy Rule’s exceptions to the definition of marketing.
  • Location of marketing/sales events: Areas where plan promotion is not permitted include, but are not limited to, waiting rooms, exam rooms, hospital patient rooms, dialysis center treatment areas (where patients interact with their clinical team and receive treatment), and pharmacy counter areas (where patients interact with pharmacy providers and obtain medications).
  • General guidance on marketing/sales events: Plan sponsors may distribute health plan brochures and pre-enrollment advertising materials at marketing events. Plan sponsors must upload all marketing/sales events to CMS’ Health Plan Management System (HPMS) prior to the event’s scheduled date, no later than the 30th day of the month preceding the event. Amendments to events must be updated in HPMS at least 48 hours prior to the scheduled event.
  • Notifying beneficiaries of cancelled marketing/sales events: Plan sponsors must notify beneficiaries of cancelled events according to rules based upon whether the event is cancelled within 48 hours of its originally scheduled date and time or if it is cancelled more than 48 hours before its originally scheduled date and time.
  • Provider marketing activities: Providers contracted with plan sponsors may distribute PDP marketing materials, including enrollment forms, for PDPs with whom the providers contract, so long as they do so for all plans with which they contract. They may also make available and/or distribute plan marketing materials for the plans with which the provider participates (including PDP enrollment applications, but not MA or MA-PD enrollment applications), so long as they do so for all plans with which they participate.
  • Changes specific to Part D Plans:
    • Formulary information: Plan customer service representatives may inform individuals that current and comprehensive formulary information is available on the Part D Plan’s Web site, but plans must provide that information in writing if requested.
    • Advance notice of changes to formulary: Plans must provide beneficiaries at least 60 days’ notice before removing a Part D drug from the Part D plan’s formulary or adding prior authorization, quantity limits, step therapy, or other restrictions on a drug, or moving a drug to a higher cost-sharing tier. Plans must also notify CMS, state pharmaceutical assistance programs, entities providing other prescription drug coverage, authorized prescribers, network pharmacies, and pharmacists 60 days before removing a Part D drug from a formulary or making any change in the preferred or tiered cost-sharing status of a covered Part D drug.

The Guidelines also include several key changes to agent/broker compensation requirements:

  • Applicability: The Guidelines clarify that CMS compensation requirements do not apply to employed agents. If a contracted agent receives a base salary and sells exclusively for one plan sponsor, that agent may be considered “employed” for purposes of applying CMS agent/broker compensation requirements. Bonuses must be calculated into the compensation structure and fall within CMS rules.
  • Setting “renewal compensation” rules: The Guidelines clarify that renewal compensation is equal to 50 percent of the initial compensation amount and is paid in the beneficiary’s initial year of enrollment in a plan and for five years after the initial compensation year. It is also paid when a beneficiary enrolls in a different plan of “like plan type” following the initial year of enrollment. “Like plan type” refers to moves from a PDP to another PDP and from an MA or MA-PD plan to another MA or MA-PD plan. Renewal compensation applies whether or not the new enrollment is in the same or a new organization.
  • Change of plan type: If an enrollee moves to a plan of a different plan type, the agent or broker may receive compensation at the initial rate and the 6-year cycle starts again. Once the cycle expires, it does not restart until the beneficiary enrolls in another plan.
  • Clarifying “initial compensation”: The Guidelines also clarify that initial compensation is paid for new enrollments into MA plans or PDPs, and enrollments into different plan types (from an MA or MA-PD to a PDP, from a PDP to an MA or MA-PD, or from a cost plan to an MA or MA-PD or PDP).
  • Dual enrollments: For dual enrollments (e.g., in an MA-only plan and a standalone PDP), the compensation rules apply independently to each plan. However, when dual enrollments are replaced by an enrollment in a single plan, compensation is paid based on the MA movement — for example, movement from an MA-only and PDP to an MA-PD would be compensated at the initial compensation amount for the MA to MA-PD “like plan type” move.
  • Mandating compensation take-back: The Guidelines provide specific guidance for recovering compensation payments from agents. Plans must do so under two circumstances: (1) when a beneficiary disenrolls from a plan within the first three months of enrollment and (2) any other time a beneficiary is not enrolled in a plan. For example, if a beneficiary enrolls in Plan A effective in March, and in July decides to enroll in Plan B with an effective date of November 1, if Plan A has paid the agent for March through November, it must recover compensation from the agent for November and December.