On November 14, 2008, the Centers for Medicare & Medicaid Services (CMS) published an interim final rule with comment period revising marketing requirements for Medicare Advantage (MA) plans and Medicare Part D prescription drug plans (PDPs). Specifically, the rule amends requirements just issued on September 18, 2008 to further limit the compensation that can be paid to agents or brokers with respect to MA and Part D plans in order to limit incentives to switch beneficiaries between plans to generate commissions, as authorized by the Medicare Improvements for Patients and Providers Act (MIPPA). Under the September 18 rule, plans were required to pay compensation on a six-year cycle, comprised of an initial enrollment year and five renewal years, with compensation in the initial year capped at 200% of the amount paid for renewal years. CMS received complaints, however, that plans were misinterpreting the rule’s intent by proposing structures under which compensation in the initial year in the cycle was less than the renewal years and renewal compensation varied from year to year. Among other things, the November 14 rule modifies the marketing requirements 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 equal 50% of the compensation paid for that beneficiary in the initial year of the six-year compensation cycle.
  • Applying similar limits on payments to organizations such as Field Marketing Organizations.
  • Requiring plans to submit to CMS their compensation structures for the previous three years plus the compensation structure they are implementing for 2009, and preventing rates from being changed without prior CMS approval.
  • Requiring plans to initially pay renewal rate compensation in 2009; upon CMS approval, plans will retrospectively pay agents/brokers an additional amount to total the initial compensation rate filed with CMS.

The rule is effective November 10, 2008; CMS is accepting comments on the rule until December 15, 2008.