A federal judge in Texas has ruled that the Centers for Medicare Services overstepped its authority in trying to cap broker compensation in Medicare Advantage plans beyond setting limits on commissions.
A federal judge in Texas vacated a final rule issued under the Biden administration in 2024 that would have limited payment to third-party administrators who help MA marketers.
In the rule, CMS sought to regulate Medicare Advantage administrative payments as "compensation" and limit those payments to a fixed fee of $100.
After staying the rule in July, Texas Judge Reed O'Connor ruled on Aug. 18 that in addition to exceeding CMS' regulatory authority, the fixed fee and contract-terms restrictions were arbitrary and capricious.
The plaintiffs in the case against the Department of Health and Human Services were Americans for Beneficiary Choice and the Council for Medicare Choice. O'Connor joined the separate lawsuits in July.
The decision is considered a win for Medicare Advantage plans but a setback for efforts to curb financial incentives.
"We are disappointed by the court's decision to vacate this regulation, which ACHP strongly supported from the beginning," said ACHP, the Alliance of Community Health Plans, which represents nonprofit health plans. "The Medicare Advantage program continues to grow, and wasteful spending unfortunately grows alongside it. It is critical that we address anticompetitive practices and put the focus back on beneficiaries. While the regulation never went into effect, it has already driven meaningful change across the industry, with many insurers revisiting and adjusting broker compensation practices — particularly important given today's challenging financial environment."
WHY THIS MATTERS
The issue revolves around Medicare Advantage plans' reimbursement to agents and brokers for helping seniors choose a plan.
About 15 years ago, Congress authorized CMS to set guidelines to "ensure that the use of compensation creates incentives for agents and brokers to enroll individuals in the MedicareAdvantage plan that is intended to best meet their healthcare needs," according to court documents.
CMS regulates compensation that MA and Medicare Part D plans pay to independent agents and brokers who help beneficiaries select and enroll in private plans. The price cap paid to agents and brokers for new enrollees in contract year 2024 was $611.
In addition to payments made to agents and brokers, Medicare Advantage Organizations reimburse third-party firms for administrative services.
Until the final rule, CMS did not cap payments for administrative services because it did not classify these payments as compensation.
The final rule also introduced prohibitions against creating an incentive for an agent or broker to recommend a plan for any reason other than it being the best fit for a beneficiary. This included volume-based bonuses.
The rule also prohibited third-party firms from giving a beneficiary's personal information to a third-party marketing organization without consent, the same protections that are part of the Health Insurance Portability and Accountability Act. This provision remains in effect.
THE LARGER TREND
In March 2025, Senate Finance Committee Ranking Member Ron Wyden, D-Ore., released a report on spending for marketing middlemen in the Medicare Advantage program. Payments for marketing and administrative services to increase enrollment have outpaced MA enrollment growth, Wyden said in the report.
Payments for those enrolled in dual-eligible special needs plans (D-SNPs) can be five to ten times greater than general enrollments, Wyden said, according to Rise Health.
Hal Andrews, president and CEO of Trilliant Health, recently told Healthcare Finance News that a crackdown on 'dual enrollees' – not to be confused with those dually eligible – in MA may be one of the reasons for recent lackluster earnings among Medicare Advantage insurers. These dual enrollees represent as much as 100% gross margin for one of the multiple plans in which they are enrolled, Andrews said.
Email the writer: SMorse@himss.org