Responding to evidence that beneficiaries need protection from predatory marketing practices, the Centers for Medicare and Medicaid Services on Thursday toughened standards for selling Medicare Advantage and prescription drug programs to beneficiaries.
CMS said it was also taking steps to extend protection to all beneficiaries, including those receiving low-income subsidies and those enrolled in special needs plans.
The proposed rule would incorporate into regulation several requirements that CMS previously imposed through operational guidance, which doesn't have the same weight of law as a regulation.
The proposed rules would prohibit sales practices such as door-to-door marketing and cold calling. In addition, it contains requirements governing broker-agent commissions that go beyond those suggested by the insurance industry.
CMS is ratcheting up pressure on selling practices that have come to light over the past 10 months. Last summer, the agency imposed a freeze on selling Medicare Advantage plans to beneficiaries by seven of the largest insurers until the companies could re-educate agents on selling practices and identify those who were misleading clients.
In February, a number of questionable sales tactics involving Medicare Advantage plans were brought to light in a Congressional hearing, raising concerns that sales agents don't have beneficiaries' best interests in mind and are conflicted by opportunities to make sales commissions.
"The Medicare Advantage program is a valuable source of enhanced benefits and coordinated care for beneficiaries, and it should not be undermined by the actions of a limited number of unscrupulous sales agents," said Kerry Weems, CMS's acting administrator.
Recent compliance and oversight action involving sales to beneficiaries includes posting on the CMS Web site the summaries of corrective actions taken against MA plans; establishing five-star ratings for plan performance; developing a "secret shopper" program of plan marketing events and requiring private fee-for-service plans to call new enrollees to verify they understand details of the plans and still want to enroll.
In addition to prohibiting cold calling and door-to-door marketing, the proposed rule would prohibit the cross-selling of products that are not related to healthcare to beneficiaries.
CMS also proposes requiring that Medicare Advantage plans use state-licensed agents for marketing MA and Part D plans and report that they're using such agents. As well, CMS would require the use of commission structures that are "level" across all insurance offerings, so as to not encourage "churning" of beneficiaries into different products just for the purpose of earning commissions for sales agents.
The rule would also clarify CMS' ability to levy fines, giving the agency the authority to levy penalties of as much as $25,000 for each enrollee affected, or likely to be affected, by the violation.
The rules are a step forward, but more needs to be done, said Robert M. Hayes, president of the Medicare Rights Center, a watchdog group.
"We are especially encouraged that the administration recognizes that it must rein in the exorbitant commissions that plans pay to agents," he said. "These commissions are fueling the marketing abuse. Unfortunately, these regulations do nothing to prevent insurance companies from using high commissions and volume-based bonuses to encourage agents to enroll people with Medicare in substandard plans that provide inadequate financial protection, abysmal customer service and poor access to providers."
"The final regulations will need to be much tougher if it is to have the desired effect," Hayes continued. "Part D and the Medicare Advantage program are structurally flawed. People with Medicare have been hurt and will continue to be hurt by the abuses of these companies. There is a fundamental conflict between the insurers' mandate to maximize profits and the public purpose to provide humane and efficient healthcare to older and disabled Americans."