California Representative Pushes New Medicare Advantage Regulations

In a letter to CMS acting administrator Kerry Weems on Thursday, House Ways and Means Subcommittee on Health Chair Pete Stark (D-Calif.) called for a limit on new sales commissions in an attempt to dissuade sales agents from pressuring Medicare beneficiaries to frequently switch Medicare Advantage plans, CQ HealthBeat reports (Reichard, CQ HealthBeat, 10/23).

CMS on Sept. 15 issued new rules governing insurance companies, agents and brokers regarding the marketing of Medicare prescription drug plans and MA plans. The new rules -- some of which were mandated by Medicare legislation passed earlier this year -- took effect Oct. 1, the first day marketing efforts for the Medicare open enrollment period that begins Nov. 15 are allowed.

Among other things, the rules stipulate that commission for sales agents will be required to conform to a structure used in other parts of the insurance industry.

First-year commission for a new customer cannot exceed 200% of the commission for the next five years, in order to remove the incentive for agents to push beneficiaries to enroll in different plans each year (California Healthline, 9/16).

However, because the regulations are just taking effect, some plans now are increasing commissions in order to lock them in for the next five years.

In the letter, Stark wrote that insurers are "gaming" the new regulations by raising commissions to levels "that far exceed any previous year's commissions" (CQ HealthBeat, 10/23). According to Stark, the typical broker fee for beneficiaries in their first year of enrollment in an MA plan had recently risen to $500, compared with $300 in past years (Yoest, Dow Jones, 10/23).

Stark noted that before the new regulations, a broker typically would receive $300 in the first year and $100 for each year the beneficiary remained in the plan, or about $700 over five years. However, the new rule requires that commissions not vary, meaning the broker would receive $500 for signing up a beneficiary and $500 for each subsequent year, or $2,500 over five years.

CMS spokesperson Jeff Nelligan said, "We are aware, have been aware and will address this issue."

Robert Zirkelbach, a spokesperson for America's Health Insurance Plans, agreed that there is a need to rework the commission structure to ensure the new rules achieve their aim (CQ HealthBeat, 10/23).