Many beneficiaries rely on insurance agents and brokers to compare and select Medicare coverage options, but agents and brokers may not always act in the best interests of the individuals they advise and enroll. In April 2024, the Centers for Medicare and Medicaid Services (CMS) issued a final rule to crack down on excessive compensation and other bonus arrangements offered to agents and brokers by Medicare Advantage and Part D plans. The rule disallows tactics that incentivize agents and brokers to steer beneficiaries into particular plans based on financial perks for the agents and brokers instead of on the enrollees’ health care needs. In explaining the need for the rule, CMS cited advertisements for agents and brokers to work with or sell particular plans stating they would receive “golf parties, trips, and extra cash…in exchange for enrollments.” 88 Fed. Reg. 78476, 78552 (Nov. 15, 2023). The rule also prohibits contract terms between Medicare Advantage organizations/Part D sponsors and third-party “field marketing organizations” (FMOs) that may affect agents’ or brokers’ ability to objectively assess and recommend plans that are best suited to potential enrollees’ needs. One example of an impermissible contract provision under the new rule is volume-based bonuses for enrollment into certain plans. The Center for Medicare Advocacy submitted comments supporting these reforms (and calling for an even further expanded scope and enforcement of the proposed changes).
In the weeks since the rule was published, three lawsuits challenging the final rule have been filed by field marketing organizations and trade associations representing them. Two actions were filed in U.S. District Court for the Northern District of Texas, Fort Worth Division, where the plaintiffs were very likely to draw Judge Reed O’Connor, who has ruled against the federal government in several high-profile cases. The actions were in fact assigned to Judge O’Connor. Americans for Beneficiary Choice v. U.S. Dep’t of Health & Human Services, 4:24-cv-00439-O (N.D. Tex.), Council for Medicare Choice v. U.S. Dep’t of Health & Human Servs., 4:24-cv-446-O (N.D. Tex.). The third case was filed in federal court in Florida. AmeriLife Holdings, LLC v. CMS, 8:24-cv-01305-TPB-UAM (M.D. Fla.).
The cases filed in Texas seek to vacate the rule as invalid, claiming that CMS lacks the authority to regulate the payments in question, that the rule is arbitrary and capricious, and that certain required procedures were not followed when the rule was issued. The case in Florida states that it seeks narrower relief, seeking only to ensure that the rule does not extend to payments from carriers to FMOs that are not passed on to agents and brokers. Briefing on the plaintiffs’ request for a preliminary injunction in the two Texas cases will be complete by June 7, 2024, and Judge O’Connor may set a hearing on that motion soon after.
The Center for Medicare Advocacy continues to support reforms that target inappropriate steering and other unfair Medicare marketing strategies. We also suggest that new and existing Medicare beneficiaries make use of the services of their state’s SHIP program, which offers free, unbiased counseling and assistance with navigating Medicare coverage options.
June 6, 2024 – A. Bers