As discussed in recent CMA publications, including our “Special Report | Recent Articles and Reports Shed Light on Medicare Advantage Issues” (Oct. 31, 2022), and “Senate Report Highlights Widespread Medicare Advantage Marketing Misconduct – But the Driving Forces of Misconduct Are Broader” (Nov. 10, 2022), we are currently in the Medicare selling season. The Annual Election Period (AEP) runs through December 7th, during which beneficiaries can make changes to their MA or Part D plans, enroll in MA from traditional Medicare, or stay in or return to traditional Medicare. During this time (and, really, throughout the year) Medicare beneficiaries face an onslaught of insurance industry marketing materials aimed at convincing them to enroll in Medicare Advantage (MA) products, often using enticements of “extra” benefits.
AHIP, the leading health insurance company trade association, boasts on its website that millions of people
choose Medicare Advantage (MA) because it delivers better services, better access to care, and better value. MA has strong bipartisan support because it is a prime example of the government and free market working together to deliver lower costs, more choices, and better outcomes for the American people. MA delivers affordable coverage by reducing Medicare’s cost sharing, and offering additional benefits that traditional Medicare doesn’t cover, such as integrated vision, hearing, and dental benefits, a cap on out-of-pocket costs, wellness programs, in-home caregiver support, and innovative telehealth options.
It would seem that such comprehensive and affordable coverage available through MA plans – often touted as “one-stop shopping” – would alleviate the need to buy any extra or supplemental coverage, such as a stand-alone Part D plan or a Medicare Supplemental (Medigap) policy. As noted in the 2023 Medicare & You Handbook, in a comparison chart (p. 11), if you are in an MA plan, “You can’t buy and don’t need Medigap”.
Apparently, many of the same people that sell MA plans believe that such plans do not, in fact, offer enough coverage, and urge people to buy additional products to “fill in the gaps” of Medicare Advantage.
There’s Still a Hole in the Bucket
In 2007, this writer, along with my then-co-worker Bonnie Burns at California Health Advocates, wrote an issue brief titled “There’s a Hole in the Bucket: New ‘Gap’ Product Being Sold to Fill-in Medicare Advantage Deficiencies” (Nov. 2007).
As stated in the reports’ introduction,
Despite the insurance industry’s and CMS’ insistence that Medicare Advantage (MA) plans are a good value for all beneficiaries, significant “gaps” created by the cost-sharing imposed by Medicare Advantage plans have led to the emergence of a new insurance product aimed at “filling” those gaps. This new insurance product, sometimes called “Advantage Plus,” is being marketed to insurance agents as a “wrap-around plan” that is “designed to fill in the gaps in Medicare Advantage Plans.” These new Advantage Plus plans pay cash benefits directly to enrollees of MA plans to cover out-of-pocket costs imposed by their MA plan. These plans (sometimes referred to as limited-benefit or mini med plans) bundle a collection of insurance products, each providing coverage for a single benefit, into various packages that can be sold at an attractive cost to each Medicare Advantage member [citation omitted].
Discussing the often significant out-of-pocket costs sometimes borne by MA enrollees, the 2007 report discusses the rise of the these “gap” products:
True to Darwinian theories of evolutionary adaptation, the insurance market has adapted to fill this void, or growth in deficiencies, in Medicare Advantage coverage by selling a new package of benefits – the “Advantage Plus” plans – that fill in some of these gaps, or otherwise “wrap around” the MA benefit. Advantage Plus plans, either in a specified benefit package or through defined benefits sold separately (such as individual hospital indemnity plans) pay a cash benefit directly to Medicare beneficiaries to cover the out-of-pocket costs they may face when obtaining certain services through their MA plan.
The report highlights a number of pitches used by agents and brokers selling such plans including a “scenario that could be quite frightening to a Medicare Advantage consumer” such as a sudden illness requiring hospitalization. One bundled product, “Advantage Plus” offered by Guaranteed Trust and Life (GTL) was discussed. Stand-alone products were also discussed: “Products that attempt to supplement or fill-in the gaps of Medicare coverage are also being sold to pay for single benefits, such as hospital stays.”
Before drawing parallels with the Medigap market before standardization of such plans required by Omnibus Budget and Reconciliation Act (OBRA) of 1990, the report notes:
it is clear that the offering of these products at all is a symptom of a much larger disease. It is increasingly apparent to beneficiaries and others that there are expensive gaps in MA plan coverage. Those gaps allow companies and agents to exploit MA plan deficiencies and sell additional coverage, using the same scare tactics about the high cost of receiving medical care, even when covered by an MA plan. As the out-of-pocket costs of Medicare Advantage plans become more obvious we expect to see more of these products being offered for sale, and more agents selling them as a way to extend their earning capacity beyond the truncated Annual Coordinated Election Period (AEP) selling season.
Unfortunately, “Either separately, or bundled together, these products have so far attracted little regulatory attention.” Using apparently evergreen language, the report discusses a confusing and convoluted marketplace of Medicare Advantage and Part D plans, the promise and subsequent failure of having private insurance companies involved in the provision of Medicare benefits more cheaply and efficiently, the overpayment of MA plans and alarm about these “new insurance products [that] have arisen to capitalize both on the inefficiencies of private MA plan benefit packages as well as beneficiaries’ fears driven by the cost shifting imposed by these plans.”
The report concludes:
Similar to consumer protections that were implemented in OBRA ’90, which largely eliminated most abuses surrounding the sale of Medigap plans, Congress must act to better protect Medicare beneficiaries from similar abuses around the sale of Medicare Advantage and Part D plans. This includes creating a limited number of standard Medicare Advantage and Part D benefit packages that any company can sell, and creating several modest deductibles and annual out-of-pocket limits that apply to all covered services, thus eliminating the need to purchase additional insurance. In addition, strengthened consumer protections should truly limit the duplication of Medicare covered services, which would prevent insurance companies and agents from potentially preying upon vulnerable Medicare beneficiaries by offering “Advantage Plus” and other limited benefit products.
Fifteen years later, the more things change, the more they stay the same….
Combining Sales of Medicare Advantage and Ancillary Products
As we noted in our CMA Alert last week (Nov. 10, 2022), some insurance companies that sell Medicare Advantage plans and/or Medigap plans are trying to maximize their Medicare sales along with sales of ancillary, or additional types of insurance coverage. For example, an Aetna-sponsored website (“Aetna Senior Supplemental Insurance part of the CVS family of companies”) promotes both Medicare Supplement plans and a separate line of “complementary insurance products” called “Protection SeriesSM ”which includes: Cancer and Heart Attack or Stroke/Plus; Dental Vision and Hearing/Plus; Home Care/Plus; Hospital Indemnity/Flex; Recovery Care; and Final Expense whole life insurance. Our CMA Alert also highlighted bonus payments to agents for sales of Aetna’s “Medicare Supplement and Ancillary products” (including Dental, Vision and Hearing, Cancer and Heart Attack or Stroke/Plus) and a similar rewards trip offered by Cigna for the sale of Cigna Medicare Supplemental products and Cigna Supplemental Health products (including Flexible Choice Cancer, Flexible Choice Heart Attack & Stroke, and Flexible Choice Hospital Indemnity).
Even a cursory review of the Medicare and health insurance sales landscape reveals that the sale of products to fill in the gaps of Medicare – and in particular Medicare Advantage – is alive and well. This is commonly referred to as “cross-selling.” In marked contrast to the proclamations of the insurance industry, many of the same people selling Medicare Advantage products both highlight and rely upon MA products’ shortcomings in order to promote the sale of ancillary products.
As explained by one agent support website,
Ancillary products are coverage options offered in addition to the main insurance you’ve sold to a client. Often, health coverage is the primary plan you’ve helped the client obtain. Dental and life insurance are examples of common ancillary products sold in addition to health insurance.
Ancillary insurance products are the same as supplemental insurance products and are used to supplement existing benefits. Ancillary insurance is a common product agents use when cross-selling Medicare or Group Benefits.
It’s relatively easy to make the additional sale because you’ve already completed a previous sale with your client. You’ve built a relationship with these clients, now you need to pinpoint their problems, or the gaps in their coverage, and present ancillary products as the solution.
As one agent website geared towards prospective clients notes under the heading “What is a Medicare Ancillary product?”:
The idea of an ancillary product is to support your Medicare Supplement or Advantage plan. Since Medicare doesn’t cover every need with your health, an ancillary product could complement your plan to help fill in the gaps.
Videos, guides, advice columns, testimonials and other promotions aimed at agents advising them to maximize their sales by combining MA with ancillary products abound on the internet.
For example, an article offered on an agent website titled “How to Cross-Sell Hospital Indemnity with Medicare Advantage” advises:
If you are selling Medicare Advantage plans, you need to be cross-selling Hospital Indemnity plans to your clients. While some Medicare Advantage plans offer $0 monthly premiums, beneficiaries are left with some gaps in coverage – especially out-of-pocket costs for hospital stays and procedures. For a client living on a fixed income, unexpected costs like that can throw off their budget drastically. The good news is that hospital indemnity plans can fill in these gaps for your clients – at a price they can afford.
Another agent website we flagged in our recent CMA Alert as having a misleading name – MedicarePlanFinder.com – offers its own guide for prospective clients titled “Simply Explained: Ancillary Insurance”:
Private Medicare plans like Medicare Advantage and Medicare Supplements can cover a lot of benefits, but they generally don’t cover everything. Ancillary insurance products like separate dental plans, heart attack insurance, and life insurance are all important too.
Depending on what Medicare plan(s) you have, ancillary insurance products might be necessary to provide you with the comprehensive coverage and peace of mind you need.
One independent marketing organization offers advice to agents in a video titled “Fill the Gaps” with a Hospital Indemnity Plan – Learn how to quote Medicare Advantage and Hospital Indemnity TOGETHER”. According to the video, hospital indemnity insurance is “designed to help cover the co-pays and deductibles of existing health insurance when a hospital stay is required” and notes that such products were developed to “fill the gaps in a Medicare Advantage plan.” The “ideal prospect” is a client in a $0 or low premium MA plan that “cannot afford an unexpected and expensive out-of-pocket expense.” Ad-ons are available to cover ambulance trips, skilled nursing facility stays, cancer diagnoses, and other scenarios. “When is the best time to sell? When presenting a Medicare Advantage plan.”
Another national field marketing organization (FMO) offers a “Complete Guide on How to Sell Medicare Advantage Plans” which includes “CROSS-SELLING IDEAS” – “When a client enrolls in an MA plan, they may not be thinking about other coverages they may need — but you can. Every insurance product has their coverage limits. By offering your clients other great products to fill in their MA plan’s coverage gaps, you’ll not only gain their trust, but also more commissions too!”
Under the heading “Good Products to Cross-Sell with MA Plans”, the Guide states: “If you’re selling MA plans, we also recommend having hospital indemnity insurance plans and DVH [dental/vision/hearing] insurance plans in your portfolio to cross-sell.” It notes: “While MA plans do offer some DVH coverage, it isn’t extremely comprehensive. Offering DVH products allows you to give seniors an affordable way to help fill in the gaps and get the coverage they need.”
With respect to hospital indemnity insurance, the Guide states:
Many Medicare eligibles are attracted to MA plans because of their extra benefits and low, or zero-dollar premiums. While appealing for those reasons, $0-premium MA plans have high copays, high deductibles, and annual out-of-pocket limits as high as $7,550. […] Hospital indemnity plans are a natural cross-sell for agents with clients interested in, or already enrolled in, an MA plan.
Additionally, individuals can add riders to these policies to help pay for cancer, ambulance, or skilled nursing related costs!
If an agent doesn’t have time to review the “Complete Guide”, the same FMO offers a “A Quick Guide to Cross-Selling Ancillary Insurance with Medicare Products” advertised as so:
One of the easiest ways for a health insurance agent to earn more money is by selling ancillary products that fill in the coverage gaps of Medicare Advantage plans and Original Medicare/Medicare Supplements. Our quick guide covers the basics of multiple ancillary plans that could be beneficial for your current and future Medicare clients. Most importantly, we discuss the ideal clients of, and how to pitch, hospital indemnity, dental, vision, and hearing, cancer, heart attack and stroke, critical illness, short-term care, and long-term care insurance! It’s a lot of valuable information packed into a brief, easy-to-read format.
BONUS: This guide features a one-page cheat sheet for cross-selling ancillary products that can help you easily identify ideal clients for several different ancillary products during appointments!
Earn more when you effectively cross-sell ancillary insurance with Medicare plans! Get started today.
The same FMO that offers both of these Guides also posts a separate article titled “Selling Hospital Indemnity with Medicare Advantage: Is It Worth It?” In short, the answer is “yes” and calls this “The Ideal Cross-Sale,” noting that the MA out-of-pocket limit will rise to $8,300 in 2023: “A tab like that can spell big trouble for seniors who require medical attention.”
The combined MA and ancillary products sales can be lucrative for agents. For example, a “Medicare-focused Field Marketing Organization” or FMO, offers a blog post titled “How to Retire on Medicare Renewals” (also referenced in our recent CMA Alert) and includes the following advice:
Earn More by Selling Ancillaries
When you talk to clients and prospects about Medicare Advantage, you can also talk about ancillary health products, such as hospital indemnity, long-term care, and cancer, heart attack, and stroke coverage. You’ve already done the work to get the lead, and you’ve already driven to their house, so ancillary sales are pure profit.
Many agents sell an ancillary plan with every third or fourth Medicare Advantage appointment, boosting their income 20% or more.
One insurance company that offers ancillary products, MEDICO, provides advice to prospective clients on their website on a page titled “How Hospital Indemnity Insurance Fills Medicare Advantage Gaps”:
You did your part. You signed up for a Medicare Advantage (MA) plan during the annual enrollment period, and now you should be set for medical coverage for the year, right? Not necessarily. As you start to use your MA plan, you might notice that its coverage has some gaps and it’s not fulfilling your specific needs, especially if you visit the hospital.
And for anyone who may already be nostalgic for the products discussed in the 2007 California Health Advocates report “There’s a Hole in the Bucket” discussed above, fear not – the GLT “Advantage Plus” still lives. While the Guarantee Trust Life (GTL) website does not appear to tie its products to Medicare Advantage, not only its name, but numerous agent websites, explicitly do so.
One need not look far for examples, including: this agent website touting GTL Advantage Plus® Elite – “An original and comprehensive Hospital Indemnity Insurance policy – Designed to help cover out-of-pocket expenses in your client’s Medicare Advantage Plan”; this agent website (with accompanying video) touting GTL’s Advantage Plus Hospital Indemnity Plan (HIP), which notes that “Clients with Medicare Advantage are excellent candidates for a HIP plan”; this GTL-branded promotional flyer titled “Hospital Confinement Indemnity Coverage: Should You Have One?” which includes a “hypothetical situation” featuring “Julie” in a “highly rated Medicare Advantage Plan”; and this link to a presentation titled “How to Cover Medicare Advantage Copays with GTL’s Advantage Plus”.
Overpayments to Medicare Advantage plan sponsors allow MA plans to offer more supplemental benefits, which in turn drives up enrollment in MA plans, exacerbating the strain on Medicare’s finances. As noted in a recent paper published by the Urban Institute titled “Understanding Medicare Advantage Payment – How the Program Allows and Obscures Overspending” by Robert A. Berenson, Bowen Garrett and Adele Shartzer (Sept. 2022):
Any policy reform must initially focus on the massive overpayments to MA, which, as we emphasize here, result from markedly inflated benchmarks against which MA plans bid, extra funding from quality bonuses from a flawed star-rating program, and, most importantly, problems with the risk-adjustment payments for Medicare beneficiaries enrolled in MA plans. Together these factors provide about $2,000 in extra funding per beneficiary per year for MA plans to use to entice beneficiaries to enroll.
Yet, despite this extra funding per MA enrollee, resulting from said overpayments, what do MA plans have to show for it, other than record profits for plan sponsors? As discussed in recent CMA Alert (Sept. 21, 2022) the Kaiser Family Foundation (KFF) released a report in September 2022 titled Beneficiary Experience, Affordability, Utilization, and Quality in Medicare Advantage and Traditional Medicare: A Review of the Literature. As noted in the report, “[t]he growing role of Medicare Advantage and the relatively high spending on this program raise the question of how well private plans serve their enrollees compared to traditional Medicare.” In short, despite this high spending, the report “found few differences between Medicare Advantage and traditional Medicare that are supported by strong evidence or have been replicated across multiple studies” with some notable exceptions wherein MA appears to perform worse than traditional Medicare in certain areas, as discussed in the CMA Alert.
Unlike traditional Medicare, there is required out-of-pocket cap (MOOP) in MA plans; however despite the MOOP, people in MA plans can pay more for care than those in traditional Medicare. For example, another KFF report from August 2022 found that about half of all MA enrollees would incur higher costs than beneficiaries in traditional Medicare for a 7-day hospital stay. Similarly, a June 2021 KFF report analyzing beneficiary costs found that rates of cost-related problems are higher among MA enrollees than those in traditional Medicare with supplemental coverage and “[a]mong Black beneficiaries specifically, a larger share of those in Medicare Advantage reported cost-related problems than those in traditional Medicare (32% vs. 24%).”
These shortfalls in MA coverage are recognized and exploited by some of the same people who sell MA products, sometimes using ancillary products offered by the same insurance companies that also offer MA plans. This represents a failure of both policy and of the market.
Our last CMA Alert praised the Senate Finance Committee’s recent report highlighting Medicare Advantage marketing misconduct and supported the corresponding recommendations for Congress and CMS. We called for more fundamental and structural change, though, in order to meaningfully tackle what ails the Medicare program.
Some needed reforms are relatively minor and straightforward. Under current Medicare marketing rules, MA organizations may not “Market non-health care related products to prospective enrollees during any MA sales activity or presentation. This is considered cross-selling and is prohibited.” 42 CFR §422.2263 (b)(4). This anemic regulation has such a limited definition of “cross-selling” that it allows a broad range of exploitative behavior, including the sale of ancillary health products during MA sales. If policymakers are truly concerned about consumer protection, they will buck the influence of both the insurance company and the agent and broker lobby and get serious about protecting Medicare beneficiaries. An overhaul of Medicare marketing rules, among other things, is urgently needed.