Medicare Advantage marketing driving up costs; fiduciary role recommended

Medicare Advantage plans increasingly rely on middlemen for marketing, a move that is hiking costs and making it more difficult for the government to oversee and regulate health plans that millions of older Americans rely on.

That was among the findings of a report released last week by Sen. Ron Wyden, D-Ore., the ranking member of the Senate Finance Committee. Among the many recommendations made within the report is that agents and brokers be required to act as fiduciaries for Medicare Advantage enrollees.

In the report, the committee found using middlemen to market MA plans is a cost that is passed along to Medicare enrollees and taxpayers. The Centers for Medicare and Medicaid Services has capped reimbursements for broker enrollment services; meanwhile, reimbursements for marketing and administrative services are not capped.

Payments for marketing and administrative services have outpaced MA enrollment growth, the committee found, and payments for those enrolled in dual-eligible special needs plans can be 5 to 10 times greater than those for general enrollments.

Among the key findings in the report:

1. Medicare Advantage plans engage in marketing practices that increasingly rely on third-party marketing organizations and lead generators, inflating costs for enrollees and taxpayers. These practices result in a complex ecosystem of middlemen that evade oversight and regulation. Seniors and people with disabilities may be misled by aggressive marketing practices and steered by third parties into MA plans that do not meet their needs.
2. State and federal regulators have limited oversight of marketing practices. Because of the way insurers are able to contract for marketing activities, state and federal governments have limited oversight and regulatory access. TPMOs nominally oversee their contracted lead generators and downstream contractors through contract terms that require compliance with regulation and consumer protections, but which do not always require TPMOs to proactively audit or otherwise ensure middlemen are in compliance with the law.
3. The MA marketing boom creates financial and other incentives for companies to limit which MA plans a broker presents to a client. This may result in brokers offering enrollees MA plans that do not meet their health needs in order to access commissions or administrative payments. As lead generation proliferates the MA marketing space, lead generators and brokers regularly use aggressive or misleading tactics, likewise steering enrollment. Uncapped spending drives aggressive lead generation tactics, including persistent calling and advertisements that create a sense of urgency.

Recommendations to Medicare Advantage providers

The report made several recommendations to protect consumers and taxpayers.

1. Ban out-of-whack marketing and other service fees that influence agents and brokers to recommend certain MA plans and drive up taxpayer costs. Congress should instruct CMS to ban MA plans from paying more to TPMOs or other related entities for any enrollment-related administrative or service for dually eligible beneficiaries or other enrollees. The committee investigation found substantial disparities in administrative service fees from $0 to more than $1,000. These administrative service fees may influence what insurer a TPMO contracts with as well as what MA plans are presented to customers.
2. Prohibit MA plan payments for any technology that limits or hides what MA plans an agent or broker sees when supporting an enrollee. The committee contended current technology solutions paid for by MA plans for agents and brokers can be manipulated by the technology platforms to suppress some MA plans – essentially to discourage agents and brokers from presenting these MA plans.
3. Regulate marketing organizations and lead generators. The web of TPMO enrollment and marketing has created opportunities for some bad actors to take advantage of vulnerable seniors, the committee said. Congress must give CMS the authority to directly regulate marketing organizations and lead generators to ensure that these companies are not using deceptive or high-pressure sales tactics.
4. CMS should implement and enforce policies designed to hold brokers, lead generators, marketers and insurers accountable. Any individual or company involved in the chain of enrollment who systematically violates or ignores CMS requirements should face appropriate penalties.
5. A fixed fee should be established for all MA plan enrollments. This fee should be indexed to inflation, not Medicare program enrollment growth and determined through a CMS-led study to examine the fair market value for MA plan commissions and related administration and service fees. This fee should be provided for all MA plan enrollments to compensate agents and brokers for their time.
6. Agents and brokers should be required to act as a fiduciary for MA enrollees.
7. CMS should standardize the language and definitions used to describe the chain of enrollment. Most notably, CMS does not define “TPMO” or “lead generator.”
8. Support unbiased sources of information for beneficiaries, including State Health Insurance Assistance Programs, Senior Medicare Patrol, 1-800-MEDICARE and ombudsman programs.

NABIP responds

In a statement, the National Association of Benefits and Insurance Professionals applauded the committee’s efforts to crack down on deceptive MA marketing practices.

“The use of misleading terms in advertising—like ‘new Medicare benefits,’ flex cards, and Part B givebacks—creates confusion and often leads seniors to enroll in plans that may not meet their health needs. NABIP strongly supports and recommends CMS enforcement of existing regulations on television marketing of Medicare Advantage plans and increased partnership with the Federal Communications Commission to address complaints,” said NABIP CEO Jessica Brooks-Woods.

“We are glad the committee has heard our concerns about third-party marketing organizations and is beginning to differentiate between these unregulated entities and the licensed professionals who serve beneficiaries with integrity. However, the current TPMO designation still wrongly lumps together offshore call centers, lead generators, licensed agents, and FMOs. NABIP urges CMS to eliminate this blanket categorization and instead focus regulatory efforts on deceptive lead generation, the source of many of the issues we are seeing in the market.”

In its statement, NABIP said it wants to clarify some parts of the report.

1. Marketing costs and taxpayer impact: Marketing costs do not increase Medicare spending beyond the per-member-per-month payment established by CMS. Medicare Advantage plans must operate within this fixed budget. These costs do not raise premiums for beneficiaries or increase taxpayer contributions.
2. Marketing rules: Medicare Advantage marketing is subject to more restrictive federal regulations than Medicare Supplement products, particularly regarding outbound solicitation. The current system relies on carriers to oversee the agents and entities they contract with. We would welcome additional uniform standards across all Medicare products and better enforcement tools to address bad actors without penalizing the majority of agents who are compliant and consumer-focused.
3. Plan selection and commission incentives: Brokers represent the beneficiary, not the carrier. Carriers are steering beneficiaries to or away from plans that carriers prefer through compensation changes and which plans are displayed on agent quoting systems. We agree that all quoting systems should represent all carriers and plans that are available. With regards to enrolling beneficiaries in national vs. regional carrier plans, national networks are often chosen because they best meet the needs of beneficiaries who travel, relocate, or live seasonally in multiple locations—not because of higher commissions. A 2023 NABIP survey demonstrated that the majority of agents enroll beneficiaries into both national and regional plans, depending on beneficiary need.
4. Role of SHIP counselors: SHIP counselors play a role in serving as one of the many actors who can educate beneficiaries. However, licensed independent agents serve as year-round caseworkers—resolving billing errors, assisting with prior authorizations, helping with appeals, and guiding clients through coverage changes.
5. Proposed limits on generic ads: We are concerned that proposed regulations limiting “generic” advertisements may go too far. Seniors need a clear path to certified, contracted agents—those best equipped to help them make informed enrollment decisions. At minimum, agents should be allowed to say they specialize in helping Medicare beneficiaries compare coverage options.

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Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at srupe@insurancenewsnet.com.