Proposed change to Medicare Advantage agents’ compensation draws fire

Image of a $100 bill with a red "X" superimposed that has the words "Medicare Advantage Agent Comp".

By Susan Rupe

A proposed federal rule that would impact Medicare Advantage compensation for Medicare agents and brokers has drawn ire from an agents association.

On Nov. 15, the Centers for Medicare and Medicaid Services proposed a rule that would redefine compensation for agents who sell Medicare Advantage plans. In announcing the proposed rule, CMS contended that financial incentives to agents and brokers, more readily paid by large plans, can result in consumers being steered to some Medicare Advantage plans over others based on excessive broker and agent compensation and other bonus arrangements instead of than recommending plans based on the consumer’s best interests.

CMS proposes to redefine “compensation” to set a fixed amount that agents and brokers can be paid regardless of the Medicare Advantage plan the consumer selects. In a statement, CMS said this addresses loopholes that result in agent commissions “that create anti-competitive and anti-consumer steering incentives.”

The proposed rule would ensure the payment of agent and broker compensation reflects only what CMS calls “the legitimate activities of agents and brokers” by broadening the scope of its definition of “compensation” to include all activities associated with sales to and enrollment of a consumer into a Medicare Advantage plan or a Medicare Part D plan.

Predictability of Medicare Advantage compensation

The proposed national agent/broker fixed compensation amount for Medicare Advantage is $642. This is an increase of $31 over the existing national compensation cap of $611, which CMS said “would eliminate the current variability in payments and improve the predictability of compensation for agents and brokers.”

In addition, the proposed rule would generally prohibit contract terms between Medicare Advantage plan organizations and marketing middlemen, such as field marketing organizations, that result in things such as volume-based bonuses for enrollment into certain plans. CMS contends these bonuses may interfere with the ability of agents or brokers to assist consumers in finding the plan that is best suited to their needs.

Ronnell Nolan, president and CEO of Health Agents for America, described the proposed rule as another attack on the Medicare agent.

“Insurance companies will give the big agencies marketing dollars, to hold events, to educate insurance agents that are under their umbrella, to provide marketing pieces,” she explained. “CMS is looking at that and saying, ‘OK, insurance companies gave this big agency X amount of dollars.’ So CMS is seeing that as every agent in the agency getting a bonus.”

Another problem with the CMS proposal, Nolan said, is that it’s difficult to determine an exact amount of money that each individual agent operating under a general agency or a field marketing organization received from an insurer for marketing when the funds were paid to the GA or the FMO.

“So while an everyday agent doesn’t receive any marketing dollars directly, they could very well receive marketing dollars from their GA, from their FMO, from the person they work under,” she said.

Government shines 'spotlight'

“It’s not just insurance companies that do this. Every company has some kind of incentive, they give marketing dollars to people to promote their product. But for some reason, the federal government has put a big spotlight on our industry.”

More than 65 million Americans are enrolled in Medicare and Nolan said agents and brokers are responsible for 70% of that enrollment. “And we spend hours with people helping them decide what is the best plan for them,” she said.

Nolan said Medicare Advantage has been under scrutiny because of consumers who claim they were steered into the wrong plan. But she said that issue could be solved “if they would just turn off those TV ads.”

CMS began reviewing Medicare Advantage television ads this year, in an attempt to crack down on companies using celebrity endorsers to make misleading claims.

“I've talked to CMS about it, and I won't shut up about it,” Nolan said. “Because that is the real problem, this false advertising that is out there on TV, where seniors can see it every day, all day. That's the problem. It's not agents. It's not marketing dollars.”

Nolan said HAFA wants CMS to “just let agents do their jobs.”

“Agents are happy to do their jobs. But they don’t need the attack in releasing these proposed rules, especially now that we’re in the middle of open enrollment season, where agents are working themselves to the bone trying to get all these people enrolled in a 45-day period.”

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 [email protected]. Follow her on Twitter @INNsusan.