Proposed Medicare Advantage regulations would impact broker, FMO compensation

The Centers for Medicare and Medicaid Services recently proposed a number of changes to Medicare Advantage regulations that will impact the industry, the agents and brokers who sell Medicare Advantage, and field marketing organizations and other third parties that are part of the MA ecosystem.

Two members of the National Association of Insurance and Financial Advisors’ government relations team delved into the implications for those who sell Medicare Advantage during a recent webinar.

What’s behind the new regulations? CMS believes there “are broader structural shifts in the Medicare Advantage marketplace,” said Roger Moore, policy director with NAIFA Government Relations.

“The Medicare Advantage market has become increasingly consolidated. Larger entities have more resources to use various kinds of incentives that are violating compensation limits by CMS,” he said. “CMS says it has received a number of complaints that administrative payments and other add-on payments to agents and brokers cumulatively exceed the maximum amount currently allowed under regulations. CMS said this is creating an environment that is conducive to agents recommending plans that are not in a consumer’s best interest.”

CMS regulations state that beginning in 2025, Medicare Advantage organizations must ensure that no contract with an agent, broker or third-party marketing organization would create an incentive that would reasonably be expected to inhibit an agent’s or broker’s ability to objectively assess and recommend the plan that would best meet a client’s health care needs.

In addition, beginning in 2025, CMS prohibits contract terms that would:

1. Tie agent compensation to volume-based enrollment or specific enrollment quotas.
2. Allow for bonuses or additional payments from a Medicare Advantage organization to a field marketing organization with the understanding that the money passed on to agents or brokers is based on enrollment volume.
3. Allow an FMO to provide agents or brokers with leads or other incentives based on previously enrolling beneficiaries into specific plans for any reason other than what best meets the beneficiaries’ health care needs.

Changes to agent/broker compensation

Agent/broker compensation rates for Medicare Advantage plans also will change under the CMS proposed regulations, said Michael Hedge, NAIFA senior director of government relations.

Current regulations stipulate that agent and broker compensation may not exceed caps that CMS calculates each year, based on a fair market value. National agent and broker FMV compensation caps for 2024 are as follows:

• $611 for each Medicare Advantage initial enrollment.
• $306 for each Medicare Advantage renewal enrollment.
• $100 for each Part D initial enrollment.
• $50 for each Part D renewal enrollment.

Medicare Advantage plans currently have the flexibility to pay agents varying rates depending on the plan in which the beneficiary enrolls.

But those compensation rates would change for 2025 under proposed CMS rules.

Agents and brokers would be paid the same amount, either from the Medicare Advantage plan directly or by an FMO, regardless of the plan in which the beneficiary enrolls. Rates for referrals would remain unchanged.

In addition, administrative payments to agents and brokers would change. Currently, agents and brokers can receive payments for administrative services that are separate from FMV caps CMS establishes each year. Under the proposed rule, CMS would effectively prohibit agents and brokers from receiving separate payments for a multitude of services they perform for beneficiaries. Starting in 2025, administrative payments would be included in the FMV calculation of enrollment-based compensation, subject to the annual caps established by CMS.

“CMS wants to eliminate any form of administrative payments whatsoever,” Hedge said.

To offset lost compensation from eliminating administrative payments, CMS proposes increasing agent and broker base compensation rates by $31 in 2025, a number Hedge described as arbitrary.

Medicare Advantage proposed rules would hurt FMOs

FMOs also would be impacted by compensation changes, Hedge said.

Medicare Advantage plans currently pay FMOs between $200 and $300 per beneficiary, an amount that varies based on geographic conditions and by carrier. The new proposed amount, $31 per beneficiary, to cover all existing administrative payments is insufficient for FMOs to continue functioning at their current capacity, he said.

“The impact on FMOs is stark,” he said. “The reality is that there are costs associated. What makes it worthwhile to the FMOs and the agents is that you get reimbursed and you are fairly compensated. With rising inflation, $31 is not remotely enough.”

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 X @INNsusan.

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Susan Rupe is editor in chief, magazine, 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].