Idaho regulator fights Medicare Advantage insurer over enrollment tactics

A federal judge in Idaho has temporarily blocked the Idaho Department of Insurance from taking action against PacificSource, an Oregon-based company that offers Medicare Advantage insurance plans, after the department accused the insurer of unfair business practices.

Idaho’s Insurance Director Dean Cameron alleged that PacificSource discouraged people from signing up for its Medicare Advantage plans by removing enrollment applications from its website and cutting payments to insurance brokers who sell its plans, which is against Idaho law.

Medicare Advantage plans offer health insurance options to seniors through private insurers, such as PacificSource. The plans are heavily regulated by federal agencies. Original Medicare is run by the government.

The state claimed that several insurance agents notified Cameron that PacificSource told them it did not want to sell any Medicare Advantage plans, and to artificially curtail the sale of those plans by making some of the plans noncommissionable to disincentivize agents. By making those plans noncommissionable, PacificSource could — in the state’s view — keep money that would have paid commissions, instead of passing it to brokers or as discounts to customers.

Cameron said the company may have done this for plans where the cost of broker commissions was already built into the premium.

He opened an investigation into the company over the allegations, according to court documents. He also directed the company to cease-and-desist efforts to conceal its Medicare Advantage plans and limit broker commissions.

The company then sued Cameron, asking the court on Nov. 6 for a temporary restraining order.

PacificSource argued that federal rules for Medicare Advantage plans, which set standards for marketing and broker payments, override state laws. U.S. District Judge David Nye granted a temporary restraining order on Dec. 4. Nye said he agreed that federal law takes priority over state regulations.

“Medicare law is famously intricate, and this case appears to be no exception,” Nye said. “In such circumstances it is appropriate to preserve the status quo until, with the benefit of briefing and a hearing, the court can give the parties’ arguments due consideration.”

He also said PacificSource could suffer serious harm to its reputation if Cameron’s enforcement actions continued while the case are decided.

“This order is issued in a preliminary posture, and the court may revise or abandon its reasoning as further briefing and prudence requires,” Nye wrote. “But at this juncture, PCHP appears likely to succeed on the merits of its preemption argument.”

He also granted a request from PacificSource to expedite the case.

As part of the temporary restraining order, the company was required to post a $5,000 security bond. On Friday, the judge extended the effect of the temporary restraining order to Jan. 15.

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