Medicare Advantage Program to Restructure Agent, Broker Pay

1. A quarter of Medicare Advantage participants chose these plans because they offered dental, vision and/or hearing coverage.

Medicare Advantage program managers have completed final regulations that could lead to an overhaul of pay for agents, brokers and field marketing organizations starting with the annual enrollment period for 2025 coverage.

The final regulations call for increasing maximum producer compensation for an initial plan enrollment by $100 — including the cost of the training services, technology services and other support services provided by FMOs in the compensation maximum.

If implemented as adopted, the final regulations will also apply to the producers and FMOs selling Medicare Part D prescription drug plans.

The rule package would also require one Medicare plan marketing organization to get clear permission from a consumer before sharing the consumer's information with other plan marketing organizations.

At press time Friday, health insurance distributors like eHealth and industry groups like the National Association of Benefits and Insurance Professionals were still digesting the 1,327-page package.

What it means: The new rules could help traditional health insurance agents, who are good at generating their own leads, when competing with the big national Medicare plans that sell via call centers.

In some cases, the rules could also disrupt the supply and quality of support services coming from Medicare plan FMOs.

The programs: The Medicare Advantage plan program is a program that gives private insurers the chance to offer Medicare enrollees plans that look like an alternative to traditional Medicare.

The plans cover about 34 million of the 66 million Medicare Advantage enrollees.

About 22 million Medicare enrollees get stand-alone Medicare Part D prescription drug plans from private insurers.

About 14 million Medicare enrollees fill in gaps in traditional Medicare coverage with a separate, state-regulated product, Medicare supplement insurance, or Medigap insurance.

Regulation basics: The Centers for Medicare and Medicaid Services, the U.S. Department of Health and Human Services that oversees Medicare, posted a preliminary version of the final regulation on the web Thursday.

The regulation is set to appear in the Federal Register, an official government regulatory publication, April 23.

Most of the marketing rules would apply to marketing arrangements in place on or after Oct. 1.

Officials note that they would not apply the new requirements retroactively or to existing 2025 producer compensation arrangements affected by the change in rules.

The new regulations are based on a draft CMS posted in November 2023.

CMS received 3,463 comments on the proposed regulations.

The thinking: Officials at the Centers for Medicare and Medicaid Services, the agency in charge of the private Medicare plan programs, say they know the programs need producers.

"Agents and brokers are an integral part of the MA and Part D industry, helping millions of Medicare beneficiaries to learn about and enroll in Medicare, MA plans, and PDPs by providing expert guidance on plan options in their local area, while assisting with everything from comparing costs and coverage to applying for financial assistance," officials said in the preamble, or official introduction, to the regulations.

But officials said that, even after having many helpful meetings with agents, brokers and FMOs, they still believe the current compensation structure gives FMOs too much ability to use inflated support services packages to steer business toward insurers with close relationships with the FMOs.

Officials also emphasized that they had to do something about lead information sharing by "third-party marketing organizations," or organizations that help generate Medicare plan sales leads.

Many people have called CMS to complain about high-pressure telemarketers, officials said.

"In some instances, through listening to call recordings, CMS observed that when beneficiaries reached an agent or broker in response to these television ads, the beneficiary was often pressured by the agent or broker to continue with a plan enrollment even though the beneficiary was clearly confused," officials said.

Leads: CMS officials backed away from a provision included in the draft regulations that would have prohibited any TPMO lead sharing.

But the agency said it will require TPMOs to use a standard, clear notice to get consumers' permission before sharing the consumers' information through each sharing arrangement.

"We reiterate that CMS is not punishing TPMOs, but rather creating a more supportive and conducive environment for beneficiaries to access the information they need to make plan decisions while not being inundated with unwanted phone calls," officials said.

Agent and broker compensation: Current Medicare plan agent and broker compensation rules exclude administrative services support from the usual Medicare plan selling compensation limits.

Officials noted that many agents and brokers told them that FMO services packages have little effect on traditional producers' sales efforts and that FMOs provide valuable services.

But CMS officials said they believe arguments that larger insurers have an easier time subsidizing FMO support services, and that some insurers seem to be providing "administrative expenses" fees that "have significantly outpaced the market rates for similar services provided in non-MA markets, such as traditional Medicare with Medigap."

In other cases, plans pay overhead fees on a per-enrollment basis, and agents who sell many Medicare plans may end up getting overhead payments that far exceed their actual overhead, officials said.

To fight that problem, CMS is adopting rules forbidding any contract terms between insurers and producers or insurers and TPMOs that might interfere with an agent's or broker's ability to assess a client's coverage needs objectively, officials said.

To compensate for the change, CMS increased pay producer limits.

Today, CMS puts a limit of $611 on an initial Medicare Advantage plan enrollment and $305 on a renewal, and a $100 limit on an initial Medicare Part D enrollment and a $50 limit on a renewal.

In November, officials proposed increasing the limit by $36.

After talking to agents and brokers, officials increased the limit by $100 for new Medicare Advantage plan or Part D plan sales.

CMS shows in a table that if the base costs used to compute compensation go up 2.5% next year, 2025 producer compensation for Medicare Advantage plans could increase to $726 for new enrollments and $313 for renewals.

CMS notes that the new rules only affect compensation for retail agents, not what coverage issuers pay TPMOs for services unrelated to independent agent or broker enrollment activities.

Officials suggested that the change would reclassify some payments as compensation rather than administrative payments but that they believe the change would have no harmful effect on TPMOs, FMOs or independent producers.

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