Medicare Advantage plan brokers and distributors are asking the federal courts to give them immediate protection against new Centers for Medicare and Medicaid Services agent compensation rules.
The plaintiffs predict in three separate suits that plan distribution channels will break down if the courts fail to block the agent comp rules for the 2025 coverage year by mid-July.
CMS has responded with questions about why the plaintiffs in the two suits filed in the U.S. District Court for the Northern District of Texas took six weeks or more to ask the courts for an injunction.
“Plaintiffs’ needless delay is itself disqualifying,” CMS says in a response to two of the suits.
For the employee benefits community, any significant turmoil in the Medicare Advantage market could have a direct effect on the 5 million retirees who get their health coverage through employer-sponsored group Medicare Advantage plans.
Federal policymakers have started to shape commercial market producer compensation arrangements by, for example, including broker disclosure requirements in the No Surprises Act. Big, lasting Medicare Advantage producer comp rule changes could influence other federal efforts to set commercial market producer compensation rules.
The history
Medicare Advantage marketing rules have limited agent and broker compensation to about 5% of the average plan cost.
CMS has been letting plans supplement producer pay with separate payments to field marketing organizations and other marketing services providers. The providers have helped with tasks such as recruiting, training, licensing and supervising agents, as well as with access to products and advertising.
In recent years, CMS says, it has heard of plans trying to get around the producer compensation limit by using marketing budgets to sweeten producers’ pay. “Marketing organizations began promising agents and brokers golf parties and trips if they worked with certain plans,” the agency says in the court filing.
Misuse of marketing money distorted the market, CMS says.
CMS responded by eliminating plans’ ability to make marketing support payments.
To compensate for the change, CMS increased the maximum producer comp amount. For a new enrollment, the 2025 pay limit is set to increase by $100, to about $726.
The brokers’ and distributors’ view
AmeriLife, a big financial services company, and affiliates filed a suit against the new CMS producer compensation rules in the U.S. District Court in Tampa, Florida.
Americans for Beneficiary Choice, another big financial services company, joined with a field marketing organization controlled by Integrity Marketing to file a second, similar suit in the U.S. District Court in Fort Worth, Texas.
The Council for Medicare Choice worked with the Fort Worth Association of Health Underwriters and a Fort Worth health insurance agency to file another suit in Fort Worth.
One judge is handling both of the Fort Worth suits.
The annual enrollment period for 2025 Medicare Advantage plans is set to start Oct. 15 and end Dec. 7.
The plaintiffs in the three suits against CMS note that distributors and plans need to make many decisions about hiring agents, training agents and setting up advertising programs by mid-July to prepare for the Oct. 15 enrollment period start date.
The plaintiffs also say that the current value of Medicare plans’ marketing support spending is closer to $200 than $100.
The regulators’ view
CMS notes that the deadline for insurers and other coverage providers to submit their bids for the 2025 plan year was June 3.
“Even if the Court granted Plaintiffs relief by July 10, plans presumably have already set their overall marketing budgets for next year,” CMS says. “Plans cannot change those budgets without dipping into their bottom line or some other source of funds.”
CMS must change the producer comp rules and other marketing rules because consumer complaints about marketing problems have increased sharply, the agency says.
The agency also contends that a $100 comp increase should offset the current marketing support spending.
Commenters who say the correct amount is $200 or higher are including the full cost of systems used for purposes other than selling Medicare plans, CMS says.