New rule proposed imposing tougher regulations on Medicare Advantage

The Biden administration is proposing tighter regulations to cut down on “anti-competitive” practices in the Medicare Advantage (MA) market including strengthening the rules that limit how much compensation agents and brokers can receive for enrolling Medicare beneficiaries into MA plans.

The Centers for Medicare & Medicaid Services (CMS) said in a statement that the proposed rules will “help people with Medicare select and enroll in coverage options that best meet their health care needs by preventing plans from engaging in anti-competitive steering of prospective enrollees based on excessive compensation to agents and brokers, rather than the enrollee’s best interests.”

As the proposed rule notes, CMS has long been required to maintain guidelines that incentivize Medicare brokers and agents to enroll individuals in MA or Prescription Drug Plan (PDP) plans that best meet their healthcare needs. As part of these guidelines, upper limits have been put in place on how much compensation agents and brokers can receive.

“We have learned, however, that many MA and PDP plans, as well as third-party entities with which they contract (such as Field Marketing Organizations (FMOs)) have structured payments to agents and brokers that have the effect of circumventing compensation caps,” CMS’s proposed draft stated. “We also note that that [sic] these additional payments appear to be increasing.”

These workarounds include extra payments from MA plans to brokers that are characterized as cash bonuses or added benefits. These payments improperly incentivize brokers to steer beneficiaries toward those plans even if they may not be the best fit.

“That’s not right. Seniors should get the plan that is based on their needs in their best interest, not based on which plan has the biggest payoff for marketers,” Lael Brainard, director of the White House’s National Economic Council, said in a briefing.

CMS’s proposed rule would eliminate the current framework that allows brokers and agents to receive separate payments. It would also redefine the definition of “compensation” to brokers to establish a “clear, fixed amount that agents and brokers can be paid regardless of the plan the beneficiary enrolls in.” The definition would also be expanded to include all activities relating to enrollment.

The proposed fixed compensation amount by CMS is $632 per MA enrollment.

“Collectively, we believe the impact of these proposed changes will better align with statutory requirements and intent: to ensure that the use of compensation creates incentives for agents and brokers to enroll individuals in the plan that best fits a beneficiary’s health care needs,” the rule proposal read.

If finalized, this rule would be applied to 2025.