Director, Center for Beneficiary Choices
Centers for Medicare and Medicaid Services
Hubert H. Humphrey Building
200 Independence Ave, S.W.
Washington, D.C. 20201
March 23, 2007
Via U.S. Mail and email
Re: Involuntary Disenrollments of Sierra Rx Part D Plan Enrollees
Dear Ms. Block:
We are writing to express our concern with a disturbing trend that appears to be developing in California (and presumably elsewhere): the involuntary disenrollment of Sierra Rx Medicare Part D plan enrollees for failure to pay premiums.
As discussed below, we do not believe that Sierra Rx is following applicable CMS rules for processing such disenrollments. In addition, we are particularly concerned about a recent amendment to their Evidence of Coverage retroactively reducing the grace period within which to pay outstanding premiums from 90 days to 30 days. Furthermore, Sierra Rx appears to be denying affected enrollees the opportunity to reconcile their billing issues (even when the billing problems are no fault of the enrollees), and is steadfastly refusing to re-enroll these beneficiaries. These disenrolled beneficiaries have been left without any coverage for their prescription drugs for the remainder of 2007, and many are facing the high cost of paying the full market price for their prescriptions from the date of their involuntary disenrollment. As a result, we request that CMS re-enroll all individuals who have been involuntarily disenrolled by Sierra Rx in 2007, impose a moratorium on Sierra Rx involuntary disenrollment actions and require that the company individually review each disenrollment and preserve prescription drug coverage for each affected enrollee.
California Health Advocates is a non-profit agency that provides support to, but does not administer, the Health Insurance Counseling & Advocacy Program (HICAP), California’s State Health Insurance Program (SHIP). We are learning of these disenrollments from Medicare beneficiaries who have contacted us directly as well as the HICAP network and other assistance agencies. While individual cases are being reported to CMS and its contractors, including the West MEDIC, the purpose of this letter is address what appears to be an emerging trend, using examples from a growing pool of cases.
Since the roll-out of Medicare Part D, our organization had not encountered any cases of involuntary disenrollment for failure to pay premiums until a few weeks ago, when we became aware of a flood of such cases, all involving Sierra Rx. Since the end of February, we have become aware of Medicare beneficiaries in at least 10 counties in California who have been involuntarily disenrolled by SierraRx Part D plans for failure to pay premiums.
As you are aware, most people who are involuntarily disenrolled from their Part D plan, absent a Special Enrollment Period right, will lose their prescription drug coverage for the balance of the calendar year and will not be able to regain Part D coverage until January 1st, 2008. Many of these affected enrollees are now without any coverage for their medications, and have no recourse.
Identified Trends in Disenrollment Cases
The cases of involuntary disenrollments by Sierra we have seen do not comport with existing CMS rules and procedures. In some cases, Sierra enrollees received no bills prior to being disenrolled. In other cases, Sierra enrollees who did receive notices and/or bills promptly followed up with Sierra, but were told by customer service representatives that many billing and disenrollment letters were sent out “by mistake” and were advised “not to worry” and to “disregard” the bills. Despite these assurances, however, these enrollees were subsequently disenrolled anyway.
The disenrollment cases we are aware of, which seem to primarily impact new Sierra Rx enrollees who joined the plan effective 1/1/07, generally fall in the following categories:
- Enrollees who have paid premiums in a timely manner but have still been disenrolled;
Example: Ms. N., who had already paid her January premium, paid both her February and March premium on February 23rd, but on March 2nd received a letter stating that she would be disenrolled on March 1st.
- Late premium bills sent by Sierra to people who have elected to be billed directly by the plan;
Example: Ms. R., who enrolled in Sierra Rx effective 1/1/07, requested to be directly billed. When she did not receive a bill in early January, she contacted the plan at least 4 times to request a bill, and was assured that her enrollment status was fine. On March 1st, however, she was disenrolled from Sierra, but did not receive her first premium bill until March 13th, almost 2 weeks after she had already been disenrolled.
- People who have elected for SSA premium withhold or electronic funds transfer through their bank who have had premiums deducted yet are still disenrolled.
Example: Ms. C enrolled in Sierra effective January 1, 2007, opting for electronic funds transfer. From January 10th through March 5th, 4 withdraws were made from her bank account for premiums, but she was informed that her membership was terminated on 2/28/07 since the February check arrived on 3/1/07 – “one day past the grace period for the February premium” according to a Sierra Rx representative. When she protested to Sierra, Ms. C was told she has “no reinstatement rights.”
In all of the cases we are aware of, Sierra members have contacted the plan and tried to reconcile outstanding premiums and requested to be re-enrolled into the plan but have been strongly rebuffed. Of the disenrolled individuals who have attempted to use Sierra’s grievance process, we are unaware of Sierra changing course and re-enrolling anyone.
CMS Enrollment Rules/Guidance
Consistent with principles of due process, CMS regulations require Part D plans that choose to exercise their optional right to involuntarily disenroll someone for failure to pay premiums to “give the individual timely notice of the disenrollment with an explanation of why the PDP is planning to disenroll the individual.” 42 CFR §423.44(c). Such notices “must be provided to the individual before submission of the disenrollment notice to CMS” 42 CFR §423.44(c)(i). Further, a PDP sponsor can only disenroll an individual if the sponsor “can demonstrate to CMS that it made reasonable efforts to collect the unpaid premium amount.” 42 CFR §423.44(d).
CMS’ PDP Enrollment and Disenrollment Guidance (updated 9/8/06) states in §40.3.1 that plans can only disenroll individuals for failure to pay premiums “after a grace period and proper notice.” The Guidance states: “the grace period cannot begin until the individual has been notified of/billed for the actual premium amount due, with such notice/bill specifying the due date for that amount and provided an opportunity to pay.” CMS reiterates that “the individual must be notified/billed of the actual premium amount due before the premium can be considered ‘unpaid.’ For new enrollees, at a minimum, this cannot occur until CMS notifies the PDP sponsor of the total premium due from the individual.”
In the disenrollment cases we have seen, including the examples cited above, it does not appear that Sierra has provided timely notice of disenrollment (or if they did provide a notice/bill, plan representatives often told enrollees who called to disregard the notice). While we are not privy to information that Sierra has shared with CMS, it is apparent that the plan could not demonstrate to CMS its “reasonable efforts” to collect unpaid premium amounts, nor could it show that it has notified members in writing after the expiration of the grace period but prior to submission of the transaction to CMS that it was planning to disenroll its members.
Amendment to Sierra’s Evidence of Coverage
In addition to failing to follow existing CMS rules concerning involuntary disenrollment, we are concerned that Sierra is applying a new, shortened grace period retroactively, before enrollees have been provided notice about the change in their plan’s contract terms.
It is our understanding that Sierra’s Evidence of Coverage (EOC), approved by CMS in 12/06, noted that Sierra Rx would allow a grace period of three calendar months within which to pay outstanding premiums. As you are aware, Sierra has since sent out an Amendment to their Evidence of Coverage (EOC) that reduces the grace period for premium payment from 3 months to 1 month. The Amendment, which bears a CMS Approval Date of 2/2007, notes that the longer three month grace period in the pre-existing EOC was a “typographical error.”
Assuming that CMS followed appropriate internal procedures when approving this change in the plan’s contract terms with its enrollees in February, then, at best, the new, more restrictive grace period should not become effective until: 1) Sierra enrollees receive notice of the Amendment; and 2) the current, pre-existing grace period has expired. For example, although this Amendment is dated 2/2007, several affected enrollees report that they did not receive it until March. In that instance, at the beginning of March, the enrollee was operating under the 90-day grace period and had not yet been notified of the change in the rules, and thus the grace period should last the full 90 days through May 2007.
It should be noted that the original 90-day grace period, which was the rule outlined in Sierra’s EOC on January 1st, should still be in effect through the end of March. Not only is Sierra applying this new, shortened grace period without proper notice to affected enrollees, however, it appears to be applying it retroactively. For example, for outstanding premiums due for the month of February – the month Sierra changed the grace period but before most or all enrollees were notified of this change – Sierra appeared to already be applying the 30 day period, and disenrolled individuals at the end of February as a result.
Example: Mr. W. received a letter from Sierra, dated March 1st, stating “On February 9, 2007, we sent you a letter that said your Plan premium was overdue … Since we did not receive that payment, we have asked [CMS] to disenroll you from Sierra Rx Plus beginning 2/28/07.” On March 11th, after his disenrollment was effective, Mr. W. received the Amendment changing the grace period. (Note that Mr. W.’s Social Security check was being deducted (albeit incorrectly by his previous plan), and he had contacted Sierra member services in mid-February but was told that the letters were sent in error, and that he should disregard it, and that under his EOC, he had a 90-day grace period.)
In addition to improper execution and notice of the new, shortened grace period, Sierra’s involuntary disenrollment procedure – as articulated in its Amendment – appears to contravene CMS policy. The Amendment states that “SierraRx Plus will allow a grace period of one calendar month that begins the first day of the month for which the premium was not paid.” Section 40.3.1 of CMS’ PDP Guidance, however, as quoted above, requires plans to trigger the grace period only when proper notice has been provided to the enrollee: “the grace period cannot begin until the individual has been notified of/billed for the actual premium amount due, with such notice/bill specifying the due date for that amount and provided an opportunity to pay.”
Recent Developments Surrounding Sierra Health
While this disenrollment trend should be of concern in and of itself, this trend is even more troubling in light of recent news reports concerning Sierra Health Services and the Sierra Rx plan. As reported by Jeffrey Young in The Hill, Sierra has informed investment analysts that it will discontinue the “money-losing” Sierra Rx Plus plan next year. (“Feds Probe Humana Over Rx Drug Patients” The Hill, 3/8/07). In addition, Sierra’s President and Chief Executive told analysts that “Sierra Rx Plus suffers from an extraordinary level of ‘adverse selection’” (Id.). Sierra has also accused Humana Inc. of inappropriately diverting its most expensive customers to Sierra. (Id.). (It should be noted that several of the disenrollment cases we have seen involve former Humana enrollees.) In addition, it can be argued that Sierra’s financial health is receiving additional attention following UnitedHealth Group Inc.’s recent announcement that it intends to acquire Sierra Health (Reuters, 3/12/07).
Given these factors which might influence the performance of Sierra Health in carrying out their Medicare Part D business, we believe that this disenrollment trend merits heightened scrutiny by CMS. We note that the following activities are subject to sanction under CMS regulations: when a plan “[a]cts to expel or refuses to reenroll a beneficiary” in violation of Medicare provisions; and if a plan “[e]ngages in any practice that may reasonably be expected to have the effect of denying or discouraging enrollment of individuals whose medical condition or history indicates a need for substantial future medical services.” 42 CFR §423.752(a)(3) and (4).
Based upon the issues outlined above, we request that CMS require Sierra to re-enroll everyone it involuntarily disenrolled in 2007, treat all involuntary disenrollments of enrollees performed by Sierra Rx in 2007 as suspect and review each disenrollment action for compliance with applicable Medicare rules. We further request that CMS impose a moratorium on the ability of Sierra Rx to involuntarily disenroll individuals for failure to pay premiums for at least as long as the pre-existing 90-day grace period, beginning with the month that enrollees were notified of the change.
Thank you, in advance, for your attention to this matter. We look forward to your response.
Cc: Jeff Flick, Regional Administrator, CMS Region IX