The Centers for Medicare & Medicaid Services (CMS) recently released final regulations to protect Medicare beneficiaries from deceptive or high-pressure marketing tactics by private insurance companies and their agents during the Medicare Advantage and prescription drug Annual Election Period for the 2009 plan year. Many of these regulations result from MIPPA , the Medicare Improvements for Patients and Providers Act passed in July 2008, and must be implemented by both Medicare Advantage (MA) and Part D plans by the beginning of their marketing activities which officially started on October 1.
Two of the regulations include prohibitions on telemarketing and other unsolicited sales contacts. They also prohibit financial incentives that could encourage agents and brokers to maximize commissions by inappropriately moving, or churning, beneficiaries from one plan to another each year. A summary of the regulations, some of them new and some codifying existing guidelines into law, are outlined below.
In addition, these more strict regulations come at the same time the Office of Inspector General (OIG) issued its report on CMS’ lack of oversight on the marketing of Medicare health and prescription drug plans during the last 2 years. See the September 2008 report, Marketing Materials for Medicare Prescription Drug Plans for more information.
Regulations/Rules for Marketing Medicare Health and Drug Plans
Disclosure of Plan Information
This codifies existing regulations and adds something new (effective 9/18/08).
- Medicare Advantage (MA) and Medicare Part D plans must disclose plan information to beneficiaries: 1) at the time of enrollment; or 2) annually by October 31st for existing members.
- For existing members, this information must now include both the Annual Notice of Coverage (ANOC), that describes plan changes for the coming year, and the Evidence of Coverage (EOC), which includes comprehensive information about coverage and plan policies. Previously, the EOC wasn’t required to be given out until January of the new plan year.
These regulations codify existing guidance as well (effective 9/18/08). They state that:
- Plans can offer gifts to potential enrollees only if they are:
- of nominal value (currently set at a retail value of $15); and
- provided regardless of whether a beneficiary enrolls in the plan.
This new guidance extends the existing prohibition on door-to-door solicitations to several other activities (effective 9/18/08). These prohibited activities include:
- outbound marketing calls, unless a beneficiary requests a call beforehand;
- calls to former members to market plans or products (note that such calls are permitted for disenrollment surveys, only after the effective disenrollment date, and if no sales or marketing information is discussed);
- calls to confirm receipt of mailed materials or acceptance of an appointment made by a 3rd party or independent agent;
- calls/visits after a beneficiary attends a sales event, unless a beneficiary explicitly gives permission;
- unsolicited emails; and
- approaching beneficiaries in common areas (such areas include parking lots, hallways, lobbies, etc.)
Note: there are exceptions to this unsolicited contact rule, including by agents/brokers who enrolled a beneficiary in a plan, and in certain instances in which someone with the Part D Extra Help (Low-Income Subsidy) is being reassigned to a different plan.
This new guidance prohibits cross-selling of non-health care related products (such as annuities or life insurance) during any MA or Part D sales activity or presentation (effective 9/18/08).
Scope of Appointments
This codifies existing guidance (effective 9/18/08):
- Items to be discussed at a marketing or in-home appointment must be identified prior to the appointment and must be identified on all marketing and advertising materials and announcements; and
- Additional products can only be discussed if the beneficiary requests it AND if they are discussed at a separate appointment, at least 48 hours later.
New guidance (effective 9/18/08) also requires the plan to document what beneficiaries agreed to hear during their appointments. This can be documented in writing or recorded by phone.
Marketing in Health Care Settings
This codifies existing guidance (effective 9/18/08) prohibiting plan marketing activities in healthcare settings. No sales activities, distribution or acceptance of enrollment forms can take place in these places. Examples of health care settings include: waiting rooms, exam rooms, hospital patient rooms, dialysis centers, and pharmacy counter areas.
Note: Marketing is allowed in healthcare ‘common’ areas, such as: hospital or nursing home cafeterias, community rooms, recreational rooms or conference rooms.
Marketing at Educational Events
This new guidance (effective 9/18/08) prohibits plans from marketing at educational events, such as health information fairs, conference expositions, and state- or community-sponsored events. Marketing activities include: selling plans and distributing or accepting enrollment forms and/or business cards.
Plans can distribute Medicare and/or health educational materials (as defined in CMS’ marketing guidelines). Also, agent and brokers can give out their business cards only upon a beneficiary’s request.
This codifies existing guidance and prohibits plans from putting the names and/or logos of their network partners on the beneficiaries’ plan ID cards. For example, some plans have put their partner pharmacy chain logo, such as Walgreens, on their member ID cards causing some plan members to erroneously believe they could only purchase their drugs at Walgreens.
Two exceptions to this rule are:
- Plans that have a network exclusive to a co-branded provider can include their logo on the ID cards; and
- Plans can include the names/logos of the provider(s) selected by the member on the ID card.
Prohibition of Meals
This codifies existing guidance (effective 9/18/08) and prohibits plans from providing or subsidizing meals for prospective enrollees. This rule applies at any event where agents or brokers are discussing plan benefits or handing out plan materials. Light drinks and snacks, however, can be offered as long as they’re not bundled together to serve as a meal.
State Licensure of Agents
This codifies existing guidance that agents and brokers used by MA and Part D plans must be state-licensed, certified or registered. This rule applies to both contracted and employed agents and brokers. (Effective 9/18/08)
State Appointment of Agents
This new guidance (effective 9/18/08) requires plans to give states information about which agents are marketing their plans. Plans must also pay any required appointment fees.
Reporting of Terminated Agents
This new guidance (effective 1/1/09) requires plans to report the termination of any agents or brokers to the state in which the agent/broker was appointed and to include the reasons for termination.
This new guidance (effective 9/18/08) creates a 6-year compensation structure designed to eliminate incentives for agents or brokers to move beneficiaries from plan to plan, a practice known in the industry as “churning.” These guidelines help protect beneficiaries from agents and brokers who may have been acting in their own financial interest rather than meeting the needs of the beneficiary. They apply to both contracted and employed agents/brokers.
In the past, it was common for agents to receive compensation only when a beneficiary first enrolled in a plan. Therefore, encouraging beneficiaries to enroll in a new plan each year could be financially beneficial to them. Now, however, agents will receive compensation based on the length of time beneficiaries stay enrolled in their plan, or in a similar plan. They will receive an initial compensation when a beneficiary first enrolls in a plan, and then an additional ‘renewal compensation’ for every subsequent year (up to 5 years after the initial enrollment) that the beneficiary stays in that plan or enrolls in a similar one (i.e. Part D plan to Part D plan, or MA-PD to another MA-PD, etc.)
With this structure, the initial compensation cannot exceed 200% of the renewal compensation amounts. Also, if an enrollee leaves a plan early, the agent’s compensation will be adjusted accordingly. For example, if a beneficiary leaves a plan within 3 months of enrolling, the agent will receive no compensation. If a beneficiary leaves after 3 months, the compensation will be pro-rated. Again, this is very different from the past compensation structure where agents were paid strictly for number of enrollments into plans.
Starting in 2010, CMS will track beneficiaries’ plan changes and direct plans on the correct compensation to pay their agents. Also, plans will now have to establish their compensation structure for each plan year, subject to CMS’ review, and have it in place by October 1.
Agent/Broker Training and Testing
This codifies existing guidance and adds new guidance (effective 9/18/08). All agents and brokers, both contracted and employed, must be trained and tested annually on Medicare rules and regulations and plan details specific to the plan products they will sell. For next year, all training and testing must be completed by October 1, 2009, in order to start marketing after that date. New guidance requires the passing testing scores to be at least 85%.
More information and where to file complaints
For more information on these regulations and guidance on implementing them, visit CMS at cms.hhs.gov/HealthPlansGenInfo.
Also, CMS will be posting a beneficiary tip sheet on what plans can and cannot do in early October. This will be posted on Medicare.gov under the Publications section.
If you or your clients come across any plans and/or agents who are not complying with one or more of the above marketing regulations, please submit a complaint to 1-800 Medicare, AND your California Senior Medicare Patrol (SMP) project. For California’s SMP, call 714-560-0309 or email Julie Schoen, SMP Project Director, at