CMS ISSUES AGENT COMPENSATION REQUIREMENTS FOR MEDICARE ADVANTAGE AND PRESCRIPTION DRUG PROGRAMS
The Centers for Medicare & Medicaid Services (CMS) today issued revised compensation requirements for sales agents and brokers who sell Medicare Advantage and prescription drug benefit plan options to people with Medicare.
“The steps we are taking should help to make sure that brokers and agents are selling health or drug plans that best meet beneficiaries’ needs when open enrollment begins on November 15,” said CMS Acting Administrator Kerry Weems. “The rule we are issuing will help to resolve any confusion about how the private plans should implement compensation structures to meet those needs.”
This CMS interim final rule with comment period modifies regulations issued on Sept. 18, 2008. Those regulations established how health and drug plans should structure the compensation for agents and brokers by reducing existing financial incentives to enroll a beneficiary in a new plan based on the agent’s or broker’s financial interests rather than the beneficiary’s health care needs. The Sept. 18 regulations required that compensation be paid on a six-year cycle, comprised of an initial enrollment year and five renewal years, and that the renewal rate be paid for a beneficiary changing plans during the renewal years. Compensation includes commissions and bonuses as well as other incentives, such as sales awards.
The rule issued today revises the Sept. 18 regulations by:
- Specifying that all compensation paid to agents and brokers reflect fair-market value based on the commissions paid in the past, adjusted for inflation for similar products in the same geographic area.
- Requiring that renewal compensation be no more, or no less, than half of the compensation paid for that beneficiary in the initial year of the six-year compensation cycle established in the Sept. 18 rule.
- Imposing similar limits on payments to organizations such as Field Marketing Organizations (FMOs). These entities are local or national companies that play an important role in helping plans market and sell their Medicare products by using agents and brokers. FMOs also train agents and brokers and help provide other services.
- Requiring plans to submit to CMS their compensation structures for the previous three years plus the compensation structure they are implementing for 2009. That information must also be provided to agents, brokers, and other third parties under contract to sell their plans. Those rates or structures cannot be changed without prior CMS approval.
- To prevent churning CMS is still requiring that plans initially pay renewal rate compensation in 2009 rather than the initial year compensation amounts for all plan changes. Once CMS identifies an initial commission was warranted, plans are to retrospectively pay agents and brokers an additional amount for a total payment of the initial compensation rate as filed with CMS.
Other rules from the Sept. 18, 2008, regulations still apply.
The interim final rule with comment period, Medicare Program; Medicare Advantage & Prescription Drug Programs: Clarification of Compensation Plans (CMS 4138-IFC2), is effective today, November 10, 2008. It will be was published in the Federal Register on November 14, 2008. Comments must be submitted by 5:00 p.m. Eastern Standard Time on December 15, 2008. The rule may be viewed at
http://www.cms.hhs.gov/HealthPlansGenInfo
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