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Regulating Private Medicare Plan Marketing

State officials will ask Congress for more power to regulate the marketing of Medicare Advantage and Prescription Drug plans because they are still receiving complaints of high-pressure sales tactics that have led some beneficiaries to sign up for unsuitable policies. Almost half of all Medicare beneficiaries are enrolled in one or both of these types of plans.

State insurance officials say they have received large numbers of complaints and have proposed that the Federal government set common standards for marketing the private plans, which could then be enforced by states. Congress will soon have an opportunity to tighten regulation of private plans as part of a bill setting Medicare payment rates for doctors and other health care providers. Unless Congress acts, doctors face a 10 percent cut in Medicare fees on July 1.

State officials say that federal payments to private Medicare Advantage plans have created a “tremendous incentive” for insurers to maximize sales by aggressive marketing, such as paying larger commissions and bonuses than agents would receive for selling other health insurance products. In 1990, Congress set tough standards for supplemental (Medigap) insurance, and that approach has worked relatively well. Senator Wyden of Oregon welcomed the proposal. “I helped write the 1990 law, which put an end to Medicare supplement insurance scams, but today some of the same deceptive practices have resurfaced in the marketing of Medicare Advantage.”

State officials also recommended that advertisements and marketing materials should specify the type of plan being offered, and avoid the use of confusing product names like “gold,” “silver” and “value,” which have no standard definition. They also recommend that when agents sell private Medicare plans, they should not be allowed to sell other insurance products such as annuities, life insurance, or long-term care to the same customer at the same time. Further, they recommend that when someone asks for information on a drug plan, they should not be pressed to buy a more comprehensive Medicare Advantage plan, which is more lucrative for the agent and the insurance company.

The administration and insurance industry have acknowledged problems in the Medicare market and have taken steps to curtail abuses. The Centers for Medicare and Medicaid Services sent “secret shoppers” to 240 marketing events last fall, and they found inaccuracies or omissions in three-fourths of the sales presentations. Further, two insurance industry trade groups have developed a training course for agents who market private Medicare plans.

Source: New York Times

Hard Sell Would Get Softer Under New Rules

The administration proposed to crack down on the aggressive marketing of private Medicare insurance plans by outlawing unsolicited visits and telephone calls to beneficiaries, regulating commissions paid to sales agents and increasing the fines that could be imposed on insurers. Medicare “should not be undermined by the actions of a limited number of unscrupulous sales agents,” said Kerry N. Weems, the acting administrator of the Centers for Medicare and Medicaid Services.

In the last two years, Medicare beneficiaries and state officials have often complained that high-pressure sales tactics led some people to sign up for unsuitable policies. After reviewing comments from the public, federal officials intend to issue final rules before the marketing of plans for 2009 begins this October. The administration’s view is that states do not have the authority to regulate the marketing of private Medicare plans.

The proposal would prohibit door-to-door marketing of private Medicare plans. Agents could not accost beneficiaries in the parking lot of a center for the elderly, a clinic or an apartment building. Agents could respond to telephone inquiries, but they could not make cold calls to beneficiaries. The rules would set a $15 limit on the value of gifts and promotional items offered to potential customers. Insurance companies could offer coffee, soft drinks, snacks, pill dispensers and water bottles worth less than $15.

But insurers could not offer free meals, whatever their value. This proposal would end a common practice. Insurers like Humana have signed up many beneficiaries at family restaurants where the companies provide sales presentations and meals. “Have Lunch on Us!” said fliers and advertisements inviting Medicare beneficiaries to Humana events last fall. The proposed rules would also prohibit agents from offering annuities, life insurance and other “non-health care related products” while selling private Medicare plans.

The administration also wants to regulate sales commissions, to discourage agents from switching people inappropriately from one Medicare plan to another. Under the proposal, the commission paid for the initial sale and first year of coverage could not exceed the commission paid for renewal of coverage in a subsequent year. Many carriers now pay higher commissions in the first year. Some pay only for the first year, with no commission in later years. This creates a “financial incentive for agents to encourage beneficiaries to change plans each year,” the administration said.

Of the 44 million Medicare beneficiaries, at least 25 million are in some type of private plan — either a Medicare Advantage plan, which provides a wide range of health services, or a free-standing prescription drug plan, which covers just medicines.

Source: New York Times

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