On November 6, 2023, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule regarding Contract Year (CY) 2025 Policy and Technical Changes to the Medicare Advantage (MA) and Medicare Prescription Drug Benefit Programs. Among other proposals, CMS proposed significant changes to longstanding rules on permissible payment structures for agents and brokers. Some of the proposed changes would likely go into effect in 2024 (once the final rule is effective), while others would not be effective until the 2025 contract year.
The rule will be published in the Federal Register on November 15, 2023, and comments are due by January 5, 2024.
OVERVIEW: KEY PROPOSALS RELATED TO MA ARRANGEMENTS WITH AGENTS AND BROKERS
CMS is proposing to make the following changes:
Prohibit override/administrative fees paid to agents and brokers (either directly by MA plans or indirectly by field marketing organizations (FMOs)) outside of the fair market value (FMV) enrollment compensation limits established by CMS
Redefine “compensation” so that the FMV compensation limits expressly include certain types of expenses (e.g., mileage, venue rental, snacks, materials) that previously could be separately reimbursed by plans
Establish a single FMV compensation rate for all plan types, replacing the current FMV compensation ceilings for different types of plans
Prohibit contract terms between Medicare Advantage organizations (MAOs) and agents, brokers or other third-party marketing organizations (TPMOs) that may interfere with the agent’s or broker’s ability to assess and recommend the most suitable plan for a beneficiary
Each of these proposals is discussed in greater detail below.
PROHIBITING OVERRIDE/ADMINISTRATIVE FEES PAID TO AGENTS AND BROKERS; REDEFINING “COMPENSATION”
CMS has previously permitted MA and Part D plan sponsors to pay agents and brokers for administrative services other than enrollment (such as training, customer service, agent recruitment, operational overhead or assistance with completion of health risk assessments) outside of the compensation limits set by CMS, provided that these administrative payment amounts are consistent with FMV for the services. CMS’s current regulations expressly permit these administrative fees to be paid on a per-enrollment basis. These are often paid to FMOs or other general agencies and commonly referred to in the industry as “overrides.”
CMS now proposes to prohibit these separate administrative payments and require that such amounts be subject to the annual FMV compensation limits set by CMS. Specifically, CMS would require that all payments to agents or brokers that are tied to, related to, or are for services conducted as part of the relationship associated with the enrollment into an MA or Part D plan must be included under compensation, including payments for certain activities previously excluded under the definition of compensation (e.g., reimbursement for mileage to and from appointments with beneficiaries, and for actual costs associated with sales appointments such as venue rent, snacks and materials). CMS proposes to increase the FMV by $31 beginning in 2025 to reflect what CMS considers to be the value of administrative compensation for these types of services, with this amount subject to annual updates according to FMV update requirements.
Under CMS’s proposal, the agency would delete the regulatory provision at 42 CFR 422.2274(e)(2) that currently allows administrative fees to be paid on a per-enrollment basis, and the deletion of that provision may be effective as of the effective date of the final rule (which would likely be in 2024). Such a revision could potentially affect MA and Part D plans’ administrative services arrangements with certain entities that currently are paid on a per-enrollment basis for administrative services.
ESTABLISHING A SINGLE FMV COMPENSATION RATE
Under current regulations, compensation for agents and brokers may be paid at a rate determined by the MA or Part D plan sponsor, but may not exceed caps that CMS calculates each year based on FMV (e.g., CY 2023 FMV caps are $601 for each MA initial enrollment, $301 for an MA renewal enrollment, $92 for each Part D initial enrollment, and $46 for a Part D renewal enrollment). CMS now proposes to set a single agent and broker compensation rate for all plans, reflecting a simplified structure for agent and broker compensation. CMS would also eliminate the requirement for plan sponsors to report independent agent and broker fees each year, because this new single compensation rate would apply in all cases.
PROHIBITING CERTAIN CONTRACT TERMS
Beginning in 2025, CMS proposes to prohibit contract terms between MA and Part D plan sponsors (on the one hand) and agents, brokers or TPMOs (on the other hand) that indirectly or directly incentivize agents or brokers in a manner that could impede their ability to impartially evaluate and suggest the most suitable plan for a beneficiary’s healthcare needs. Examples of contract terms CMS views as problematic include those that:
Tie the compensation, renewal or other aspects of a plan’s contract with an agent, broker or FMO to preferentially high enrollment rates or achievement of set enrollment targets
Arrange for bonuses or additional payments from MA or Part D plan sponsors to an FMO that are intended to be passed on to agents or brokers based on enrollment volume in plans sponsored by those MA or Part D plan sponsors
Arrange for an FMO to provide an agent or broker with leads or other incentives based on previously enrolling beneficiaries into specific plans, for reasons unrelated to the beneficiaries’ healthcare needs