Rep. Stark Urges CMS To Block New Medicare Advantage Sales Commissions Rules, Saying They Will Promote 'Churning'

Main Category: Medicare / Medicaid / SCHIP
Article Date: 27 Oct 2008 - 5:00 PDT

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House Ways and Means Subcommittee on Health Chair Pete Stark (D-Calif.) on Thursday in a letter to CMS acting administrator Kerry Weems called for a limit on new sales commissions in an attempt to dissuade sales agents from pressuring Medicare beneficiaries to frequently switch Medicare Advantage plans, CQ HealthBeat reports (Reichard, CQ HealthBeat, 10/23).

CMS on Sept. 15 issued new rules governing insurance companies, agents and brokers regarding the marketing of Medicare prescription drug plans and MA plans. The new rules -- some of which were mandated by Medicare legislation passed earlier this year -- took effect Oct. 1, the first day marketing efforts for the Medicare open enrollment period that begins Nov. 15 are allowed. The rules stipulate, among other things, that commission for sales agents will be required to conform to a structure used in other parts of the insurance industry. First-year commission for a new customer cannot exceed 200% of the commission for the next five years, in order to remove the incentive for agents to "churn" beneficiaries between different plans each year (Kaiser Daily Health Policy Report, 9/16).

However, because the regulations are just taking effect, some plans now are increasing commissions in order to lock them in for the next five years. In the letter, Stark wrote that insurers are "gaming" the new regulations by raising commissions to levels "that far exceed any previous year's commissions" (CQ HealthBeat, 10/23).

Stark added, "I am gravely concerned that without immediate action ... these elevated commissions will lead to an unprecedented amount of churning of beneficiary enrollment this year, in a way that is disruptive to their care and detrimental to their coverage." Stark recommended a cap on sales commissions at a "reasonable rate, perhaps as a percentage of what was offered in years past." CMS spokesperson Jeff Nelligan said, "We are aware, have been aware and will address this issue." According to Robert Zirkelbach, a spokesperson for America's Health Insurance Plans, members are dedicated to reducing unnecessary plan turnover and support CMS' efforts to oversee MA marketing activities. Zirkelbach agreed that there is a need to rework the commission structure to ensure the new rules achieve their aim (CQ HealthBeat, 10/23).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

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