Congress Should Regulate Private Medicare Plans

Armen Hareyan's picture

State officials soon willask Congress to grant them more regulatory authority over the marketing ofprivate Medicare drug benefit and Medicare Advantage plans to respond tocontinuing complaints of aggressive marketing practices, the New York Times reports. In a draft report by the National Association of Insurance Commissioners, state officials propose creating aset of marketing standards for private Medicare plans that states, if theyadopt them, would enforce.


The report says that the "current federal regulatory framework does notadequately protect consumers from marketing and sales abuses." It alsosays that states cannot help the beneficiaries who register complaints or holdinsurance companies accountable because doing so is under the jurisdiction ofthe federal government. States currently are permitted to regulate insuranceagents and brokers who market private Medicare plans, but they generally arenot permitted to regulate the insurance companies who do so, according to the Times.According to the report, this creates "a bifurcated regulatorysystem" between states and CMS that confuses consumers.

According to the report, the rate CMS pays to MA plans -- 13% higher on averagethan traditional Medicare -- creates a "tremendous incentive" forinsurers to market the plans aggressively. Some insurers pay higher bonuses orcommissions to agents for selling MA plans over other plans. "Stateinsurance regulators and consumer groups feel very strongly that thesefinancial incentives have resulted in significant agent misconduct ranging fromunsuitable sales to outright fraudulent activity," the report says.

The report makes several recommendations for new private plan regulations,including:

  • Marketing for plans should specify the exact type of plan being offered, such as HMO or prescription drug plan, instead of labels such as "gold," "silver" or "value" plan, which do not have a standard definition of benefits;
  • Agents should be prohibited from selling other products, such as long-term care coverage or life insurance, to beneficiaries at the same time they are selling Medicare plans;
  • Agents should not pressure beneficiaries to buy MA plans when they ask about prescription drug plans;
  • Insurance companies should register all sales agents authorized to sell Medicare plans with state regulators; and
  • Agents should be required to disclose to the states bonuses and commissions obtained through Medicare plan sales.

According to the Times, the Bush administration and healthinsurance groups have recognized marketing issues with privately offeredMedicare plans and "have taken steps to curtail abuses." CMS sent"secret shoppers" to 240 Medicare plan marketing events last fall andfound "inaccuracies and omissions" in 75% of the sales presentations.In addition, trade groups America's Health Insurance Plans and the National Association of Health Underwriters have developed a training program for agentswho sell private Medicare plans. However, Guenther Ruch -- chair of the panelthat wrote the report and chief of regulation and enforcement for the WisconsinInsurance Department -- said, "It does not appear to us that themisconduct has been reduced much," adding, "We saw a huge uptick incomplaints in the last two or three weeks of March, as the annual openenrollment period for Medicare Advantage plans was ending" (Pear, NewYork Times, 5/5).

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