State Insurance Department Statements Scrutinize MA and MedSupp Unfair Trade Practices

Practices related to enrollment in Medicare Advantage plans continue to draw scrutiny from government regulators. Over the last few weeks, and simultaneous with Medicare’s Annual Open Enrollment Period, six states issued statements regarding recent Medicare Advantage and MedSupp (or “Medigap”) carrier actions related to enrollment and marketing accessibility. 

Specifically, regulators from state insurance departments in the states of Delaware, Idaho, Montana, New Hampshire, North Dakota and Oklahoma, have indicated that the following acts, if taken by MA and MedSupp carriers, are considered unfair and deceptive under state law:

• Removing the enrollment application from [the insurance carrier’s] website,
• Encouraging producers to avoid selling their products, or
• Changing or discontinuing producer compensation during the year.

Only Oklahoma applied its interpretation beyond the Medicare context, to apply to carriers offering any health insurance plans in the state. 

Idaho’s Director of the Department of Insurance has issued cease and desist letters to two carriers regarding behavior found in violation of the stated policies.

There has been extensive recent press coverage of Medicare Advantage plans pulling back on or terminating compensation payments to agents and brokers on certain but not all plans in an effort to dissuade enrollment in those plans.  Though the Centers for Medicare & Medicaid Services (“CMS”) has made no recent statements regarding these practices, it has previously emphasized in December 2024 that with respect to MA and Part D compensation it

“only determines what the maximum fair market value (FMV) is for initial and renewal enrollments, and [that] MA organizations and Part D sponsors determine payment schedules through their contracts, provided they stay at or below FMV. So, a plan may set a range (for example, $0 to max FMV) and they may adjust their compensation within that range, including $0.”[1]

CMS further noted that state regulators have “primary oversight and enforcement of Medigap coverage, including sales and commissions,”[2] so therefore, the issuance of these recent notices are well within the states’ authority.

Historically, although MA organizations may not deny enrollment to eligible individuals[3], unless granted a rare enrollment cap by CMS,[4] and must make publicly available certain information about its plan offerings[5], CMS has not required MA organizations to actively market all available plans.  Moreover, CMS does not appear to prohibit plan sponsors from making changes to agent/broker compensation during the plan year, as long as the compensation remains within the range disclosed to CMS.[6]

The state issuances referenced herein assert that they will closely and actively monitor carriers’ practices and compliance and take enforcement action as warranted under applicable law. Depending on the jurisdiction and/or enforcement action, violations could result in administrative penalties, fines, and/or suspension or revocation of licenses. There may also be indirect consequences of state enforcement action; namely, damaged relationships with the applicable state department of insurance and its regulators (e.g., especially for carriers who offer insurance plans outside of MA and MedSupp) and broader inquiries into other enforcement areas related to Medicare Advantage (including from federal legislators).

In addition to the six states referenced herein, there is indication that other states’ regulators may follow with similar announcements. Whether this will have a significant impact on MA organizations’ behaviors remains to be seen. Medicare law preempts state efforts to regulate Medicare Advantage, other than with respect to licensure and solvency.[7]  But, regardless of whether state efforts to regulate MA organizations’ interactions with agents/brokers fall within or outside of this preempted space, CMS rarely challenges state regulatory efforts that run close to or cross that line. Therefore, MA carriers, and broker-agents (and, potentially, contracting vendors where applicable) are encouraged to review their compensation policies, marketing practices, and enrollment procedures to ensure full compliance with the MA enrollment process and state insurance requirements.

EBG is monitoring this closely and will follow with further developments.

Endnotes

[1] CMS Center for Medicare: NAIC Q&A AND FOLLOW-UPS  (Dec. 17, 2024).

[2] Id.

[3] 42 C.F.R § 422.60(a).

[4] See 42 C.F.R. § 422.60(b).

[5] Plan sponsors must make available upon request and on their website descriptions of their plan offerings, including with respect to service area, benefits, access, emergency coverage, supplemental benefits, prior authorization and review rules, grievance and appeals procedures, quality improvement programs, disenrollment rights and responsibilities, and catastrophic caps and single deductible.  42 C.F.R. § 422.111(c)(1), (h)(2).

[6] See Ibid. at note 2.

[7] 42 C.F.R. § 422.402.