While the Supreme Court decision in Loper Bright Enterprises v. Raimondo was making headlines, other courts were considering recent regulations of another agency—the Centers for Medicare and Medicaid Services (CMS)—that are material to Medicare Advantage.
On July 3, a judge in Texas partially granted motions for a stay in a lawsuit challenging a CMS rule issued in April (“2025 Final Rule”) impacting plan agreements with agents and brokers to limit administrative payments, standardize compensation payments, and to restrict plan agreements with third-party marketing organizations (“TPMOs”).
For plans and TPMOs, the decision means they can revert to operating under the compensation/administrative services rules as those existed prior to CMS's issuance of the 2025 Final Rule. CMS has already issued revised 2025 fair market value (“FMV”) compensation amounts to reflect the stay that was granted by the court. In a July 18 memo, CMS announced FMV limits that are $100 less than the previously announced FMV standards. CMS also alerted plans that they must submit their annual reporting of compensation amounts to be paid to independent agents and brokers. Plans may continue to pay compensation at or below the FMV limit and may continue to pay separate administrative costs, subject to the requirement that these be paid at their FMV.
The Decision
Plaintiffs Americans for Beneficiary Choice and Council for Medicare Choice separately challenged three elements of the 2025 Final Rule in the Texas case: 1) a fixed fee restriction; 2) a contract terms restriction; and 3) a requirement that prevents the distribution of data to TPMOs without consent. The fixed fee restriction sought to regulate payments for administrative services—provided to agents and brokers as part of the MA process—as “compensation” and capped the total payments that health plan carriers can make for administrative services to $100. Under the contract terms restriction, health plan carriers are obligated to ensure that no provision of a contract with an agent, broker, or other third-party marketing organization creates “an incentive that would reasonably be expected to inhibit an agent or broker’s ability to objectively assess and recommend which plan best fits the health care needs of a beneficiary.”
After finding associational standing, U.S. District Judge Reed O’Connor determined that the plaintiffs showed a likelihood of success that the fixed fee and contract-terms restrictions were arbitrary and capricious under the Administrative Procedure Act (“APA”); and also that these restrictions demonstrated a substantial threat of irreparable harm. The judge found that:
- CMS failed to substantiate key parts of the 2020 Final Rule, including the $100 fixed fee that was insufficient to account for such things as technology, training, marketing, data security and more. CMS’s argument that it was difficult to quantify the costs, the district court held, was no excuse for its failure to consider and substantiate them;
- CMS failed to sufficiently consider the degree to which longstanding policies had created “reliance interests” when it changed its position on administrative payments;
- CMS failed to provide fair notice with respect to the contract-terms restriction;
- CMS failed to sufficiently respond to public comments; and
- CMS’s response failed to remedy these issues.
The judge failed to find, however, a substantial likelihood of success on a fourth element challenged by the plaintiffs—the 2025 Final Rule’s prohibition on the sharing of beneficiary contact information between TPMOs without the beneficiary’s consent. The plaintiffs asserted that this provision ran afoul of the data-sharing principles of the Health Insurance Portability and Accountability Act (“HIPAA”). Although denying the stay on this point, the court conceded that the claim “may ultimately have merit.”
The judge agreed that the plaintiffs’ obligation to alter business operations and procedures constituted irreparable harm, as did the potential loss of revenue. Plaintiffs’ six-week delay in seeking a stay, the court said, was not fatal to the issue of irreparable harm.
Further, the balance of the equities and the public interest favored a stay under Section 705 of the APA, at least temporarily. “The Court is not convinced that the current compensation framework—which has been in place for over 15 years—is so flawed that it requires these sweeping new requirements now or that beneficiaries would be unfairly prejudiced by granting a stay pending final judgment,” Judge O’Connor wrote.
Takeaways
The Texas cases involve the provisions of the APA that call for a reviewing court to hold unlawful and set aside agency action, findings, and conclusions found to be “arbitrary, capricious, an abuse of discretion, or not otherwise in accordance with law.” While it does not involve the kind of agency deference on ambiguities at issue in Chevron—recently overruled by the Supreme Court—aggrieved parties will likely seek to challenge agency actions any way they can, and courts will be willing to at least consider those grievances. As the court noted, a Section 705 stay under the APA is one more tool in the challengers’ toolbox, “stop[ping] the portions of the rule which are deemed to be almost certainly unlawful.
What if the Texas court decides for CMS sometime during 2025 MA/PD plan year? CMS is unlikely to require plans to come into compliance with the final rule changes in the middle of a plan year, or at the very least, would likely use "enforcement discretion" in enforcing those requirements. However, interested parties should be sure to watch for the 2026 proposed rule, scheduled to be released in September 2024. The Administration likely will have more to say on agent/broker and marketing issues.
Epstein Becker Green Staff Attorney Ann W. Parks contributed to the preparation of this post.
Blog Editors
Authors
Member of the Firm
