A stay issued by a federal court was not well publicized as it came out during the July 4 holiday, but the action could have major implications for the 2025 Medicare Advantage (MA) enrollment season. A federal judge suspended the implementation of the Centers for Medicare and Medicaid Services’ (CMS) MA broker and agent compensation reform changes. The move has major implications for the agency’s efforts to reform what I believe is a badly broken system.
What problem did CMS identify?
For the past number of years, the number of marketing related complaints have increased dramatically. CMS has attempted to force health plans to have better delegated oversight over the independent third-party marketing organizations (TPMOs) that have grown considerably because of the lucrative nature of enrolling MA members. Agents receive compensation each year a person stays with MA and even more for first-year enrollees.
I value the role of agents in the system. They provide a valuable service. Most seniors and the disabled will not be successful enrolling in the complex world of Medicare without help. Ethical agents seek the best plans for their clients by comparing medical and pharmacy benefits in each plan.
The problem is that the TPMO trend has moved the system away from ethical behavior by independent agents and toward one dominated very much by money. Large TPMOs have popped up over the last decade to seize major dollars as MA enrollment has grown. They hire agents and have massive call centers. They entered into extraordinary financial incentive arrangements with major MA plans above and beyond the agent compensation system. This is essentially a back-door way to get around the agent compensation limits. And many of these deals prioritized enrolling or moving Medicare beneficiaries into certain plans rather than what is in the best interests of the beneficiaries. In essence, the TPMOs steered members to certain plans because of the financial incentives. Even agents working for these TPMO firms complained that they were being ordered to coax members into certain plans even if it meant higher costs or fewer benefits for them and their families.
What did CMS do to reform the system?
After the major complaints about the actions of various TPMOs and lack of adequate MA plan oversight, CMS initially proposed and finalized some more rigorous oversight requirements for MA plans as well as restrictions on certain television advertisements.
But effective January 1, 2025, CMS finalized a rule that sought to stop the steerage deals with MA plans based on the extraordinary financial incentives. While overall compensation per enrollee went up to help support the broker and TPMO structures, the extraordinary incentive deals between MA plans and TPMOs were barred.
Specifics of the rule
The rule redefines “compensation” to set a clear, fixed amount that agents and brokers can be paid regardless of the plan the beneficiary enrolls in (up $100 for new enrollees from $611 to $711 and a smaller overall amount for renewals). But it also eliminates variability in payments and bonus compensation, especially with brokers and TPMOs. The new rule has the effect of substantially reducing overall compensation in the system. Some say it could amount to a halving of existing compensation, but most of the excess compensation is retained by TPMOs and a subset of agents/brokers anyway. One plan lobby, the Alliance of Community Health Plans (ACHP), recognized the importance of returning integrity to the system and actually proposed and backed reform to CMS.
Federal court stay
But as noted, the federal judge has now stayed the implementation of the changes nationwide. He found primarily in favor of Americans for Beneficiary Choice, an association representing insurance brokers and two Texas insurance agencies. The judge said plaintiffs met several bars required for a stay, including demonstrating that their businesses would likely suffer irreparable harm if the rule was not stayed as well as the likelihood of success on the merits. The judge called the finalized CMS rule arbitrary and capricious in that the agency did not substantiate how the increased compensation of $100 per enrollee from the steady state made up for the other broker and TPMO compensation. The judge also found that the rule went beyond the agency’s purview.
As a side note, this decision really has nothing to do with the Supreme Court’s striking down of the Chevron deference in administrative rulemaking. Indeed, the judge’s finding that the rule is arbitrary and capricious would meet the standard to strike a rule under the old precedent rules. Nonetheless, the decision would seem to underscore what agencies are in for as lower courts now do not have to defer to agencies on many aspects of interpreting laws. See this blog for more information on Chevron: https://www.healthcarelabyrinth.com/what-does-the-end-of-chevron-deference-mean-for-healthcare/
Winners and losers
This is a victory for both the major TPMOs and major health plans. In my view, the major health plans colluded with the major marketing organizations to push membership to them as MA blossomed. When MA plans were ordered to ramp up oversight, many did so half-heartedly as they benefited from the cozy deals with the big brokers and TPMOs. Ironically, they now face a big dilemma on their victory about how to ensure a smooth 2025 enrollment season with compensation agreements in question. The enrollment season was slated to be rocky due to low Star revenue, negative rate hikes, and a return of utilization and inflation that has eroded margins. (Likely, though, old agreements will be re-upped in most cases – at least temporarily.)
Smaller health plans without the resources of the big plans as well as smaller broker agencies and independent agents lose.
Moving forward Congress should give explicit direction on the issue
There is no question that CMS’ proposed reforms were good for the nation and beneficiaries. MA is a popular and important program. But these types of abuses throughout the MA system give the program a bad name and take away from the value of the private alternative to traditional fee-for-service (FFS) Medicare. It is not unlike the bad actor health plans that abuse the risk adjustment system to gain revenue.
The stay and the lack of reform likely means continued steering of members against their best interests and a return to major complaints on marketing and enrollment.
The judge seems convinced that the rule was arbitrary and capricious and may be far beyond what the agency can do. Implicit (certainly not stated) is the thought that the regulatory agency should not impact contracts between entities engaged in free commerce. But the fact is that the MA plans and brokers are engaged in enterprise using taxpayer dollars and the agency and Congress should have the right to ensure integrity and fairness in that system. If it is likely that under the repeal of the Chevron precedent that such reforms are destined for constant litigation and stays, Congress should get together to clearly dictate the rules and the ability of CMS to implement them.
Plan reforms and technology opportunites
Whatever the status of the rule, some MA plans saw the writing on the wall and began initiatives to clean up their own acts (ever so slightly perhaps) and abandon the unseemly deals in favor of more transparency with the public they serve.
Humana is one MA plan that has begun relying more on in-house agents. CVS Health recently acquired Hella Health, a startup MA broker that is tech enabled. While accusations could be made that CVS now will use Hella to steer members to them, it does change the paradigm for good in many ways. CVS wants to build a trusted agent model and have tech resources that transparently educate members on benefits in a direct-to-consumer method.
In the end, the controversy could lead to a positive realignment in the marketing area with new technologies to demystify enrollment and the myriad medical and drug benefits offered. I am in the field and expert in Medicare and recently tried to help some seniors enroll in the right plan for them. Quite frankly, at times I was mystified in trying to determine the best plan for these friends – whether it was premium, cost-sharing, covered drugs, or supplemental benefits. Yes, CMS has made great strides with medicare.gov to allow people to compare, but it is by no means clear or concise. The elderly and those health literacy issues have a huge battle. As did I, they get overwhelmed both in thinking about what to do and then searching for the right plan. (And that is why they turn to brokers and integrity must be a priority.)
Additional tech investments are needed to clear up the confusion and make it easier for trusted agents and beneficiaries to understand what is best for a given person based on his or her individual circumstances. Ironically, many large-scale TPMOs had the resources and built intelligent systems. The issue was it is based in part on the ugly financial deals. CVS Health and other plans may now build such technology for their approaches. And other entities may get in the game to serve independent agents, smaller broker organizations and the public at large.
Opportunities are there both on the complex retail drug front, where formularies, tiering, cost-sharing, and the phases of Part D create challenges. Even with the coming $2,000 annual cap on out-of-pocket costs, these decisions are important. On the medical benefit front, beneficiaries need to be educated on core benefits, including whether important gaps in the inpatient benefit are closed, premiums, deductibles, and cost-sharing. CMS is now requiring MA plans to do a better job on educating members on supplemental benefits and they can be numerous. Educating members on the myriad benefits and advantages and disadvantages based on unique clinical and social determinant circumstances is key.
Sources and additional reading
https://www.beckerspayer.com/policy-updates/court-blocks-medicare-advantage-broker-fee-caps.html
https://www.healthcaredive.com/news/judge-pauses-cms-broker-compensation-cap-rule/720879
https://www.modernhealthcare.com/insurance/medicare-advantage-marketing-ruling-2025-open-enrollment
#medicareadvantage #agents #brokers #tpmos #marketing
— Marc S. Ryan
