In mid-September 2008, the Centers for Medicare and Medicaid Services (CMS) issued updated marketing and sales guidelines for Medicare Advantage (MA) and prescription benefit programs (PBP). Below, you will find an outline of the new regulations, separated into two main sections. The first section includes a list of the new marketing guidelines, and the second deals with compensation and testing guidelines. CMS is utilizing a secret shopper program in order to ensure regulation compliance. Just click on the link and for a short description of what the provisions mean for your business.

Sales and Marketing Guidelines

  1. Co-branding
  2. Cross-selling
  3. Nominal gifts
  4. Providing meals
  5. Sales/marketing at educational events
  6. Sales/marketing in health care settings
  7. Scope of appointment
  8. Unsolicited contacts

Compensation and Testing Guidelines

  1. Agent training and testing
  2. Compensation structure
  3. Plan reporting of terminated agents
  4. Use of certified agents

Sales and Marketing Guidelines
CMS has prohibited the use of names and/or logos of co-branded network providers on membership plan identification cards. Additionally, organizations must include the following disclaimer on all marketing materials that include the name and/or logo of a co-branded network partner: “Other [pharmacies/physicians/providers] are available in our network.” Beneficiaries need to understand the availability of multiple network providers and are not to be misled to believe that the co-branded network provider is the only provider available. MA organizations may include provider names and/or logos on the member identification related to member selection of specific providers or provider organizations. For example, in some plans enrollees may select a primary care provider or particular group of service delivery providers, such as a hospital network. Because the beneficiary has made the decision to choose a provider, that provider’s name or logo may appear on the card.

Agents may not offer information on other products to beneficiaries during Medicare sales activities or appointments. In the event that the beneficiary specifically requests information about other products, the agent must make a separate appointment, which is to take place at least 48 hours after the initial appointment or sales activity. Agents are permitted, however, to leave plan materials (not including enrollment applications) if requested by the beneficiary. Plans are allowed to sell non-health-related products on inbound calls only when a beneficiary requests information on non-health-related products.

: Organizations can offer gifts to potential enrollees as long as the item is worth $15 or less, based on the retail purchase price of the item regardless of the actual amount paid for the item.

During any marketing or sales event where MA or PBP plans are being discussed and/or plan materials are being distributed, agents and other Medicare organizations may not provide meals to beneficiaries. Light snacks (e.g., fruit, raw vegetables, pastries, cookies, cheese and crackers, chips, yogurt, nuts, etc.) are permitted.

Sales activities, such as the distribution of marketing materials or plan applications, may not be conducted at educational events. CMS has defined an educational event as one that provides general information on health and wellness or on Medicare in general, so they may not be used to steer a beneficiary toward a specific plan. Educational events are events that are promoted to be educational in nature and have multiple vendors (e.g., health information fairs, conference expositions, community-sponsored events, etc.). Events may be sponsored by plans or outside entities. Furthermore, organizations must include a disclaimer on all marketing materials for educational events that specifically states that the event is “educational only and information regarding plans will not be available.”

Agents may not conduct marketing activities in health care settings, such as doctors’ offices waiting rooms or hospitals, except in common areas (e.g., hospital or nursing home cafeterias, recreational rooms, conference rooms, etc.). For pharmacy counters located inside retail stores, the common area refers to any space outside the place where patients receive medication or discuss medication with pharmacists.

Plans are not allowed to participate in any kind of sales activity, including dropping off enrollment applications, in areas where beneficiaries receive health services. If an agent would like to schedule an appointment with a prospect who is living in a long term care facility, they can only do so at the express invitation of the beneficiary.

Before any marketing appointment, the agent must outline the scope of the appointment, and the beneficiary must agree to it. This exchange must be documented either by sound recording or written record. For example, if a beneficiary attends a sales presentation and agrees to a private appointment, the agent should have a form specifying the products that will be discussed during the appointment. Appointments made by phone must be recorded, or a scope-of-appointment form should be sent to the beneficiary, who will return the form before the appointment begins.

Medicare providers may not make unsolicited contact with any potential clients. In all cases, the prospect must contact the agent to inquire about Medicare products. Furthermore, third parties that do not provide Medicare products are also banned from contacting beneficiaries on behalf of the producer.

Unsolicited contacts include, but are not limited to: outbound telemarketing calls; calls to former members who have disenrolled or current members who are in the process of disenrolling; calls to beneficiaries to confirm receipt of mailed information; calls to beneficiaries to confirm acceptance of appointments made by third parties or independent agents; approaching beneficiaries in common areas such as parking lots or waiting rooms; and calls or visits to beneficiaries who attended a sales event, unless the beneficiary gave express permission at the event for a follow-up call or visit.

There are a few exceptions to this rule, as follows: Medicare providers may conduct outbound calls to existing members to conduct normal business related to plan enrollment; calls or mail to former members after the effective disenrollment date to conduct a disenrollment survey for quality improvement purposes (these may not include any sales or marketing content); and calling beneficiaries who you enrolled in a plan while they are a member.

If a beneficiary contacts the agent of their own accord, agents may contact the client. Any language used during the return phone calls must be scripted, and the script must be approved by CMS. In the scripts, representatives or agents are allowed to say that they are contracted with Medicare, but they are prohibited from using language that implies that they are endorsed by Medicare, calling on behalf of Medicare, or that Medicare asked them to call. Representatives or agents cannot request beneficiary identification numbers (e.g., Social Security numbers, credit card numbers, etc.), and the scripts must include a privacy statement explaining that the beneficiary is not required to provide any personal data during the call, and that the information provided will not affect the beneficiary’s enrollment in the plan.

Compensation Structure and Testing Guidelines
Agents selling Medicare products must be trained and tested on Medicare rules and regulations and on plan-specific details explicit to the products they are selling. To pass the test, agents must receive a score of 85 percent or higher. Tests may be written or computerized. America’s Health Insurance Plans (AHIP) is providing agent training and testing, and is requiring a score of 90 percent to pass the test. Plan-specific tests will most likely be available at the Web sites of individual insurers.

Medicare plans are not required to compensate agents for selling Medicare products (although most do). Plans that do compensate their agents must follow the following compensation regulations:

  1. The definition of compensation includes financial or non-financial payments of any kind, including commissions, bonuses, trips, gifts, etc. Salaries for career agents are not included in this guideline unless they are related to volume of sales.
  2. Compensation is paid on a six-year cycle, meaning that payments are made during the first year and each of five subsequent years.
  3. First-year compensation for agents can not exceed 200 percent of the aggregate compensation in each subsequent renewal year (of which there must be five, per above regulation).
  4. After the 2009 baseline year, no contracting entity may provide, and no agent may receive, compensation higher than the renewal payment payable by the replacing plan on renewal policies if an existing policy is replaced with a similar plan type during the first year and during the five renewal years. Examples of similar plans include an MA or MA-PD (prescription drug) replaced with another MA or MA-PD, or a cost plan replaced with another cost plan. For plan changes, new compensation can be paid. For example, if a PD (prescription drug) is added to an MA-only, new commission may be paid for enrollment in the PD (but not for the MA plan).
  5. Plans must establish a consistent compensation structure for new and replacement enrollments and renewals effective in a given plan year.

All MA or PBP sponsors must report to CMS the termination of any agents and the reasons for the termination.

All MA and Part D contracting entities that conduct marketing business through independent agents must use state-licensed, certified, or registered individuals. Any agents and internal sales staff who perform marketing functions must be licensed. (See “Testing Regulations” for more information.) However, any plan activities that involved customer service such as providing factual information, fulfilling requests for materials, and taking demographic information for purposes of plan enrollment do not have to be performed by licensed individuals.

Heather Strickland is the associate editor for Agent’s Sales Journal. She can be reached at 800-933-9449 ext. 225.