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Let Us Police Bad Medicare Advantage Plan Marketing: States to Congress

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What You Need to Know

  • Insurers have long called for regulatory uniformity.
  • Congress put CMS in charge of overseeing Medicare plan marketing.
  • State regulators say they are often in a better position to rein in abusive marketing practices.

State insurance regulators say Congress should give them the authority to crack down when Medicare Advantage plans use deceptive marketing and advertising strategies.

The officers of the National Association of Insurance Commissioners are asking the Democratic and Republican leaders of both the House and the Senate for an expanded role in Medicare Advantage plan regulation.

“We are finding an increase in complaints from seniors about confusing, misleading and potentially deceptive advertising and marketing of these plans,” NAIC leaders write in a new letter to congressional leaders. “Unfortunately, because of federal law, state insurance regulators are not permitted to exercise their oversight authority in advertising and marketing of MA plans.”

The NAIC has asked Congress to update the main Medicare Advantage plan statute, the Medicare Modernization Act of 2003, or MMA, to let states regulate plan marketing practices.

Three of the officers who signed the letter — Dean Cameron, the NAIC president and Idaho insurance director; Chlora Lindley-Myers, the NAIC president-elect and Missouri insurance director; and Jon Godfread, the NAIC secretary-treasurer and North Dakota insurance commissioner — are either Republicans or nonpartisan officials appointed by Republicans.

The fourth, Andrew Mais, the NAIC vice president and Connecticut insurance commissioner, is a Democrat.

What It Means

Federal financial services regulators might be about to face increasingly intense competition from state financial services regulators.

Increased competition between regulatory agencies could lead to some of your clients getting better support when problems occur.

But in other cases, regulator competition could lead to confusion about which rules apply, new oversight gaps, and efforts by the parties involved to put disputes in the hands of what they believe to be the friendliest regulators.

Although this particular conflict involves Medicare plans, and the role of federal and state regulators varies widely from market to market, similar turf wars could occur in connection with fixed annuities and insurance products, variable insurance and annuity products, securities and other financial services products.

The Regulators’ Request

NAIC officers acknowledge in their letter that state regulators do have authority over insurance agents and brokers.

“However, without any real authority over the plans themselves, a wide regulatory gap exists that allows abusive marketing practices to flourish,” the regulators write. “Without the restoration of oversight authority (or, at least, greater authority) over the plans, state insurance departments are too often unable to prevent the abusive marketing practices.”

NAIC officers argued that states are better equipped than federal agencies to oversee plan marketing practices.

Local vs. National

The United States has traditionally left regulation of the business of insurance in the hands of the states.

Insurers have favored a state-based insurance regulation approach in some situations but in others have favored increasing national regulatory uniformity, by expanding the federal government’s role in insurance regulation.

When members of Congress drafted the legislation that became the MMA, they moved toward increasing Medicare plan regulation uniformity. They gave a federal agency, the Centers for Medicare & Medicaid Services, authority over Medicare Advantage plan marketing practices.

States can license Medicare Advantage plans and regulate their solvency. States can also regulate the agents and brokers to sell Medicare plans.

The TPMO Regulations

In recent years, national insurance marketing organizations have used national TV ads and other means to reach out to Medicare Advantage plan prospects.

In some cases, the marketers have encouraged the prospects to call their own call centers.

In other cases, the marketers have connected consumers with agents who have paid for sales leads, or steered consumers toward Medicare plan information websites, and used the websites to generate leads for lead-generation programs.

Traditional local agents have complained that the ads have tended to give consumers unrealistic ideas about what typical Medicare Advantage plans offer.

Consumers have told CMS that, in some cases, they somehow became part of lead-generation efforts without being aware that agents or brokers would be calling them.

CMS recently responded by publishing a final rule that defines the term “third-party marketing organization”; puts Medicare Advantage plan issuers in charge of overseeing any TPMOs that help them with marketing and selling coverage; and requires lead-generation TPMOs to warn consumers when the TPMOs will be providing the consumers’ contact information to insurance agents and brokers.

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