Slowing increases in sales commissions for Medicare Advantage plan agents and brokers could be one way to hold down plan sales and marketing costs, according to a report from the Urban Institute.
Today, the Centers for Medicare and Medicaid Services — the agency that runs the Medicare Advantage program — ties increases in the official cap on Medicare plan sales commissions to increases in Medicare plan health care costs.
One way to moderate commission spending growth would be to link the commission cap to a factor that increases more slowly than health care costs, such as the general Consumer Price Index or another measure of overall inflation, according to the Urban Institute team.
"Choosing a more appropriate growth rate for commissions and benchmarking them to other markets could reduce incentives for agents and brokers to steer beneficiaries into particular options while also lowering public spending on commissions," the researchers wrote.
What it means: Health financial discussions in Washington have been muted in recent months, but that could change.
The report: The Urban Institute is an independent research center. It has traditionally been more popular with Democrats in Washington, but Republicans have also used its data.
The authors of the new report are Laura Skopec, Judy Feder and Stephen Zuckerman. It was based partly on researchers' interviews with 19 people with an interest in the Medicare market.
Medicare: The authors looked at sales and marketing of Medicare Advantage plans, or comprehensive health plans that serve as what looks to enrollees like an alternative to "Original Medicare," and sales and marketing of Medicare Part D prescription drug plans.
Federal law puts Medicare Advantage plans and Medicare drug plans under the jurisdiction of CMS, not state insurance regulators.
Medicare drug plans rely on enrollee premiums to cover most of their costs.
Medicare Advantage plans collect premiums from enrollees but use payments from the federal government to fund most of their operations.
Medicare supplement insurance, another product that clients may use to fill in gaps in Original Medicare coverage, operates under a separate set of federal laws under the jurisdiction of state insurance commissions.
The proposals in the Urban Institute report would have no effect on Medicare supplement insurance sales.
The backdrop: CMS officials have been complaining for years about reports about annoying TV ads, aggressive telemarketing practices and high sales and marketing costs in the Medicare Advantage and Medicare Part D programs.
The CMS administrator, Dr. Mehmet Oz, is a former television health talk show host as well as former professor of cardiothoracic surgery. He had an active Medicare producers' insurance license when he was nominated to his post, because he had been preparing for the possibility that he might be involved with Medicare plan outreach efforts.
He said at a nomination hearing that Medicare Advantage plan issuers might be spending too much money on sales and marketing and that there might be too many agents trying to sell Medicare plans.
Republicans and Democrats in Congress are looking for ways to cut spending on Medicare and other federal health programs.
The annual enrollment period for Medicare Advantage plans, or time when Medicare enrollees can easily change plans, runs from Oct. 15 through Dec. 7 each year.
Medicare plan agents faced enormous stress during the 2024 enrollment period, because of major marketing regulation changes that were suspended just a few months before the enrollment period started.
This year, many big Medicare plan issuers are slashing their plan menus, cutting sales commissions to zero or pulling out of the program entirely because of concerns about claim costs.
The Medicare drug plan issuers still in the market are removing some drugs that they cover and putting some drugs in tiers that require patients to pay more out of pocket to use them.
Medicare plan agents, then, could face a new period of extreme stress over the next weeks.
Whitney Stidom, a vice president at eHealth, a web broker, says that the upheaval will make the role of agents and brokers more important than ever.
"People face tougher choices and will need more guidance to avoid costly mistakes," Stidom said in an email.
The report: The Urban Institute researchers who prepared the new Medicare agent and broker report said that Medicare plan agents received a weighted average maximum commission of $615.67 per new enrollee, or 4.5% of total Medicare Advantage payments after risk adjustment, and an average of about half that for renewals for people already enrolled in Medicare Advantage plans.
The researchers acknowledged the widespread belief that agents and brokers are helpful to many enrollees, although studies substantiating that value are hard to find.
Other ideas for improving Medicare plan sales and marketing included in the researchers' report include:
♦ Simplifying Original Medicare, to reduce the need for supplemental insurance.
♦ Reducing federal government payments to Medicare Advantage plans, to reduce their ability to spend too much on sales and marketing.
♦ Spending more on nonprofit Medicare plan market navigators.
♦ Improving the ability of federal regulators to police the plans.
♦ Enabling state regulators to help oversee the plans.
♦ Putting agent-of-record information in every Medicare plan enrollee's plan records, to make tracking complaints easier.
The researchers acknowledged that the proposal for slowing commission growth could lead to new problems.
"Some of our interviewees noted that lowering commissions could drive local agents and brokers out of business, concentrating the sales industry in the hands of national brokerage agencies and web-brokers that lack strong ties with their communities," the researchers wrote.
NAIFA's reaction: Kevin Mayeux, CEO of the National Association of Insurance and Financial Advisors, praised the authors of the new report for acknowledging the role that agents and brokers play in helping people understand Medicare plan options.
But, "while the report references rising commissions and marketing costs, it fails to account for two critical factors: rapid growth in Medicare Advantage enrollment and the natural adjustments tied to inflation and cost of living," Mayeux said.
"Policy reforms should focus on curbing misleading marketing and lead generators, stabilizing plan-level compensation practices, and improving federal-state oversight and data sharing," he added.
Credit: Rix Pix/Adobe Stock
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.