Feds limit deceptive MA marketing tactics

June 1, 2008

Washington, D.C. - The Bush administration has proposed additional curbs on certain sales practices by insurers likely to confuse and deceive seniors enrolling in Medicare Advantage and prescription drug plans. Insurers applauded the marketing policy, partly in hopes of heading off legislation that would give states a larger role in policing Medicare marketing activities.

The new rules from the Centers for Medicare and Medicaid Services (CMS) prohibit cold-calling and door-to-door solicitation of Medicare beneficiaries, along with cross-selling health plans with life or disability insurance. Insurers can't promote plans at health fairs or community meetings. Plan sponsors also have clear responsibility for marketing activities by independent agents and can't set commissions or payments in ways that encourage high-powered sales activities or beneficiary churning. And insurers that violate the rules will face hefty fines.

These prohibitions are similar to those proposed by insurers in March. A Medicare marketing policy backed by members of America's Health Insurance Plans (AHIP) opposed cold-calling, door-to-door sales, cross-selling and inducements such as free meals or prizes to persuade seniors to sign up for private plans. Insurers say they are increasing agent training to clarify prohibited sales tactics and are revising commission and bonus standards to discourage quick sales and efforts to shift seniors from one plan to another.

To codify the CMS policy, Senate Finance Committee Chairman Max Baucus (D-Mont.) wants to incorporate the administration's new rules into a broader Medicare bill moving through Congress.

A key issue is whether Congress also revises current law to give state regulators added authority to enforce marketing standards for private Medicare plans. One reason insurers support stiffer federal marketing rules is to avoid the need to comply with 50 different state policies.

The National Association of Insurance Commissioners (NAIC) and state officials have urged Congress to revise this policy so that they can enforce marketing and sales rules for private Medicare plans and can help resolve consumer complaints in this area. To address insurers' concerns, NAIC is proposing to develop model marketing standards for MA and Medicare drug plans that states would have to adopt in order to be able to police these plans.

Sen. Herb Kohl (D-Wis.), chairman of the Senate Special Committee on Aging, has urged legislation that gives states a larger role in policing illegal Medicare sales tactics. Kohl is skeptical that federal efforts will protect seniors sufficiently and wants states to step up regulation of the insurance industry.