How Agents Influence Medicare Beneficiaries’ Plan Choices

Abstract

• Issue: Much of the information available to beneficiaries shopping for Medicare Advantage, Medicare Supplement (Medigap), or Part D plans comes from agents (brokers) or health insurers.
• Goals: To understand the role of agents in shaping consumers’ Medicare choices and identify ways to better serve beneficiaries.
• Methods: Analysis of data from the Centers for Medicare and Medicaid Services, interviews with industry experts, as well as an online search simulation and analysis of information available through online brokerage sites regarding Medicare Advantage, Medicare Supplement, and Part D prescription drug plans.
• Key Findings: Nearly all (96%) Medicare Advantage and Part D plans contract with agents, who are not required to represent all available plans. An analysis across five markets of three large, online broker plan selection tools found that, on average, each tool includes less than half (43.3%) of Medicare Advantage plans and less than two-thirds (64.7%) of Part D plans. In the analysis of online searches, more than one-third (36%) of results from the first page led to agents’ or health insurers’ websites.
• Conclusion: Agents play an important role for beneficiaries; however, the existing approach affects information about coverage options and may not optimally serve beneficiaries’ needs by limiting their choice.

Introduction

Medicare beneficiaries have more plan choices than ever before, including private plans. In 2021, Medicare beneficiaries will have, on average, 33 Medicare Advantage plans and another 30 stand-alone Part D prescription drug plans available in their market.¹ Beneficiaries think the selection process and plan options are complicated, with reported complexity increasing among people in poorer health and for those with lower levels of education.² To help navigate their decision-making process, beneficiaries turn to a wide range of educational and informational resources, including licensed Medicare agents, or brokers.

Choices about Medicare are not as simple as “Which plan should I enroll in?” Broadly, Medicare decision-making can be grouped into four areas:

1. Determining eligibility/obligations.
2. Choosing benefit structure, for example, 1) traditional Medicare combined with a Part D prescription drug plan and Medicare Supplement plan versus 2) a Medicare Advantage private plan.
3. Selecting a plan or plans.
4. Using coverage.

Each of these is critical for ensuring that coverage is aligned with an individual’s needs, preferences, and resource constraints.

Aside from the Centers for Medicare and Medicaid Services (CMS), agents and health insurers make the most significant investments in educational tools and resources for Medicare beneficiaries. In this report, we examine the role that agents play in shaping the way individuals learn about their Medicare options and what the specific implications are across three of the four Medicare decision-making areas: choosing benefit structure, selecting a plan, and using coverage. For this analysis, we explored online Medicare information sources and tools, and conducted interviews with industry representatives and Medicare patient advocates (see “How We Conducted This Study” for further detail). We conclude with a set of policy options to build a more beneficiary-centric model for guiding beneficiaries through Medicare.

Key Findings

Plans rely on independent agents to support membership growth. Ninety-six percent of Medicare Advantage and Part D plans contract with independent agents.³

Independent insurance agents are authorized to enroll individuals in Medicare plans and contract with one or, typically, more insurance carriers. Though it is not required, many agents affiliate with broker agencies that provide services such as marketing, technology, training and compliance, and administrative support. Licensed agents (and affiliated agencies) are compensated by the carriers directly on a per-enrollee basis. The more enrollments and renewals that agents generate, the higher their earnings. This means that carriers’ and agents’ incentives for growth are perfectly aligned.

Becoming a licensed, active Medicare agent is typically a three-step process⁴:

1. Secure a state-issued health insurance license.
2. Complete a certification (for example, through America’s Health Insurance Plans).
3. Undergo product and sales training from contracted carriers.

To govern the marketing and communications of Medicare Advantage, Part D prescription drug plans, and the 1876 Cost Plans, CMS establishes the “Medicare Marketing Guidelines”⁵ and revises them annually. These guidelines lay out how plans and their agents may communicate, educate, and market Medicare plans to beneficiaries, and are the basis for CMS’ oversight of plans’ activities in this realm. These guidelines also govern the actions of licensed agents. Importantly, oversight of the agents is delegated to the carriers themselves. This means that plans are ultimately responsible for agent and agency adherence to the marketing guidelines. At risk of penalties from CMS and erosion of beneficiary confidence, and other licensure-related sanctions from the states themselves, carriers and agents take this obligation seriously. As one health plan executive said, “agents, agencies, and carriers share a market-based interest in ensuring a high degree of compliance.”

Because of the complexity of the plan selection process, many beneficiaries rely on independent insurance agents to help them identify the coverage and benefits options that may best meet their needs.

According to industry experts, agents are also important because many are multilingual and are usually embedded in the communities they serve. Given their local roots, agents can help plans reach a broader spectrum of beneficiaries, including racial and ethnic minorities and nonnative English speakers. Yet beneficiaries have limited ability to gauge the caliber of their agent, as there is no systematic or transparent way either for them or plans to avoid a bad actor. Often, friends or family can provide a referral to an agent, but in other cases it is up to the beneficiary to screen agents.

The agent–plan model can limit plan choice in ways that are not obvious to beneficiaries.

An analysis across five markets of three national, online agent plan selection tools found that, on average, each online agent studied includes less than half (43%) of Medicare Advantage plans and less than two-thirds (65%) of Part D prescription drug plans in that area. (Exhibit 1).

Agents typically secure contracts with multiple carriers, but they are not required to contract with all available carriers in their market. This means that a single agent will not necessarily represent every available plan. In this way, the agent market is filtering plan options, something that may not be apparent to the beneficiary even if the agents and agencies disclose it in their communications.

It is not clear what proportion of total available plans in a given geographical area a typical agent will represent, though it surely varies. As an initial proxy, we conducted a simulated search of Medicare plan options using Medicare.gov and three national, online agent search tools in five markets: Los Angeles County, Calif.; Miami–Dade County, Fla.; New York County, N.Y.; Summit County, Ohio; and Harris County, Texas.

Results varied widely between tools and plan types, but all of the agent tools excluded some of the plans available in the area. Furthermore, only one of these sites offered Medigap plans, and it included less than one-fifth (18%) of the Medigap options available across the five counties.

To understand the quality of the plans offered through online search tools, we also looked at the representation of Medicare Advantage and Part D plans at these online agent sites by star ratings. Overall, the online agent tools we surveyed offer only a limited number of top-rated plans. For instance, in Miami–Dade County, Fla., the online agents offered only three or four of the 10 Medicare Advantage plans with five stars. None of the agents that we surveyed in Summit County, Ohio, or Harris County, Texas, offered the five-star Medicare Advantage plans available in those areas. This may be happening for a variety of factors unrelated to the quality of the plans, such as the incentive structure, the carrier’s investment in or commitment to partnering with agents, or the size of and reach of the carrier (for example, national vs. regional or local).

Regardless of the reason, the fact that agents do not contract with every carrier does not necessarily mean that people will not find a plan that works well for them, nor does it mean that agents will not provide objective guidance. As one former brokerage manager told us: “We would instruct our staff in no uncertain terms that if they were using the tools and found a carrier that’s better for the client that we didn’t carry, just give them the toll-free number and tell them to call there.”

However, there is no explicit imperative or financial incentive for agents to behave this way. Agents are not required to disclose that they do not offer all available plans and beneficiaries may not recognize that agents may not present all options available to them.

Agents’ and insurers’ Medicare resources are widely available online and likely to be among the first information sources seen in online searches.

Digital advertising, communication, and outreach by health plans and agents are common sources of Medicare information, and today these efforts compete with nonprofit and government sources for beneficiary attention. Research shows that a growing number of Medicare beneficiaries rely on online tools for at least part of their research and decision-making.

To understand what a typical Medicare beneficiary might encounter when turning to internet-based resources, we simulated a series of online searches. A review of the top-30 Google keywords related to Medicare produced 572 results (Exhibit 2). Following are results from the analysis:

• The federal government accounted for 35 percent of total results, with the majority (78%) linking to CMS-sponsored pages and resources.
• Agents and health plans together represented 36 percent of search records (20% for agents and 16% for health plans).
• Agents and health plans made up 87 percent of search page ads, while CMS accounted for 7 percent.

These results indicate that much of the online information available to beneficiaries is owned by organizations with commercial interests. This raises important questions about the extent to which consumers are aware of the sources, potential limitations in the information, and any potential conflicts or biases that may be inherent in the source. Even though this information is regulated, it may narrow plan choices available to beneficiaries without their knowledge — for instance, if a beneficiary develops a relationship with a brokerage that only works with a select number of Medicare carriers in the beneficiary’s state.

Patient advocates point to broader challenges that compound beneficiaries’ confusion.

To round out the analysis, it was important to seek the beneficiary perspective about the Medicare choice model. The patient advocates with whom we spoke agreed that agents have a role in guiding Medicare choice. In particular, knowledgeable agents can provide meaningful reassurance to beneficiaries considering their options.

However, patient advocates pointed to three key areas of complexity for beneficiaries:

1. Enrollees are unprepared for trade-offs related to benefit selection (i.e., traditional Medicare + Medicare Supplement + Part D vs. Medicare Advantage + Part D). Onboarding into Medicare requires beneficiaries to make decisions that result in trade-offs they are not likely to fully understand. As one patient advocate noted, “it’s a really complicated process, and when people come into it, they often don’t even know what questions to ask.” The current agent model focuses primarily on plan selection and is not designed to guide and educate beneficiaries through deciding which type of Medicare is right for them.
2. The current model for plan selection favors beneficiaries who have the means and resources available to get the information and/or assistance they need to make a decision. Over time, Medicare has evolved to provide more customer choice around plans. For savvy beneficiaries as well as those with uncomplicated medical needs, this may be ideal. However, it may leave others behind, particularly those with fewer resources, less education, and complex medical needs, likely having a negative impact on health equity.
3. Beneficiaries may not understand their postenrollment rights. Ideally beneficiaries will use the coverage to which they are entitled, but this is not always straightforward. One example is the appeals process for coverage denials. Patient advocates expressed concern that while it is fairly common for a plan to reverse a coverage decision upon appeal, actual appeals by beneficiaries are infrequent.

Beyond the information that beneficiaries need, advocates also expressed concern about policy changes to Medicare Advantage that do not have equivalents in traditional Medicare. First, Medicare Advantage plans are permitted to offer nonmedical benefits that are health-related, such as transportation services and meal delivery. Second, regulations make it easier for beneficiaries to switch into and within Medicare Advantage carriers and plans, compared with switching into a Medicare Supplement policy.

Both features — supplemental benefits and easy plan switches — are simple for beneficiaries to understand and may take on disproportionate weight in decision-making when compared with features that are harder to understand but may have a greater impact on their out-of-pocket costs, for instance.

Third, the further loosening of Medicare marketing guidelines — in particular, the distinction between education and marketing events — could expose beneficiaries to situations where they are unknowingly being sold a specific plan rather than learning about the Medicare program more generally.

Policy Options

Based on this analysis, two initial areas of investment could improve the decision-making experience for beneficiaries within the constraints of the existing model.

Increase Transparency and Beneficiary Access to High-Quality Agents

• Incentivize appropriate disclosures (during in-person encounters and via online tools) of the share of plans with which an agent works, associated compensation and incentives, and other relevant information, such as education and credentials. This will give beneficiaries visibility into the caliber of agent they are working with, as well as all their plan options, promoting greater competition among both agents and Medicare plans.
• Create a Medicare agent marketplace with a performance rating for agents. This could be managed at the state level (for example, by licensing agencies) or federal level but should be standardized across states given that agents may operate in more than one geographic area. In this system, beneficiaries would have the ability to search and evaluate agents based on their qualifications and beneficiary ratings.

Boost Support of Organizations That Provide Medicare Education, Beyond Just Plan Selection

• Continue to invest in Medicare.gov. During the past several years, CMS has made significant strides to improve the beneficiary experience and the breadth of resources and tools available to understand Medicare and beneficiaries’ options. These efforts, with continued and direct patient and user feedback, should continue as more beneficiaries rely on online tools for information and guidance.
• Support existing public and not-for-profit educational efforts that focus on broader topics around Medicare and navigating Medicare beyond the individual plan choice. There are several advocacy organizations, as well as State Health Insurance Assistance Programs, educating people about the entire range of issues facing Medicare beneficiaries. Enhancing these resources, which have no financial stake in plan decisions, is crucial in the existing model where beneficiaries are asked to make consequential trade-offs with imperfect information.

Conclusion

Our analysis shows the important role licensed agents play in shaping Medicare choice for beneficiaries and the extent to which carriers rely on them for growth. It also shows how the agent business model may affect beneficiary choice and overall Medicare literacy. Further, agents play an important role and share a common interest in ensuring high degree of compliance and adherence to regulations as well as customer satisfaction.

By taking a comprehensive look at the existing model, policymakers may conclude that strengthening regulations of the agent marketplace may not only help consumers make more effective choices but also serve the agents well by creating greater transparency and enabling high-performing agents to better distinguish themselves from their competitors.

And finally, it may behoove policymakers to dig deeper and further understand the sources, nature, and types of information typically available to consumers, whether these resources meet the consumers’ needs, and whether a more comprehensive redesign of the Medicare guidance model is needed.