By John Reichard, CQ HealthBeat Editor
June 15, 2007 -- The Centers for Medicare and Medicaid Services (CMS) announced late Friday that seven insurers with the lion's share of the Medicare private fee-for-service plan market have agreed to suspend marketing of the plans. The announcement follows hundreds of complaints by Medicare beneficiaries that they were duped or strong-armed by sales agents into joining the plans without understanding how they worked or the restrictions involved. CMS said the plans will be able to resume marketing when the agency certifies they have controls in place to prevent deceptive marketing.
State insurance regulators joined Senate Aging Committee Chairman Herb Kohl, D-Wis., at a May 16 hearing in saying Medicare officials have failed to properly oversee the marketing of private plans in Medicare, with Kohl revealing the results of a congressional investigation he said turned up "countless" cases of seniors being preyed upon by unscrupulous insurance agents. Cases cited at the hearing primarily involved private fee-for-service plans, which were added to Medicare as an alternative to HMOs and other managed care plans that critics feared would increasingly ration care to the elderly.
CMS described the agreement as "voluntary" on the part of the seven insurers, and said they will be permitted to continue enrolling members during the marketing suspension. House Ways and Means Health Subcommittee Chairman Pete Stark, D-Calif., termed the agency's response to marketing abuses by private fee-for-service plans as "pathetic."
The seven insurers are Humana, United Healthcare, Wellcare, Universal American Financial Corporation, Coventry, Sterling, and Blue Cross/Blue Shield of Tennessee. A total of 1.5 million Medicare beneficiaries are enrolled in private fee-for-service plans, 200,000 of which signed up as a part of company or union retirement health benefit plans. The other 1.3 million are in the individual, "non-group" market—in other words, they signed up on their own. The marketing suspension applies only to the non-group market. The seven insurers have 90 percent of the non-group market, CMS said.
Abby Block, director of the CMS Center for Beneficiary Choices, told reporters in an afternoon telephone briefing that CMS received 2,700 complaints between December 2006 and April 2007 about plans in the private health plan side of Medicare, known as Medicare Advantage. The majority of the complaints were about private fee-for-service plans, she said. Other types of Medicare Advantage plans include HMOs and PPOs.
Block didn't blame the companies themselves for the marketing practices, but rather a relative handful of "rogue sales agents" selling their products. Wisconsin Insurance Commissioner Sean Dilweg told the Senate Aging Committee hearing in May that "seniors are being told that they can go to any provider without being told that they may only go to a provider that accepts Medicare, and also a provider that has agreed to accept the plan's payments."
To have the suspension lifted, a plan must provide a complete list of sales representatives if requested to do so by CMS and must authorize the agency—if it seeks to do so—to make the list available to state insurance departments. Plans must make calls to new enrollees to make sure they understand the plan rules and want to enroll. Sales reps will have to pass a written test showing their familiarity with Medicare and the product they are selling. Lists of planned sales events provided to CMS must include "delegated" brokers and agents as well as those sponsored by the plan.
Stark was unimpressed. "The administration's response is to allow private companies to determine which crimes they'll plead to and which sentences they'll serve," the California Democrat said in a statement. "This will do virtually nothing to protect Medicare beneficiaries and is a pathetic attempt to pre-empt congressional action." Stark added that the plans are receiving excessively high payments that, as long as they continue, will lead to huge sales commissions that continue to fuel marketing abuses. Stark is widely expected to propose legislation cutting Medicare payments to private fee-for-service plans.
Senate Finance Chairman Max Baucus, D-Mont., offered milder criticism. "I applaud plans for volunteering a suspension," he said. "I'd like to see CMS spend less time promoting private coverage and more time figuring out how to regulate the actions of insurers who sell directly to seniors."
Karen Ignagni, president of America's Health Insurance Plans, said the insurance industry is "moving immediately" to put additional protections in place. She said AHIP has asked CMS and the National Association of Insurance Commissioners to develop a uniform reporting mechanism allowing plans to clearly identify brokers and agents selling on behalf of Medicare Advantage plans. "Secondly, we have urged the development of clear guidelines for health plans to report serious broker-agent misconduct to CMS and the states," she said.
Others pointed a finger at the growing private health plan presence in Medicare. "This is a clear acknowledgment that there are health plan abuses throughout the country that are causing many seniors to be enrolled in plans that are unresponsive to their needs," said Ron Pollack, Executive Director of Families USA.
