The Centers for Medicare & Medicaid Services (CMS) today released final regulations that will protect Medicare beneficiaries from deceptive or high-pressure marketing tactics by private insurance companies and their agents during the upcoming 2009 Medicare Advantage and prescription drug open enrollment period.  The regulations also include other non-marketing related Medicare Advantage and prescription drug plan (PDP) provisions.  

The two regulations issued today include prohibitions on telemarketing and other unsolicited sales contacts.  The new rules also prohibit financial incentives that could encourage agents and brokers to maximize commissions by inappropriately moving, or churning, beneficiaries from one plan to another each year.  Plans must be in compliance with these provisions when they begin their marketing activities on October 1.

“The regulations give insurers bright-line guidance on what types of marketing activities are acceptable and what types are not acceptable,” said CMS Acting Administrator Kerry Weems.  “Medicare beneficiaries can be assured that we will monitor marketing activities and move aggressively with enforcement measures or other actions if these rules are violated.”

Acting Administrator Weems emphasized CMS efforts that will build upon the success of past marketplace surveillance program activities to ensure that drug plans’ and health plans’ marketing practices reflect the new requirements. Surveillance will include:

• tripling the number of “secret shopper” activities in which a Medicare official poses as a prospective enrollee and monitors sales agents’ presentations for inaccurate information and prohibited sales tactics;
• reviewing plans’ local print and broadcast advertisements;
• reviewing recordings of enrollment calls to ensure compliance with the new regulations; and
• ensuring that health and drug plans detect, report, and respond to agent/broker marketing misrepresentation and other issues. 

During last year’s open enrollment period, CMS’ marketplace surveillance activities included secret-shopping 300 sales and marketing events.  As a result, three organizations were required to develop corrective action plans and one organization’s marketing activities were suspended.  Other plans with lesser deficiencies received warning letters from CMS.

“The vast majority of beneficiaries are extremely pleased with their prescription drug and Medicare Advantage plans and have not encountered heavy-handed sales tactics,” said Weems.  “CMS takes its enforcement role very seriously, however, and we will monitor activities throughout this year’s enrollment period to ensure that beneficiaries are protected from aggressive marketing behavior from agents and brokers.”

One regulation makes final several marketing revisions to the Medicare Advantage and Part D Prescription Drug Programs Proposed Rule that CMS issued on May 16.  In July, Congress codified similar marketing restrictions in the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA).  The provisions prohibit:

• Providing meals to beneficiaries as part of marketing activities;
• Telemarketing, door-to-door solicitation, and other sales contacts made without a beneficiary’s express invitation;
• Cross-selling of non-health care related products during any sales, marketing, or presentation for an MA plan or PDP;
• Conducting sales presentations or distributing and accepting plan applications in provider offices or other places where health care is delivered; and
• Conducting sales activities, distributing, or collecting applications at education events.

In addition, the regulation requires that agents and brokers be state licensed and appointed in accordance with state laws.  The marketing provisions must be in place when plans’ marketing activities begin October 1.

CMS also issued an interim final rule that would implement other provisions included in the new Medicare law. A key provision specifies restrictions on how agents and brokers are paid for signing up a beneficiary in a plan to eliminate incentives for agents or brokers to move beneficiaries from plan to plan, a practice known in the industry as churning.  These guidelines, designed to protect beneficiaries from agents and brokers who may have been acting in their own financial interest rather than meeting the needs of the beneficiary, are based on existing industry standards for agent and broker compensation structure.

“This fall, Medicare beneficiaries will need to compare their current plan’s offerings for 2009 against those of other plans.  As seniors compare the value and price of the plans offered, we want them to have complete confidence in the information insurers provide on benefits and costs of available plans,” said Weems.  “These rules, in conjunction with other regulations CMS will issue before the annual enrollment period begins November 15, establish tighter performance standards and tougher penalties for non-compliance, ensuring a positive experience for beneficiaries as we move toward the start of annual enrollment.”

The final rule implementing MIPPA marketing requirements may be viewed at http://www.cms.hhs.gov/HealthPlansGenInfo/.

The Interim Final Rule dealing with agent commissions and other MIPPA provisions may be viewed at http://www.cms.hhs.gov/HealthPlansGenInfo/.

Comments are due at 5:00 p.m. Eastern time on November 15, 2008.

Guidance for MA plans under Part C and PDPs under Part D plans may be viewed at http://www.cms.hhs.gov/HealthPlansGenInfo/

Fact Sheets with more information on each rule may be viewed at http://www.cms.hhs.gov/apps/media/fact_sheets.asp.

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