United States: CMS Issues Draft Medicare Marketing Guidelines, Continues To Tweak Agent/Broker Compensation Guidance

The Centers for Medicare and Medicaid Services (CMS) issued draft Medicare Marketing Guidelines (Draft Guidelines) in May 2009 that propose to update the existing guidelines to incorporate the various legislative and regulatory changes adopted since the guidelines were last issued in July 2006.

Among the clarifications within the Draft Guidelines are specification that Medicare Advantage Organizations and Part D Plan Sponsors (collectively, Plan Sponsors) may contact current members for any reason; identification of materials that may—and may not—be distributed at educational events; and clarification of those health care settings (waiting and exam rooms, dialysis centers and pharmacy counter areas) where Plan Sponsors' marketing activities may not occur, even "after hours."

CMS received more than 1,700 comments to the Draft Guidelines, and agency officials are in the process of reviewing and considering the statements. It remains to be seen whether CMS can review all of these comments and finalize the guidance prior to the October 1, 2009, start date for the CY 2010 marketing period, although the agency's goal remains in place.

Employed Agent Exception to Compensation Rules

The Draft Guidelines do not specifically state that the agent/broker compensation provisions within the Draft Guidelines do not apply to employed agents (as the September 2008 final rules so provide). CMS officials have since clarified in a public presentation that the agent/broker compensation requirements, including those set out in the Draft Guidelines, do not apply to employed agents.

Revisions to Agent/Broker Compensation Payments for CY 2009 Enrollments

The past few weeks have seen a flurry of correspondence from CMS regarding the amounts Plan Sponsors are obligated to pay independent agents and brokers for CY 2009 enrollments.

Initial Versus Renewal Commissions

According to CMS's November 2008 interim final rule, all enrollments in Medicare Advantage (MA) and Part D Plans are considered renewal enrollments (the first renewal year and the second overall year within the six-year enrollment cycle created by CMS), and Plan Sponsors were instructed to pay independent agents and brokers accordingly. If CMS subsequently identified an individual as newly entitled to Medicare (and electing a MA or Part D Plan as part of his or her initial election) or enrolling in a MA, Cost or stand-alone Part D Plan for the first time, CMS would instruct the Plan Sponsor to modify the applicable agent/broker's compensation to reflect the individual's "initial enrollment" status.

The agency reiterated this concept in its January 16, 2009, memorandum, which also established the high-end cutoff of the fair market value range (FMV Range) for independent agent/broker compensation. In May and June 2009, CMS issued to Plan Sponsors reports identifying those Medicare beneficiaries whose enrollment in a MA or Part D Plan should be treated as an "initial enrollment," entitling the enrolling agent/broker to a higher compensation.

Clarification on Circumstances of "Initial Enrollments"

CMS received tremendous criticism from the industry in response to the issuance of reports on Plan Sponsors' initial enrollments, as many agents and brokers felt that CMS excluded from categorization of initial enrollments those situations in which a Medicare beneficiary switched from a MA Plan to a Part D Plan (or vice versa). On June 25, 2009, the agency issued a notice through HPMS indicating it was reviewing its guidance regarding initial enrollments. On July 2, 2009, CMS issued follow-up guidance clarifying those 2009 enrollments that will be considered an "initial enrollment" for purposes of triggering higher compensation rations: "Independent agents and brokers enrolling a beneficiary with Original Medicare and a PDP into a MA Plan or MA-PD, and vice versa, should be paid a initial compensation for any such enrollments with effective dates in 2009." (The agency previously had stated that its regulation guidance "is clear that, for 2010, agents and brokers should be paid an initial fee for enrollments from a PDP to an MA plan.")

FMV Range of Compensation Amounts

Although CMS issued a memorandum on June 5, 2009, establishing the low end of the FMV Range, the agency announced on July 7, 2009, that it intends to rescind this low-end value of the FMV Range. Plan Sponsors are permitted to adjust and resubmit their 2009 compensation rates, so long as the re-submitted rates fall below the high-end of the FMV Range established in the January 16, 2009, guidance. Such re-submitted compensation rates, which are due to the agency by July 31, 2009, "will become the new 2009 compensation amounts and must be paid for enrollments effective September 1, 2009, through the remainder of 2009."

CY 2010 Compensation Amounts

CY 2010 compensation amounts will equal a Plan's CY 2009 compensation amounts, updated by the percentage of the applicable rate change (0.81 percent for MA, 5.79 percent for Part D, as announced in April 2009).

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