Medicare Advantage Sales Middleman Sues HHS Over Rule Capping Broker Compensation

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Dive Brief:

• A major field marketing organization is suing the Biden administration over a final rule capping payments from Medicare Advantage health insurers to agents and brokers, joining a raft of other litigation from sales groups seeking to roll back the regulation.
• In its suit filed last week in a Texas district court, AmeriLife argues the government doesn’t have the authority to cut off payments to field marketing organizations, or FMOs, which don’t themselves enroll beneficiaries in plans but use payments from carriers to oversee independent brokers that do.
• AmeriLife is seeking either a declaration that the rule does not apply to payments paid from MA plans to FMOs that aren’t passed along to agents and brokers, or an order preventing the rule from applying to those payments. And the clock is ticking — according to the suit, uncertainty around the regulation has prevented FMOs like AmeriLife from negotiating time-sensitive contracts with MA payers for the upcoming plan year.

Dive Insight:

In April, the Biden administration finalized a rule capping how much MA plans can compensate agents and brokers in a bid to stop predatory marketing and improper back-door payments, a longstanding issue in the industry connecting seniors to the private Medicare coverage.

The rule does so by broadening Medicare’s definition of compensation to include all actions associated with the sale to or enrollment of a beneficiary in an MA plan. As a result, insurers will no longer be able to pay brokers additional fees that aren’t subject to the government’s compensation cap, beginning with the upcoming annual enrollment period this fall.

That change threatens the business model of the middlemen that frequently link seniors to health insurance coverage, including plaintiff AmeriLife, an insurance sales office that brings in the lion’s share of its business from FMOs.

Dozens of MA carriers contract with AmeriLife for access to its network of brokers and agents, including UnitedHealthcare, Humana, Cigna and CVS’ Aetna, according to AmeriLife’s website. Those plans pay AmeriLife for providing operational and administrative support to those brokers, including managing state licensing, providing enrollment platforms and creating marketing materials for different plans, the lawsuit says.

Historically, those payments — which don’t directly end up in the pockets of agents or brokers — haven’t been restricted by the government, except a stipulation requiring them to be paid at fair market value, according to the suit.

However, the CMS final rule appears to include them in its compensation cap — even though it only applies to independent agents and brokers. That discrepancy has “left the industry deeply confused as to which parties are intended to be regulated,” the lawsuit says.

As a result, carriers and FMOs haven’t been able to enter into contracts for the 2025 plan year, which they need to finalize by the end of July to be ready for marketing that kicks off in October, according to the lawsuit.

AmeriLife’s lawsuit isn’t seeking to stop the CMS from capping total payments from carriers to agents and brokers. Instead, the FMO is only looking to carve out carrier payments unrelated to compensation incentives.

However, at least two other recent lawsuits are asking courts to throw out major portions of the rule, or vacate it altogether.

Two groups representing FMOs — Americans for Beneficiary Choice and Senior Security Benefits — sued the Biden administration last month, arguing the CMS doesn’t have authority to cap administrative fees to third parties.

Also last month, the Council for Medicare Choice, which represents firms that employ agents and provide administrative services to those agents, and two other plaintiffs sued the government over similar concerns.