In June 2007, seven health care sponsors voluntarily agreed to temporarily suspend marketing their private fee-for-service (PFFS) Medicare plans. After facing increased scrutiny from federal agencies regarding questionable marketing activities, the companies needed time to review their practices and ensure that seniors were not being deceived or misled when they switched from standard Medicare to these private insurers.
The companies -- United Healthcare, Humana, Wellcare, Universal American Financial Corporation, Coventry, Sterling, and Blue Cross/Blue Shield of Tennessee, which collectively represented approximately 90 percent of PFFS sales at that point -- agreed to satisfy a list of requirements from the Centers for Medicare and Medicaid Services (CMS) before resuming the marketing of their PFFS plans to seniors. As part of the agreement, potential enrollees must understand the process of choosing health care providers, the companies would work with those providers to ensure access to payment terms and conditions, and all brokers and sales representatives must undergo training and demonstrate they understand the complexities of PFFS programs. In addition, the companies agreed to call each applicant to ensure they understood plan rules, add disclaimer language to marketing materials, and notify CMS of marketing and sales events so they can be monitored. Each company's voluntary suspension would be lifted when CMS certified that they had met their obligations, and by September 2007, all seven had been given the green light to resume their marketing activities.
But if the companies, agents, and state and federal regulators thought that would be the end of the dispute, they were mistaken. The Senate Finance Committee has already held multiple hearings in 2008 to discuss potential solutions, and CMS Acting Administrator Kerry Weems spoke before the committee at a February 2008 hearing to report on findings and progress. While he noted that data showed that the vast majority of enrollees did receive phone calls or letters explaining PFFS plan details, results in other areas were less encouraging.
"Our review of the plans' 2008 marketing materials uncovered too many cases where information was inaccurate or incomplete," Weems told the committee. "We are very concerned with this lack of quality control and have included some proposed remedies in the draft 2009 Call Letter." Suggestions include a quality control checklist to ensure that marketing materials are accurate and complete and using a template to standardize some plan materials so enrollees will find common language and consistency across plans.
The National Association of Insurance Commissioners (NAIC) has also voiced concerns to the committee. Illinois Insurance Director Michael McRaith, chair of the organization's Health Innovations Working Group, testified that state regulators are identifying problems with the marketing of PFFS plans and asked for help with assisting seniors. McRaith supported passage of the Accountability and Transparency in Medicare Marketing Act of 2007, which would allow states to help the federal government regulate the marketing and sales of PFFS plans.
PFFS plan scrutiny isn't surprising, considering the recent exponential growth in sales and subscribers. Once considered a niche market, PFFS plans now have millions of enrollees. According to CMS statistics, total non-employer PFFS enrollments were just under 814,000 in 2006; in 2008, the number has jumped to more than 1.5 million. Even the smaller employer-related PFFS segment jumped from about 36,000 in 2006 to more than 500,000 in 2008. In all, nearly 2.1 million people now subscribe to PFFS plans.
What's the impact?
Regulators, insurance companies and agents all stand to be affected by new initiatives, policies, and potential legislation. If there are problems with current marketing practices, what are the most effective solutions? What, if anything, is most likely to result from Senate Finance Committee hearings and legislative bills? What guidelines should agents follow -- and what tactics should they avoid -- to protect their business? According to Abby Block, director for CMS' Center for Beneficiary Choice, agent education is an important part of resolving issues related to PFFS sales practices.
"I think one of the most critical things in terms of getting this product marketed appropriately is that the agents truly understand how Medicare itself works, and then how this particular product works," she said, noting that rigorous and accurate testing of agents is especially important. While agents are required to complete a course and test demonstrating product knowledge, Block said that some testing environments can be suspect. She has heard of cases where agents could leave the testing area and obtain correct answers to questions they missed in order to guarantee a successful immediate retake.
Other field violations are still being reported, including door-to-door sales and even clients enrolled in plans without signing an application. While Block acknowledges that most agents are good stewards of their business and want to treat clients fairly, she said that some tactics can leave clients in a worse position than they were in previously. Some agents specifically target low-income clients, and without a clear explanation of program features, the end result can actually be less coverage for the client.
But while Block said that the moratorium yielded positive results that enabled CMS and insurance companies to recognize what kind of oversight is required, not everyone agrees with that assessment. In fact, according to NAIC member and Pennsylvania Insurance Commissioner Joel Ario, the voluntary suspension in 2007 was anything but a success.
"I don't think the moratorium had much impact at all," he said. "I don't know that it changed anything in the marketplace." Ario believes that seniors still have problems accessing accurate information, and market oversight is the key issue in the PFFS arena.
Ario also said that broader issues are impacting the market, including standardization. "At some point, choice becomes more confusing than helpful," he said. Aside from standardization among products, Ario said that common terms would make comparing products easier for consumers and allow agents to obtain more accurate information as well.
Jody Suttie, an insurance coordinator for Gremler Financial Group, agrees.
"Some type of standardization via the governing bodies would be helpful," Suttie said. She believes that a simplification of PFFS plans will be good for the overall market -- as boomers transition from employer plans to Medicare, these programs can be an attractive alternative if they can be properly understood and explained.
Unfortunately, Suttie said, that isn't always the case with today's marketplace. "The plans are confusing to the senior population that is used to the standardization of Medicare Supplement plans," she said. "If it is hard for an agent to explain, it is harder for the senior to comprehend."
Opposing views
While standardization is an area of common agreement among many, pending legislation highlights opposing views. Ario said that the Accountability and Transparency in Medicare Marketing Act makes sense because states are already accustomed to handling insurance issues, and agents work well with state regulators because they know the hard work that goes into weeding out those bad apples that give them a bad name. Overall, he believes that local regulatory bodies are well equipped to assist in regulating the PFFS market.
Block, however, disagrees. "This is a public program financed largely through public funds," she said. "It's a national program and we have a federal responsibility that the monitoring and oversight of the program stay with the federal government." Block did acknowledge that the states have a role to play and said that CMS works closely with them, sharing information and cooperating on areas of common interest.
Finding your way
As Congressional hearings invite differing opinions from various organizations, how can agents in the field negotiate their way through a challenging regulatory environment? While mandatory testing helps ensure that a knowledgeable sales force is in the field, experts agree that agents will need to be proactive and diligent in keeping up with changing developments.
In fact, America's Health Insurance Plans (AHIP), a trade organization representing about 1,300 companies -- including those involved in last year's suspension of marketing PFFS plans -- wants agents to work with its members to stay on top of market developments. AHIP co-sponsors an online course with the Association of Health Insurance Advisors and the National Association of Health Underwriters that complements plan-specific training that agents should already receive from individual companies.
Ario said that agents need to consider multiple sources for their market information. "Agents who are monitoring not only what comes to them from their companies, but also from federal and state regulators, are going to increase the chances that they don't miss any changes," he said.
Suttie pointed out that the few "bad apple" agents won't be persuaded by new training or legislation, so agents have to be diligent in policing themselves. "Be an educator to and advocate for your client," she advised.
With a slate of Congressional hearings on the subject already completed and the Accountability and Transparency in Medicare Marketing Act still pending, the regulatory future is still somewhat undecided. But one area where both the NAIC and CMS agree is in a forecast of increased scrutiny regarding PFFS plans and the agents who sell them. Block indicated that CMS will have more to say regarding PFFS sales and practices. "We have some regulatory proposals that are in the works," she said.
Ario also expects to see an evolving regulatory environment. When asked if he believed that agents should expect more changes in the future, Ario's answer was short but clear: "It is very safe to say that," he said.
Michael Murillo is a freelance writer and a frequent contributor to the Agent's Sales Journal. He can be reached at vivamurillo@hotmail.com.
