Medicare Plan Pay Confusion Could Wreck 2025 Enrollment, Lawsuits Warn

What You Need to Know

CMS wants Medicare Advantage and Medicare drug plan producer comp to include support services costs.
Plaintiffs say regulators have refused to clarify how the new rules will really work.
FMOs and web brokers warn that continuing uncertainty could cripple upcoming enrollment period marketing.

Medicare plan agents, brokers, distributors and trade groups are asking the federal courts to block the new Medicare plan agent compensation rules quickly.

Any uncertainty around agent pay that lingers for more than a few weeks could cripple efforts to hire, train and supervise agents and to create and run advertising campaigns, plaintiffs say in three separate, similar lawsuits.

The Medicare Advantage plan annual enrollment period for 2025 starts Oct. 15, but months before then, “a long line of dominoes will begin falling, irreversibly,” according to Americans for Beneficiary Choice, the lead plaintiff in one of the suits. “Relief any later than mid-July will be too late.”

The plaintiffs want the courts to use stays or injunctions to keep the compensation rules from taking effect this summer, and they also want the courts to issue judgments that would overturn the new regulations.

What it means: How smooth the Medicare Advantage plan annual enrollment period for 2025 will be is unclear.

The backdrop: The Centers for Medicare and Medicaid Services, the arm of the U.S. Department of Health and Human Services that oversees Medicare, has been phasing in tougher marketing rules in recent years because of concerns about insurers bombarding consumers with ads and telephone calls, and possibly using misleading seminars and web sites to add people who do not want to hear from Medicare agents on lead lists.

Executives at some health insurers contend that high producer compensation costs hurt small issuers’ efforts to compete with big insurers.

For 2025, CMS has adopted final regulations increasing maximum agent compensation by $100 but requiring insurers to include agent support services spending in that total.

The change will only affect independent agents and brokers, not what the health insurers pay to field marketing organizations or other “third-party marketing organizations, according to CMS.

CMS expects the 2025 cap for new Medicare Advantage plan sales to be about $726. The cap for renewals would be $363.

The annual Medicare Advantage and Medicare Part D prescription drug plan annual enrollment period is set to run from Oct. 15 through Dec. 7.

Field marketing organizations: An FMO is a distributor that recruits agents and brokers, trains them, helps them get licensed, and provides marketing and compliance support.

The suits: AmeriLife, a big financial services distributor with a large FMO, and two affiliates filed their suits in the U.S. District Court in Tampa.

The top defendant is CMS. The other defendants are HHS, CMS Administrator Chiquita Brooks-LaSure, and HHS Secretary Xavier Becerra.

Americans for Beneficiary Choice, a nonprofit group managed by Horizon Government Affairs, and Senior Security Benefits, an FMO affiliated with Integrity Marketing, another big financial services distributor, filed a separate, similar suit with the same list of defendants in the U.S. District Court in Fort Worth, Texas.

The Council for Medicare Choice, a nonprofit group that represents agencies, brokerage firms and FMOs, joined with the Fort Worth Association of Health Underwriters and Vogue Insurance Agency, based in Arlington, Texas, to file a third, similar suit in the U.S. District Court in Fort Worth.

The Fort Worth court has put both of its cases in the hands of Judge Reed O’Connor, who is known for declaring the Affordable Care Act and the ACA individual mandate to be unconstitutional. The U.S. Supreme Court eventually overturned the ruling based on the argument that the plaintiffs lacked standing to bring the case.

CMS and HHS did not reply to emails seeking their comments.

The plaintiffs’ views: Here are seven of the points the plaintiffs make in their complaints and other filings.

1. The scope of the compensation cap is unclear.

Although CMS applied the new compensation requirements only to independent agents and brokers, it failed to define “independent agents and brokers,” according to a comment from eHealth, a web broker, in the Council for Medicare Choice appendix filing.