Medicare Plan Commissions May Steer Beneficiaries to Wrong Coverage

https://www.medpagetoday.com/special-reports/features/103306

Commonwealth Fund report: opaque, misaligned agent incentives influence enrollment choices

Agents and brokers who sell Medicare plan coverage often steer their clients to a Medicare Advantage (MA) plan because it earns them a higher commission compared with a Medigap supplemental plan with traditional Medicare that might better serve the beneficiary’s needs.

That’s the finding from a new Commonwealth Fund reportopens in a new tab or window that was based on responses from more than two dozen sellers of MA, Medigap supplemental, and Part D plans who participated in focus groups the fund organized in September 2022.

For example, one California broker was extremely candid: “A lot of times … you’re pushing an Advantage plan when someone wants a freedom of choice [of doctor], which would be a supplement plan,” the report said.

Incentives that are misaligned with that of the beneficiary “have financial consequences for beneficiaries, can affect beneficiaries’ coverage options down the road, and can affect Medicare spending,” Gretchen Jacobson, vice president of the Commonwealth Fund’s Medicare program and an author of the report, told MedPage Today.

“Ideally, [the system] should be more transparent on how brokers and agents winnow down choices,” she said.

The report is a timely one as nearly halfopens in a new tab or window of Medicare beneficiaries are now enrolled in MA plans, and as federal regulators try to tamp down MA fraudopens in a new tab or window and denials of care, as well as higher per beneficiary spendingopens in a new tab or window for MA enrollees compared with those in traditional Medicare.

While brokers are required by a 2022 federal policy to inform clients that they don’t sell all plans in their area, they’re not required to reveal how many plans they sell or which ones, the report noted. There is no minimum number of plans they must search for a client nor is there a requirement that they disclose the names of the plans they searched.

Brokers said that in addition to commissions, another factor that influences their decision on what plans they offer clients is whether the plan made it “easy for me to work with.”

Along with a lack of information about how brokers narrow down plan options, beneficiaries lack information on “what role financial incentives might play in the advice they give,” the report said.

Among the report’s findings:

• Most brokers and agents in the focus groups said they received higher commissions for enrolling beneficiaries in MA plans compared with Medigap supplemental plans with traditional Medicare, and one said the commissions could be three times higher. They receive more from selling MA than they do selling a Medigap, even when adding in the commission they get from selling a Part D drug plan.

• Agents said many plans offer bonus commissions as high as $100 per policy when an agent sells a benchmark number of a certain plan — say 20 policies in a 3-month period — and that can “create an incentive for a broker or agent to steer clients to a plan regardless of whether it’s the best one for their clients,” the report said.

• For themselves, most brokers and agents said they would reject MA plans in favor of traditional Medicare with a Medigap, “believing that combination offers better coverage and choices than Medicare Advantage, particularly as people age.” Said one broker, “If I ever have a medical issue, I’d want to be able to go to any physician I want.”

• Some in the focus groups remarked that based on the commission rates and information from the Centers for Medicare & Medicaid Services, it seemed “obvious” that the federal government wanted more people in MA plans rather than in traditional Medicare.

• Commissions for sales of Part D prescription drug plans are so low, agents said, that many neglect to enroll their clients in them and that the plans were “not worth the time.” Then, after having been enrolled in Medicare for years, beneficiaries may need a Part D for their medications. By then, however, they have to pay a federally required Part D late-enrollment penalty each month, amounting to about $1 for every 3 months that they didn’t have Part D or other creditable coverage after becoming Medicare eligible. Additionally, they can’t enroll in a Part D plan until the next open enrollment period. These low Part D commissions also don’t incentivize brokers and agents to encourage their clients to reevaluate their Part D plan each year, even though coverage and premiums can change and vary greatly among plans, participants said.

• Focus group members said they are concerned about deceptive MA marketing. These ads, one participant said, mislead clients into believing “they can just switch to a Medicare supplement anytime that they want” when supplement plans in most states require beneficiaries to pass an extensive underwriting questionnaire before they can be approved. Most focus group participants said that for many of these clients with health conditions, there are few options, although they may enroll beneficiaries in an MA preferred provider organization, which offers more provider choice. Focus group participants characterized the advertising as “relentless,” “overwhelming,” and “misleading,” and said it has led some clients to enroll in plans that excluded their doctors, and other clients to unknowingly change plans. “I’ve had clients call me up in tears not realizing that their plan had been switched,” one said. In some cases, agents have even lost clients who didn’t believe them and wanted everything the ad promised.

• Focus group participants said they tend to sell MA plans to beneficiaries with lower incomes, and Medigap policies with traditional Medicare to those with higher incomes.

• For Medigap supplemental coverage, commission structure pays more to sell plans with higher premiums and low or no deductible, such as a G or an F plan, rather than plans with lower monthly premiums and higher deductibles, such as K or L. But for beneficiaries with limited financial resources, a plan with a higher deductible but lower premiums and out-of-pocket payment limits “may make more sense,” the report said. “The [Medigap] commission structure may result in some beneficiaries paying more than they need to.”

• Health plan sellers can earn extra money — $75 to $100 — for 5 minutes of work if they complete a “health risk assessment” for clients who enroll in a new MA plan. The report noted that it is unclear if these assessments are sent to the enrollees’ primary care physicians, whether it informs their care management, “or helps to expedite additional resources and benefits to them.”

• One reason for the rapid recent increase in beneficiaries choosing MA plans over traditional Medicare with supplemental plans is the rising cost of Medigap premiums. One Arizona broker said, “They’re getting these price increases year in and year out on those supplement plans. And yeah, you bet, it has definitely shifted my focus.”

David Lipschutz, JD, associate director of the Center for Medicare Advocacy, who reviewed a pre-release copy of the Commonwealth Fund report, said it struck him that many brokers believe the Medicare program itself is steering beneficiaries toward MA plans rather than Medigap plans.

“This speaks to the growing imbalance between MA and traditional Medicare, and while there have been improvements in Medicare materials over the last couple of years, there is still a bias toward MA that must be addressed,” he said.

Lipschutz added that the commission imbalance “leads many agents and brokers to steer people towards MA plans and neglect Part D.”

The four focus groups were held by PerryUndem, a public opinion research firm, in partnership with the Commonwealth Fund.

Filed under: General Problems