Medicare Plan Commissions May Steer Beneficiaries to Wrong Coverage
This article is easy reading exploring some the differences and why people may choose one plan over the other plan. Attached is also a Commonwealth Fund article with more detail.
Medicare Plan Commissions May Steer Beneficiaries to Wrong Coverage, MedPage Today, Cheryl Clark.
Agents and brokers selling 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.
What role do financial incentives play for healthcare planning agents and brokers in the advice they give to their clients?
One incentive for agents and brokers steering clients to a Medicare Advantage (MA) plan are the higher commissions in the sales of it. Medigap supplemental plan with traditional Medicare commissions are lower. The sale may still occur even if a Medicare Supplemental plan might better serve the beneficiary’s needs.
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. 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. Assume 20 policies in a 3-month period which 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. “
- For themselves, most brokers and agents said they would reject MA plans in favor of traditional Medicare with a Medigap. One broker; “Combination offers better coverage and choices than Medicare Advantage, particularly as people age. 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. Based upon the commission rates and information from the Centers for Medicare & Medicaid Services, it seemed “obvious” the federal government wants more people in MA plans rather than in traditional Medicare.
- Agents claim, commissions for sales of Part D prescription drug plans are so low, many neglect to enroll their clients in them and the plans were “not worth the time.” Then, after having enrolling 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.” 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 recent and rapid 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.”
This is an excellent article comparing FFS Medicare and Medicare Advantage plan issues. The Commonwealth Fund also has a report on similar findngs which can be found here:
Challenges Choosing Medicare Coverage Views Brokers Agents, Commonwealth Fund, multiple authors.
The demographics from which the findings are based upon is here: Table – Focus Group Demographics (commonwealthfund.org).
It appears that CMS is starting to take an active role in investigating the selling of both programs.