A recent lawsuit has pushed back against an industry-opposed Centers for Medicare & Medicaid Services (CMS) final rule on broker compensation in Medicare Advantage (MA) plans.
In Americans for Beneficiary Choice and Council for Medicare Choice v. the Department of Health and Human Services (HHS), a Texas district court judge ruled against the federal government and opted to pause enforcement of new CMS rules. A summary judgment is scheduled for July 17.
CMS established fixed broker and agent compensation in April as well as raised the pay cap for new enrollments to plans by $100, from $611 for initial sales to $711. Other contracts between MA plans and third-party marketing organizations are also deemed prohibitive because they created adverse incentives for brokers, CMS argues. The agency would like to eliminate volume-based bonuses.
“There was a focus on these administrative payments alleging that was a way for plans to get around the compensation limits that they were using the administrative costs to get money to agents or brokers in a manner that exceeded compensation limits,” Helaine Fingold, a partner at law firm Epstein Becker & Green, told Fierce Healthcare.
The plaintiffs argued CMS overstepped its authority in adopting this rule, and the court agreed much of the broker compensation requirements were “arbitrary and capricious,” deciding that compensation should not be limited. They also argued CMS did not provide sufficient data proving its viewpoint.
“There were a lot of pieces that industry felt very frustrated by, and there wasn’t a way to address them because they didn’t have the information on where CMS was coming from,” said Fingold.
Industry participants told CMS in comments on the proposed rule that the fixed fee compensation could cause brokers and agents to leave the field. Others said CMS brushed aside concerns that raising the fixed fee by $100 is not enough to cover costs from technology, staffing, marketing campaigns and data security systems.
Plaintiffs said the final rule could cost carriers one-third of total revenue.
With enrollment quickly approaching, the court is moving fast on the case initially filed in mid-May. That’s because health plans need to budget out their acquisition costs, and there is a lot of preparation that must be completed before October.
“It needed to move quickly … because materials have to go out to print and brokers have to get trained to go sell these benefits,” said Jenn Kerfoot, chief strategy and growth officer for DUOS, in an interview with Fierce Healthcare.
It could be that CMS gives updated guidance in the form of a memo on the final rule, similar to the agency’s announcement it would update star ratings criteria following the Elevance Health and SCAN Health Plan star ratings lawsuits, said Kerfoot. This would allow for a simpler solution for field marketing organizations and carriers that need to develop a quick turnaround.
“Even if the court ultimately says, ‘CMS didn’t do what they needed to do and we’re not going to let this move forward,’ certainly this administration could come out in September with some alternatives that might try and get ahead of where the court is,” explained Fingold. “But that wouldn’t be effective until the 2026 plan year.”
The court also determined universal relief should be imposed.
“This has a very big implications for the industry as a whole, but also this illustratively shows the power of lower courts,” said Kerfoot.