As the State Insurance Commissioner, I recently testified before the United States Ways and Means Subcommittee on Health with concerns over Medicare Advantage Fee-For-Service Plans.
Since Jan. 1 my department has received approximately 400 complaints about marketing and sales problems involving Medicare Advantage and Medicare Part D Prescription Drug plans. The National Association of Insurance Commissioners (NAIC) has surveyed the experience of all members and to date, has received responses from 43 states. The striking similarities to problems I have seen in Wisconsin to those of other states indicate troubling patterns and trends. Complaints listed were pervasive throughout the states. Examples include:
• Complaints about cross selling where insurance agents and brokers use Medicare Part D as a pre-text to get in the door with a senior.
• Sales by unlicensed agents/brokers.
• Agents improperly portraying that they were from “Medicare” in order to gain people’s trust.
• Seniors who filled out a “sign-in sheet” at a health fair and later discovered that they had been dis-enrolled from their old plan and enrolled in a new plan without their consent.
• Mass enrollments and door-to-door sales at senior centers, nursing homes, or assisted living facilities.
I believe a driving force behind the confusion and misrepresentation is money. Not the cost of the product, but what companies and agents can make selling the product. Medicare Advantage plans are reimbursed at an amount that is significantly higher than the cost of original Medicare. I have read of reimbursements being, on average, between 111 percent to 113 percent or more of original Medicare with Medicare Advantage Private Fee-For-Service plans receiving as much as 119 percent of original Medicare’s costs. As long as the profit potential for plans and the reimbursement to agents is so high, the marketing and sales abuses, in my opinion, will continue.
Limited state regulatory authority
Under other circumstances, the types of marketing practices I have described are either prohibited by state law as unfair or deceptive practices or would be questioned by watchful state regulators. However, since these cases involve Medicare Advantage plans, the hands of state regulators are often tied. We have lost all meaningful regulatory authority over Medicare Advantage plans except for licensure and solvency as a result of federal preemption.
To be very clear, states do have regulatory authority over insurance agents and brokers selling Medicare Private Fee For Service Plans. With this authority, my department, with limited resources, is acting aggressively against rogue agents. However, without any ability to regulate the plans, I and other commissioners are limited in our ability to prevent sales and marketing abuses. We currently cannot hold the companies selling Medicare Advantage plans responsible for the acts of their agents thereby severely restricting our ability to respond to inappropriate agent conduct. We do successfully utilize this authority in regulating other insurance markets.
Legislative suggestion:
As lawmakers work to improve the Medicare Advantage program, I encourage Congress to closely examine the Medigap regulatory model as a potential solution to the problems I have outlined. Medigap is a proven successful example of shared state-federal regulation of a Medicare related product that works well, and is popular with Medicare beneficiaries. Given the opportunity by federal law, the NAIC worked with CMS, industry representatives, consumer advocates and other interested parties to establish a model regulation that includes standardized benefits, benefit plan design and regulatory standards for all Medigap plans. CMS and the NAIC continue to work together in ensuring the consumer protections under this model.
Additionally and very importantly, the Medigap model will provide people with greater stability and consistency in their health insurance plans from year to year. Wisconsin has 92 Medicare Advantage plans, 50 of which are Private Fee For Service, and over 50 Medicare Part D prescription drug plans offered by 22 companies. As I review our complaints, I see sons and daughters with PhD’s and legal degrees struggling to navigate these products for their parents. Simplified plans under the Medigap model allowed beneficiaries to compare plans and costs, and thereby make educated buying decisions. Adoption of this model will allow the same to be true for consumers shopping for Medicare Advantage and prescription drug plans.
In order for these programs to be successful and to truly be valuable to senior citizens, these issues need to be addressed as soon as possible. The baby boomers will hit the market in full force by 2010. The fastest growing segment of our population is seniors over 85.
Sean Dilweg is the commissioner of the Wisconsin Office of the Commissioner of Insurance.
