General Business Issues

Featured Health Business Daily Story July 11, 2008

Health Plans Should Focus on the Activities of Their Brokers and Agents to Avoid Medicare Penalties

Reprinted from MEDICARE PART D COMPLIANCE NEWS, a monthly newsletter on implementation problems and compliance strategies for the new Medicare drug benefit.

By Barbra Golub, Managing Editor (bgolub@aispub.com)

CMS is looking to have more flexibility in determining financial penalties levied against Part D and Medicare Advantage (MA) plans in its recently proposed Medicare “catch-all rule." To avoid such penalties, plans “want to stay out of CMS’s cross hairs…and stay away from marketing issues prior to a CMS audit,” said Jeff Fox, president of consulting firm Gorman Health Group, LLC. “CMS [is] looking for a poster child to [present] to Congress….You don’t want to be that poster child.”

"Plans ask what to do…Anything [to comply with proposed regulations] around agents and sales brokers, I would put in place for the 2009 open enrollment,” Fox told listeners during a June 5 audioconference sponsored by Atlantic Information Services, Inc.

He also recommended that sponsors submit comments on the proposed rule by the July 15 deadline. “As you read the rules pay attention to the details,” and “take advantage of the comment period,” he said.

The proposed rule allows CMS to levy penalties of up to $25,000 for each enrollee affected, or likely to be affected, by such a violation. Typically, penalties and assessments imposed by CMS have “been pretty minimal,” said Fox. Now, CMS is proposing “very specific” penalties.

Against the threat of significant financial penalties, he said, it is critical to establish a solid working relationship with CMS with regard to sales activities.

CMS, for its part, will continue to take into account such factors as the severity of the infraction, the evidence supporting the infraction, and the amount of harm caused the beneficiary — as well as the organization’s past conduct. “If your relationship with CMS is only when [it audits] you, that’s not healthy,” he asserted. And make sure “at the end of the day the beneficiary will not be harmed,” recommended Fox.

Also worrisome to Fox are CMS’s proposed regulations requiring plans to pay the same commission to agents for all stand-alone Prescription Drug Plans (PDPs) and for all MA and MA prescription drug plans (MA-PDs).

The agency also wants to mandate that first-year commissions cannot be set any higher than subsequent years’ commissions. “If anything gets changed prior to 2009, I’m hoping it’s this,” he said. “CMS wants to stop churning, but I think this will increase churning.” The proposed rule means that plans must pay the same commissions for the same products in all geographic areas where they operate, Fox said in response to a question.

CMS likely won’t set a cap on plans’ commissions to agents for the 2009 open-enrollment period, Fox said, but the agency probably will mandate a top tier on commissions for the 2010 selling season.

The proposed rule also codifies current guidance that plans use state-licensed agents, and would require plan sponsors to appoint agents before they can market products.

Although some states have always required that brokers be licensed in their states, Fox expressed worry that the requirement on following state appointment laws for agents is “just the tip of the iceberg on what states want.” States will look to plans to give detailed information on what agents and brokers are doing, holding the plans accountable, he added.

License to Sell

Fox recommended that plans do a certain amount of research related to the licensure of their agents. In addition to asking to see a copy of the agent’s license, Fox suggested plans investigate whether agents have previously lost their licenses and are being sanctioned by the state. It is “very important to do due diligence,” he said. “At the end of the day…[if there is a] bad apple in your distribution chain, CMS will come down and see what else you are doing wrong,” Fox asserted.

The new rules also would require plans to train agents selling Medicare products, and ensure that agents pass written or electronic tests on the CMS regulations and on the plans they want to sell. Mary Kaye Thibert, vice president of Gorman Health Group, suggested that plans make sure agents are taking tests and at least 80% of them are passing. She said plans should do both online and in-person testing and ask agents random test questions periodically.

Door-to-door marketing has always been prohibited, he noted, but now the level of federal regulatory scrutiny over brokers’ selling behavior is “probably 10 times” what CMS has done previously with respect to monitoring Medicare plans’ internal sales staff. As you perform training, keep in mind that “every beneficiary is a potential ‘secret shopper,’” Fox said. “Make sure sales reps are invited into homes, [and] they’re not knocking on doors” without invitations, he added.

CMS also seeks to prohibit all unsolicited direct contact, such as outbound calling, without the beneficiary initiating contact. This is one of Fox’s “top 10 concerns” with the proposed rule. “If you’re following up on a direct-mail campaign with phone calls, [it] can lead to much better success,” he noted. The response rates grow, he added. But the rule would prohibit plans from making such follow-up calls on direct-mail campaigns. Under CMS’s proposed rule, the prospective enrollee must call the plan or send in a business-response card before the plan could make direct contact, he said.

Fox did clarify that if a beneficiary initiates a request for more information, the plan can call back. And while he acknowledged there is no time frame with regard to calling a beneficiary back, he said that six months may be “stretching it.”

No More ‘Wiggle Room’ on Cold Calling

Plan oversight of cold calling will be “very difficult,” Fox said. With the risk of noncompliance so great, and given that agents for years have been “smiling and dialing” — picking up the phone and calling potential members when leads are slow — he suggested that plans do spot checks of agents, asking new enrollees five or six questions about how they came to be enrolled in the plan. There is no “wiggle room” for plans to make cold calls, he contended.

CMS has always prohibited sales in physician offices, allowing such sales only in common areas of health care settings. Under the proposed rules, the agency would broaden this approach, eliminating enrollment efforts in all settings where providers operate, including physician waiting rooms; pharmacy counters; educational events, such as health fairs; hospitals; and long-term-care facilities.

Cross selling is a “hot button” issue for CMS, Thibert said. “It probably is more hot than anything.” To address reports of high-pressure sales tactics, CMS has proposed that a beneficiary must agree in advance to what variety of products will be discussed by the sales representative. Plans would be allowed to sell different lines of business after a 48-hour “cooling off” period. The agency also would require pre-appointment discussions to be documented by plans.

Fox noted that it will be extremely difficult for plans to document discussions between sales representatives and beneficiaries, especially for broker-generated leads. Plans may spend more for follow-up calls prior to appointments to ensure that beneficiaries understand which products will be discussed, he said.

He advised plans to develop a monitoring tool to see early on what is happening with brokers’ sales calls and make sure calls are documented. Unfortunately, he said, “brokers aren’t used to ‘multiple sales discussions’ with one client.”

CMS Puts Beneficiaries on a Diet

Also prohibited under the proposed rules are meals offered to prospective beneficiaries. Thibert described this as a “big thing,” explaining that CMS doesn’t care if the value of the meal is under $15 anymore. The agency, however, will allow coffee, donuts, and snacks, she said.

This rule will “impact response rates for seminars” under the principle of “if you feed them, they will come,” Thibert contended, especially with a shortened enrollment cycle.
Fox added that in tight selling periods, seminars are very important for plans to meet enrollment numbers. He said he doesn’t “quite understand” why CMS is prohibiting all meals, and he surmised that maybe the agency thinks beneficiaries feel they have to enroll in a plan if a company feeds them.

He clarified that coffee, soft drinks, cakes, cookies, and pies would probably be acceptable under the proposed rules. But plans would no longer be able to offer breakfasts and lunches.

In response to a question about whether this requirement will make it into the final rule, Fox said yes “because it came out of left field.”

To purchase a recording of AIS’s June 5 audioconference New Medicare Advantage and Part D Marketing Rules: Key Strategies for Health Plans, please call (800) 521-4323 or visit www.AISHealth.com and click on MarketPlace.

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