A federal judge in Texas has struck down portions of a rule governing Medicare Advantage broker and marketing payments, siding with agent groups that challenged the regulation put into place last year.
On Aug. 18, U.S. District Judge Reed O’Connor vacated provisions of a CMS rule that had capped administrative payments at $100 and restricted certain contract terms between MA plans and third-party marketing organizations.
The plaintiffs (Americans for Beneficiary Choice and the Council for Medicare Choice) sued CMS in May 2024, arguing the agency lacked authority to impose the restrictions. CMS finalized the rule in April 2024, intending to curb steering and volume-based incentives by classifying administrative support payments as “compensation” subject to the caps.
Shortly after, Judge O’Connor temporarily suspended the enforcement of the $100 fee and contract restrictions and later found the provisions unlawful, ruling that CMS can regulate how compensation is used but not set rates or reclassify administrative reimbursements. He also ruled the measures arbitrary and capricious, citing a lack of justification for the $100 cap and inadequate notice around prohibited contract terms.
The court upheld a separate provision requiring member consent before third-party firms share personal data such as names and phone numbers. That piece of the rule is within CMS’ authority and remains in effect, according to the judge.
