CMS is reminding state insurance departments that federal law preempts any efforts to regulate Medicare Advantage broker compensation and marketing practices.
The Dec. 4 memo obtained by Becker’s comes as UnitedHealthcare is suing the director of the Idaho Department of Insurance over his attempts to enforce MA commission requirements, and as several states have issued emergency orders and warnings aimed at preventing insurers from cutting broker commissions during the open enrollment period.
Over the last year, many insurers have cut commissions for some of their MA or Part D plans as the sector faces rising cost pressures.
CMS reminded states that the Social Security Act “shall supersede any state law or regulation (other than state licensing laws or state laws relating to plan solvency)” with respect to MA plans. The agency reiterated that it maintains the authority to govern agent and broker compensation, marketing materials, enrollment forms, and application requirements.
The memo noted that MA plans are required to submit a range of compensation to CMS on a yearly basis, which may include a minimum of $0, and that compensation payments within that range “are a matter of negotiation between the MA organization and its first tier, downstream, and related entities, including agents and brokers.”
The memo is likely to serve as a potential boost to UnitedHealthcare’s argument in its lawsuit against Idaho. In its Nov. 21 complaint, the insurer argued the state’s regulatory efforts violate the Supremacy Clause of the Constitution, noting that federal law provides only narrow exceptions for state licensing and solvency requirements.
At least 10 states have taken action against insurer practices around MA broker compensation this year:
- Idaho issued emergency cease-and-desist orders to UnitedHealthcare and PacificSource in late October.
- Delaware warned such practices violate state and federal law.
- New Hampshire warned against mid-year compensation changes.
- North Dakota warned against practices restricting access to Medicare products.
- Colorado said that payers cannot eliminate broker compensation midyear.
- Oklahoma warned payers they could not abruptly stop paying commissions.
- Mississippi called such practices unfair trade practices.
- South Carolina called the alleged tactics “unfair trade practices.”
- North Carolina warned plans about restricting access to Medicare products and modifying compensation structures.
- Connecticut said it was notified of a DOJ complaint against three insurers and three brokers for improper incentive payments, though the state said it does not have regulatory authority over MA plans.
CMS said it “appreciates its longstanding partnership with state insurance commissioners” and “welcomes and appreciates feedback and conversation on any concerns that State Departments of Insurance may have.”
