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June 20, 2024
BluePeak has received numerous inquiries from clients concerning the new agent and broker compensation regulation finalized by CMS in its April 2024 final rule. This regulation broadly defines compensation to include all activities related to the sale or enrollment of a beneficiary in a Medicare Advantage plan. A key issue under discussion is whether the compensation caps apply to Field Marketing Organizations (FMOs).
There are now three pending cases filed since of end of May with US district Courts (2 in Texas, 1 in Florida) pertaining to the 2024 Final Rule and its potential applicability to FMOs. The arguments against the MA sales compensation are fairly consistent across all 3 cases:
- Stating that the Rule is unlawful because CMS has exceeded its authority. Congress has given CMS authority to provide guidance as to MA compensation, not the authority to change and broaden the fundamental definition of compensation (that has existed for more than 16 years) to now include administrative payments.
- Further indicating that the historical definition of compensation has not included payments to FMOs that are used to maintain the administrative services and infrastructure for independent sales agents, unrelated to sales compensation.
- Citing the extensive time and resources invested by FMOs in the current industry structure that relies on Plans paying FMOs fair market value for their services and that the Rule threatens the viability of the industry.
- Stating that the Rule is unlawful as arbitrary and capricious as CMS failed to examine relevant data, did not explain how it arrived at its compensation decisions or amount, failed to consider comments as to the impact of the change on the industry, and failed to consider other viable alternatives that were less disruptive.. Noted that CMS failed to provide any legitimate or record-backed explanation as to why it would be necessary to overrule the agency’s prior position and failed to afford interested parties with notice and opportunity to comment (by failing to respond to comments and significantly changing language from the notice of proposed rulemaking to the Rule text).
- Citing CMS refusal to provide details of the evidence and information used for its decisions or whether it even intended application to FMOs, and ongoing refusal to clarify questions regarding the scope of the Rule and its potential inclusion of FMOs thereby creating significant ambiguity and confusion in the industry.
- Noting that encouraging Plans to use captive agents as opposed to independent agents is contrary to CMS stated intentions and would actually limit consumer choice, leave beneficiaries less informed and reduce Plan competition.
- Indicating that the Rule’s restrictions on the sharing of beneficiary data overrides long standing HIPAA policy to the detriment of beneficiary choice.
All three cases are seeking injunctive relief by mid-July to avoid imminent harm and to allow for FMOs and Plans to complete contracting and preparations for the October selling season, as well as seeking clarification as to FMO applicability, or potential disallowance of the Rule’s sales and marketing changes in full.
This legal uncertainty complicates the timeline for plans seeking to finalize agreements with FMOs, brokers, and agents.
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