Medicare Advantage sales tactics draw fire as Senate panel investigates

Washington -- Ongoing consumer complaints about misleading sales pitches for private Medicare health plans have spurred a powerful Senate committee to scrutinize their marketing practices and prompted calls for legislation. The problems have continued despite Centers for Medicare & Medicaid Services efforts to curb abuses.

The Senate Finance Committee since January has held three hearings about the marketing, costs and regulation of the plans.

"I know there are good companies and good, honest agents out there, but the system still allows for predatory marketing, and we have no room for this type of fleecing of America's seniors," said the panel's chair, Sen. Max Baucus (D, Mont.). He intends to offer legislation to address the problems.

Many physicians and consumer advocates are wary of the health plans, especially private fee-for-service products, which continue to see strong enrollment growth. They welcomed the committee's effort.

"Reports of marketing and sales abuses by Medicare Advantage plans are cause for alarm, and the Senate is doing the right thing by investigating the issue," said Edward L. Langston, MD, chair of the American Medical Association Board of Trustees.

One major concern is insurance companies' use of independent brokers and agents to sell private Medicare plans. When consumers want to complain about misleading marketing practices, they get stuck between the two, said Michael McRaith, director of the Illinois Division of Insurance. He testified on behalf of the National Assn. of Insurance Commissioners.

"We have companies pointing their fingers at agents. We have agents pointing their fingers at companies," he said.

Federal scrutiny of Medicare health plans began last spring amid a flurry of complaints about deceptive sales tactics. Under pressure, seven major insurance companies, which account for 90% of Medicare private fee-for-service enrollment, voluntarily agreed in June 2007 to stop marketing these plans temporarily. The fee-for-service products drew the most fire from consumers and state regulators.

Before the insurers could restart their marketing, they had to show CMS that they'd adopted several consumer safeguards. These measures included verifying with follow-up phone calls that members actually intended to enroll, explaining in their enrollment materials how the plans work, and testing sales agents to confirm that they understand the plans.

By the end of August 2007, CMS had given all seven insurance companies the go-ahead to resume marketing. By then the agency also had instituted more than a dozen new oversight activities, such as additional "secret shoppers" at Medicare Advantage marketing events, random audits of insurance agent training, and information-sharing with state regulators about consumer complaints regarding agents and brokers.

Limited results

However, a National Assn. of Insurance Commissioners survey of state insurance department officials begun in January shows that abuses remain. Of the 36 states that have responded so far, 34 reported receiving consumer complaints about agent misrepresentations in the marketing of Medicare private plans. Nineteen reported complaints about fraud.

Only 18 states said Medicare Advantage marketing has improved since July 2007, while 14 reported no significant change and two reported a worsening of the situation. Still, the survey found signs of improvement. For example, 21 states reported better communication with CMS.

The common complaints that remain include insurance agents saying they're "with Medicare" -- an illegal sales tactic, testified Peter Hebertson, director of outreach at Salt Lake County Aging Services in Salt Lake City. Some agents also switch seniors from traditional Medicare to Medicare Advantage plans without informing them of the potentially higher co-payments or deductibles.

"We're getting daily reports about seniors being misled about the Medicare Advantage program," he said. Many companies have acted to stop the abusive sales practices, but independent agents continue to be a problem, he said.

Humana -- one of the seven companies that took a marketing hiatus -- received 1,595 complaints about marketing of its Medicare Advantage products, testified Patrick O'Toole, Humana vice president for Medicare sales. This figure represents 0.6% of its Medicare Advantage sales by agents that year. Of those complaints, 258 were validated, and the company took corrective action, including firing 44 agents, he said.

America's Health Insurance Plans spokesman Mohit Ghose said there is room for improvement in Medicare Advantage plan marketing. "I don't know that [complaints are] increasing or decreasing, but one complaint is too many."

More state muscle?

At the Senate Finance Committee hearings, lawmakers discussed possible legislative solutions. Among the options is increasing state enforcement authority. State insurance commissioners can discipline independent agents, but federal law does not allow them to investigate insurance companies, said McRaith, director of the Illinois Division of Insurance.

Baucus and Sen. Charles Grassley (R, Iowa) said they are exploring the idea of more state-assisted enforcement. Grassley also suggested that requiring all private Medicare plans to pay agents the same commissions instead of today's varying rates could discourage high-pressure sales tactics. Sen. Olympia Snowe (R, Maine) is considering whether new enrollees should be able to switch their plans within 90 days of signing up.

McRaith said the National Assn. of Insurance Commissioners supports a bill introduced last July by Sen. Herb Kohl (D, Wis.). The Accountability and Transparency in Medicare Marketing Act of 2007 would ask the insurance commissioners to develop standardized marketing rules and agent commissions within nine months of the bill's enactment. The measure has not been scheduled for a hearing.

The AMA, AHIP and Humana had not taken a position on the bill as of press time in mid-February. However, Humana supports standardized agent commissions and creation of a database of agents who've been associated with fraud, O'Toole said.