RISE previously reviewed the biggest changes contained in updated Medicare Communication and Marketing Guidelines, which include a new definition of marketing, the addition of the term communication, and guidance for the pre-enrollment checklist. The Centers for Medicare & Medicaid Services relaxed its previously stringent requirements and made what many consider to be long, overdue changes, just in time for the 2019 open enrollment period. RISE Executive Director Kevin Mowll looks back at the complex history of the guidelines, questionable health plan sales practices, and why now is the right time for CMS to have released the updated guidelines.
Earlier this month FierceHealthcare published an article that reviewed the aggressive sales techniques that many Medicare Advantage sales agents used in the past to mislead potential customers and how these tactics ultimately led CMS this year to release new marketing and sales guidelines for the first time in 10 years.
It’s important that the industry have context regarding why the stringent guidelines existed and why it makes sense for the agency to make changes to them now, according to Kevin Mowll, executive director of RISE, a speaker at the upcoming The 12th Annual Medicare Marketing & Sales Summit.
The history of the marketing guidelines
The future of insurance plans in the Medicare market looked bleak in the early 2000s, Mowll recalls. The Balanced Budget Act of 1987 had slowly starved HMO plans of premium increases to keep up with the inflation in health care costs. Many plans were driven out of the market and those that remained had to trim their geographical footprints, drop zero-premium plans, and shrink their overall membership.
Despite fears that the industry would dry up completely, Republicans saw the need to revive privatized Medicare plans and provide prescription drug benefits for beneficiaries—a hot political agenda item for senior citizens, who also are key voters. The result was a rescue plan: The Medicare Modernization Act (MMA) of 2003, which was passed in August of that year.
However, Mowll notes, the big pieces of the plan did not fall into place until 2005 and 2006 when Part D became a reality and Medicare beneficiaries finally had a prescription drug benefit available to them. Simultaneously, CMS sponsored a new type of Medicare plan called a Private Fee for Service (PFFS) product, which also could deliver Part D.
There was a big reason that the agency needed to press the accelerator on the PFFS plan, Mowll says. “The badly shrunken Medicare HMO industry had withered away to such an extent that only urban and suburban markets still had any plans available. Their menu of plan options was depleted down to a small list of limited competitive choices, while the rural areas were wholly naked in coverage options,” he says. “The PFFS product was designed to remedy these coverage deficiencies.”
To get private payers back into the Medicare risk plan game, the government boosted payment rates for plans to an average of 115% of what they currently paid under original Medicare (this was an average of county-by-county payment rates that soared as high as 131% of FFS levels in rural counties). It was an overnight success, Mowll recalls, and plans swamped back into contracting with the government to provide plans for Medicare beneficiaries.
“Products and programs were slammed together in a bit of frenzy as thousands of beneficiaries were being swept up into the enrollments of competing Medicare Advantage plans,” he says.
Up until then, employed sales representatives from health plans almost exclusively conducted sales activities for Medicare risk plans because CMS was against contracting this out to brokers. But the agency relaxed this requirement under the MMA, a move that Mowll says partially led to the coming chaos in Medicare plan sales practices.
The other piece that led to the sales chaos was the explosion of PFFS products. Previously CMS required that Medicare risk plans contract with every provider in the network to guarantee that providers would look exclusively to the plan for payment for services that they provided for members. In addition, the agency required that they hold members harmless for any payment disputes that may arise between the providers and the plans.
But the PFFS product was a dramatically different model, Mowll says. CMS allowed the plans to simply demonstrate that they had a state license to put up an insurance product (always a prerequisite). Instead of having direct provider contracts, the government said that the plans could allow members to receive services from any health care provider that accepted Medicare FFS payment if the provider agreed to be “deemed.” Deemed status meant the provider agreed to treat the PFFS members enrolled with the Medicare plan and agreed to payment at the Medicare fee schedule by the plan rather than by Medicare directly. Mowll recalls that some Medicare plans even “sweetened the deal” and offered to pay providers at a slightly higher fee schedule.
The problem, however, was that CMS never educated Medicare providers about the whole program and never encouraged any of them to become deemed. This failure eventually contributed to the drama that would unfold in the coming years, Mowll says.
Questionable Medicare sales practices
“The ultimate conflagration that occurred was, in hindsight, completely predictable,” Mowll says. “The government was preoccupied with the roll-out and implementation of Part D. It was highly visible and welcomed coast-to-coast by seniors, advocacy groups, and the grass roots educational networks set up by the government to help smooth its introduction. However, what the government completely underestimated and was blind to was the spectacular growth and adoption of the PFFS plans in every county in every state of the union.”
This meant that health plans had to educate and train thousands of individual representatives about Medicare Advantage products and CMS Medicare marketing guidelines. Previously these representatives only sold Medicare supplement policies and never had to follow the federal government’s sales practices restrictions. Meanwhile, state requirements around marketing and sales practices were often lax and typically addressed only the more potentially egregious practices of “twisting” and misrepresentation.
“When it was all put into motion, the majority of newly enrolled Medicare Advantage members received the benefits to which they were entitled, and providers made accommodations for the sake of their patients. However, it was an extremely bumpy ride at best. At worst, we experienced some shocking performances by the bad apples that came with the whole bunch of decent sales agents,” Mowll says.
The introduction of strict sales and marketing guidelines
As a result of several reports that sales agents manipulated, misled, and misrepresented potential customers, CMS reacted with extremely strict new sales and marketing guidelines and instituted tight reporting on all sales activities, complaints, and grievances. Further, Mowll says CMS hired staff to personally attend public sales meetings, which were required to be announced well in advance for CMS to attend with secret shopper auditors.
“These strictures were necessary and appropriate, as obnoxious and burdensome as they were to Medicare Advantage plans,” Mowll says. “Over the years from 2007 through 2010, cowboy sales and marketing practices practically evaporated, which was what CMS needed to do to respond to the public outrage and bad press of the 2006 and 2007 era. However, those strict practices remained in place until just recently, outlasting their usefulness and becoming overly burdensome and costly.”
The previous guidelines helped to produce a well-trained, well-informed, and relatively compliant sales force of both employed and contracted sales representatives, according to Mowll. Each representative must take and pass an annual sales practices exam to earn the right to sell Medicare Advantage plans for another year.
“At this point in time, it is appropriate to finally relax the most burdensome and taxing requirements,” he says. “This move on the part of CMS is a bit overdue and will be a welcome change. The Medicare Advantage Organizations will be eager for this move and, at the same time, will likely be eager to ensure that none of the excesses of long ago reappear on their watches for fear of losing the privilege of a more relaxed regulatory environment for sales and marketing.”
RISE will provide the latest on guidelines changes, marketing approaches, senior buying trends, and sales innovations at The 12th Annual Medicare Marketing & Sales Summit, Feb. 25-26, 2019 in Las Vegas.