Comments Received from Pennsylvania DOI

Comments received from Pennsylvania DOI

General Comments:

We should be consistent in how we refer to traditional Medicare or original Medicare – some parts say traditional some original – I also don’t think original should be capitalized – either way we should be consistent – capitalize or not.

Paragraph 1: The private insurance sector plays a dominant and major role under the MMA in providing these coverages to the consumer.

Suggestion: “Dominant” and “Major” mean the same thing – the use of both is redundant – choose ne or the other.

Paragraph 2 Suggestion:

The MMA created a new market for the insurance industry in providing outpatient prescription drug coverage to the Medicare eligible population.

Paragraph 4 Suggestion: In addition to the above, the MMA expanded preemption of state law relating to MA plans and PDPs .

Paragraph 1, first sentence: Delete “within and outside of insurance departments,”

Paragraph 1 Suggestion: Recent surveys of DOIs by the National Association of Insurance Commissioners (NAIC) showed that many insurance departments are receiving a proportionally high number of Medicare-related complaints as compared to other insurance markets.1

Paragraph 2 Suggestion: These complaints include reports of agent/broker and/or company misrepresentations in the marketing and sales of MA plans, particularly Private-Fee-For-Service (MA-PFFS) plans, and misrepresentations about provider networks, provider acceptance of plans, reimbursements, benefits, premiums, or other features.

Paragraph 3 Suggestion: Including beneficiaries who believed they were signing up for a PDP or a Medicare Supplement (Medigap) Plan . . .

1 NAIC Senior Issues Task Force State Survey on Medicare Marketing Issues, updated 6/1/07. Testimony of Director McRaith to the Senate Finance Committee, February 7, 2008. Comments received from Pennsylvania DOI

Paragraph 4 Suggestion: In many instances, it was reported that when beneficiaries requested disenrollment from the MA plan, it took months to do so.

Paragraph 5: For example, agents used signatures of consumers who thought they were attesting to the agents' MA sales presentations by signing a "form" and ended up enrolling in a MA plan.

Paragraph 5 Suggestion: In addition, agents had beneficiaries sign an MA application even when the beneficiaries had not made a decision to enroll in a MA plan. The agents promised to “hold” the applications, but the beneficiaries were subsequently enrolled in the plan with their knowledge.

Paragraph 6 Suggestion: States also report complaints of aggressive sales practices such as cross-selling whereby agents use access to beneficiaries afforded under the MMA, which allows the agents to explain PDPs, to pressure beneficiaries into other types of insurance products such as annuities, funeral expense policies, life insurance policies, or MA plans.

Paragraph 1 Suggestion: States have also reported improper enrollment of individuals with Alzheimer's disease or dementia, mentally incapacitated individuals, or beneficiaries with limited English proficiency who do not understand the products they are buying.2 Dual-eligible beneficiaries have also been enrolled into plans that are unnecessary or inappropriate.

Paragraph 2 Suggestion: Since aggressive marketing and sales practices, especially in the MA-PFFS market have increased dramatically since the implementation of the MMA, these practices are likely a direct result of the substantial payments Medicare Private Plans receive under the CMS bid process. These payments translate to large compensation for agents. Some plans reportedly offer bonuses up to $10,000, in addition to commission, for high levels of enrollment in MA products. Arguably, such substantial financial incentives drive sales practices, plan choices offered, and advice provided to Medicare beneficiaries.

Paragraph 3 Suggestion: The sheer number of Medicare Private Plans leads to confusion among beneficiaries. For example, in 2007, the State of Florida reported that thirty-seven insurance carriers were marketing and selling over 300 different Medicare Advantage (MA) plans. All of these plans had different coverage levels, cost-share amounts, and premiums rates. Additionally, the plans offered 57 standalone Medicare Prescription Drug Plans (PDPs), all of with different coverage levels, cost-share amounts, and premiums rates, as well as

2 Testimony of Alan Heumann, Senior Health Insurance Assistance Program Director, Louisiana Department of Insurance, NAIC public hearing Sept. 11, 2007, p. 2. Comments received from Pennsylvania DOI different drug formularies.3 As a result of the number of plans and the complex nature of these plans, it is very difficult, if not impossible, for beneficiaries to make informed decisions when purchasing MA and PSP products.

Paragraph 4 Comment: Is the 20% of all beneficiaries for 2003 or 2006? If 2003, do we know what the % is now? Would it be more helpful to give the % than to simply say “increased significantly”?

Paragraph 6

In some cases, this is directly the result [these problems are a direct result] of the split regulation between states and the federal . . .

Paragraph 6 Suggestion: Additionally, because of the broad preemption of state law under the MMA and limited state regulatory authority, states report significant problems assisting Medicare-eligible consumers.

Paragraph 1:

Should “proportionately” be disproportionately? Proportionate means fair or balanced? Is that what we are saying?

Complaints made to state DOIs suggest that CMS and the plans are providing conflicting information concerning enrollment or disenrollment and a beneficiary’s current enrollment status. Because of the bifurcated regulatory system, states are unable to directly assist beneficiaries with such problems and can only to refer the individuals to CMS. Even where beneficiaries are able to find solutions to such problems, the final resolution is often delayed for months and generally involves disenrollment and unexpected out-of-pocket costs for the consumers. Beneficiaries who incur unexpected medical expenses resulting from the improper marketing are generally not made whole even when the issues are resolved. Some beneficiaries have been required to pay higher premiums for the Medigap policies that were dropped. Other beneficiaries have been forced to apply to Medicaid for payment of uncovered medical expenses. Such resolutions are not satisfactory, but rather a cost-shift to the individual or other government programs.

Paragraph 4

It was felt by some, CMS, and the plan sponsors, that ensuring plans meet the requirements in CMS' 2008 Call Letter and the May 25, 2007 guidance memorandum would address the problems in the MA marketplace.

3 Senkewicz testimony, p. 1. Comments received from Pennsylvania DOI

Comment: I’m not sure who the “some” in this sentence are – CMS and the plan sponsors or someone else?

Also in the line above there needs to be a space between certified and compliance.

First full paragraph (paragraph 1) They The guidelines set forth the types of filings that qualify for expedited review and also set forth deemer provisions on CMS.

Paragraph 3 The plan sponsor must certify that Medicare marketing materials use the CMS format and acceptable terminology, and submit them the materials to CMS.

Paragraph 4 line 2 “has” should be “have” The model documents . . . and the use of . . . documents have caused problems . . .

Regulatory Framework – Suggestion:

Regulatory Framework State regulators, consumer groups  The regulatory structure for marketing and sales activities should use the Medigap model for regulatory authority.  General marketing and sales standards, should be developed and then promulgated by CMS as a federal regulation, in a manner similar to Medigap. o States that adopt the CMS regulation as state law can then enforce those standards against the plans. o States that do not adopt the CMS regulation would remain preempted in regulating the plans’ marketing and sales activity. Other issues: State regulators, consumer groups  The current federal regulator framework does not adequately protect consumers from marketing and sales abuses.  The current pre-emption of state’s regulatory authority of Medicare private plans, with the exception of licensing and solvency, separates the regulation of agents from the regulation of plans resulting in an inefficient and inadequate regulatory framework.  State regulators should be able to share regulatory authority with CMS on Medicare private plans while at the same time operating in a regulatory environment that works for both the plans and the agents who sell the plans.  States should have the authority to enforce compliance by plan sponsors of a common set of state regulations developed by the NAIC and CMS on the marketing of Medicare insurance products. Comments received from Pennsylvania DOI

o Under this proposal, the burden on plans and confusion to beneficiaries would be minimized as states would clearly stay out of the bulk of CMS functions, including contract negotiation, pricing, enrollment and disenrollment, and approval of marketing materials; and o State regulators would have greater authority over enforcement of marketing and sales violations, and consumer protection. Industry, CMS  Medicare Advantage (MA) and Medicare Prescription drug plans (PDPs) are different from Medigap, and thus should be regulated differently.  MA plans and PDPs are based on a payment system of federal funding where carriers contract with CMS to provide Medicare covered services to beneficiaries. Contract requirements, including marketing and sales regulations, guidelines,  etc are established by CMS.  Medigap is a private health care plan sponsored by private health insurance companies and paid for with private health care dollars (subscriber payments) and no involvement of federal funds.  Medigap insurers are subject to state regulation, with limited direct federal oversight. State regulation of Medicare Advantage, other than solvency and licensing, would result in conflicting and varied regulation of MA plans, which would be costly to plan and confusing to beneficiaries.

Industry, CMS  Increase collaboration and information sharing between CMS and state regulators, but do not change the fundamental federal oversight of Medicare private plans. Other issues: State regulators, consumer groups  All Subgroup members support the increased collaboration, coordination, and information sharing between CMS and state regulators.  Some members would not support this collaboration as the sole solution to the problems in the marketplace but rather an endorsement of the status quo and the current bifurcated regulatory system which does not allow states to adequately protect their citizens.  Despite CMS and states' best efforts, this approach of increasing collaboration and information sharing has not worked up to this point to alleviate fraud and abuse in the market. Industry, CMS  The problems in the market place can be addressed by increased communication and information-sharing between state and federal regulators, modeled on the effort begun by the Memorandum of Understanding between states and CMS.  This information-sharing would assist states in better exercising their authority over agents, but maintain federal oversight of this program.

OR – IF you want more text: Comments received from Pennsylvania DOI

Regulatory Framework

The regulatory structure for marketing and sales activities should use the Medigap model for regulatory authority.

State regulators and consumer groups argue that general marketing and sales standards, should be developed and then promulgated by CMS as a federal regulation, in a manner similar to Medigap. Further, states that adopt the CMS regulation as state law can then enforce those standards against the plans. However, States that do not adopt the CMS regulation would remain preempted in regulating the plans’ marketing and sales activity.

Even so, state regulators and consumer groups remain concerned that he current federal regulator framework does not adequately protect consumers from marketing and sales abuses. The current pre-emption of state’s regulatory authority of Medicare private plans, with the exception of licensing and solvency, separates the regulation of agents from the regulation of plans resulting in an inefficient and inadequate regulatory framework. State regulators feel they should be able to share regulatory authority with CMS on Medicare private plans while at the same time operating in a regulatory environment that works for both the plans and the agents who sell the plans.

States should also have the authority to enforce compliance by plan sponsors of a common set of state regulations developed by the NAIC and CMS on the marketing of Medicare insurance products. Under such a proposal, the burden on plans and confusion to beneficiaries would be minimized as states would clearly stay out of the bulk of CMS functions, including contract negotiation, pricing, enrollment and disenrollment, and approval of marketing materials; and state regulators would have greater authority over enforcement of marketing and sales violations, and consumer protection.

Industry and CMS maintain that Medicare Advantage (MA) and Medicare Prescription drug plans (PDPs) are different from Medigap, and thus should be regulated differently. They argue that MA plans and PDPs are based on a payment system of federal funding where carriers contract with CMS to provide Medicare covered services to beneficiaries. Contract requirements, including marketing and sales regulations, guidelines, etc are established by CMS. Further, Medigap is a private health care plan sponsored by private health insurance companies and paid for with private health care dollars (subscriber payments) and no involvement of federal funds. Medigap insurers are subject to state regulation, with limited direct federal oversight. State regulation of Medicare Advantage, other than solvency and licensing, would result in conflicting and varied regulation of MA plans, which would be costly to plan and confusing to beneficiaries.

Increase collaboration and information sharing between CMS and state regulators, but do not change the fundamental federal oversight of Medicare private plans. Industry, CMS All Subgroup members support increased collaboration, coordination, and information sharing between CMS and state regulators. However, some subgroup members would Comments received from Pennsylvania DOI not support such collaboration as the sole solution to the problems in the marketplace but rather an endorsement of the status quo and the current bifurcated regulatory system which does not allow states to adequately protect their citizens. Member feel that despite CMS and states' best efforts, this approach of increasing collaboration and information sharing has not worked up to this point to alleviate fraud and abuse in the market.

Industry and CMS argue that the problems in the market place can be addressed by increased communication and information-sharing between state and federal regulators, modeled on the effort begun by the Memorandum of Understanding between states and CMS. Further, such information-sharing would assist states in better exercising their authority over agents, but maintain federal oversight of this program.

As a result of the problems identified in the MA-PFFS market, CMS has implemented agent and broker training requirements. Companies are now responsible for ensuring that agents and brokers selling PFFS products have adequate training. CMS may expand these training requirements to all Medicare private plans at a later date. {make this a footnote for better transition to the next paragraph: However, it should be noted that these requirements are sub-regulatory guidance and do not have the same legal effect as the Medicare statute and regulations}

Paragraph 2 Suggestion: The content of the training program and test must cover marketing guidelines, compliance requirements, federal and state regulations, and product-specific training. Further, CMS requires agents and brokers selling PFFS products to be trained and tested on the subject matter and to attain a minimum test score of 80 percent.4

Paragraph 6 & 7 and Page 21 and Page 22 Paragraph 1, & 2,

Suggestion: States derive their regulatory authority over agents and brokers from laws such as the Unfair Trade Practices Laws. Many states have similar procedures for acting on consumer complaints against agents and brokers and for pursuing necessary enforcement actions including orders limiting agent/broker activity, suspension or revocation of licenses, and monetary fines.

States currently have several regulatory systems in place to track agents and agent activity including the National Insurance Producer Registry (NIPR) Producer Database (PDB). NIPR developed, implemented, and maintains the PDB, a central repository of producer licensing information which is updated on a regular basis by participating state insurance departments.

4 CMS Memo to All Medicare Advantage Organizations offering Private Fee for Service Plans, November 28, 2007, "Information on PFFS marketing oversight". Comments received from Pennsylvania DOI

The PDB contains producer information including demographics (such as name and address, licensing (states in which the agent is licensed, license numbers, authorized lines of business, and license status), appointments (including terminations), and regulatory actions and permits users to create and download the information in a single report for all 50 states and the District of Columbia and Puerto Rico. The PDB also includes producer information from other enforcement-type data bases maintained by the NAIC.

In order to better track the agents who sell for the plans and clearly make plans responsible for the acts of their agents, some states have required plans to appoint agents. As stated above, CMS has taken the position that states cannot require plans to appoint their MA and PDP agents. To track agent activity, CMS has chosen to provide states with a listing of agents rather than requiring state agent appointments or requiring agents to use their National Insurance Producer Registry (NIPR) number on the application. CMS seems to have ignored the agent listing, monitoring and reporting systems already in place at the state insurance regulatory level.

However, CMS does not require use of such systems for Medicare private plans and has not utilized the systems in tracking Medicare private plan producers. Further, it is the position of CMS that state agent appointment laws are unenforceable as they relate to Medicare private plans.

CMS Medicare Marketing Requirements make plan sponsors responsible for monitoring and acting on agent activity. CMS requires that plans verify state licensure of agents and brokers as required by state law, and that the plans have a process in place to address agent and broker problems. CMS also requires that plans monitor agents and brokers for marketing violations and track signs that may indicate problems (such as rapid disenrollment, complaints, etc). Yet, the Requirements are silent about plan sponsors reporting improper agent activity to state insurance regulators.

Even so, CMS also now requires that MA-PFFS plans track and report to CMS complaints concerning inappropriate agent and broker marketing activity.5 Further, pursuant to the terms of the MOU between state departments of insurance and CMS, CMS may relay that information to state departments of insurance. Through the information-sharing MOU, CMS and states are able to share some information, but only to the extent that CMS decides to share the information. For example, when CMS receives a consumer complaint about an agent in a state, CMS may relay that information to the relevant state for action. However, states are unable to view complaints about agents licensed in other states, therefore trends or patterns of behavior may go undetected. Furthermore, when a complaint is filed directly with the company, neither the state nor CMS may be aware of the complaint.

Thus, regulators content that the requiring plans to report inappropriate agent and broker marketing activity to the appropriate state insurance department would more effective and would reinforce collaboration and cooperation between states and CMS.

5 CMS November 28, 2007 memo to PFFS plans. Comments received from Pennsylvania DOI

Additionally, with agent identification, tracking, and regulatory systems already in place, state insurance regulators should be utilized in a manner that allows states to carry out their regulatory duties concerning MA and PDP agents. Further, NIPR numbers should be captured by Medicare private plans as they contract with agents in those states where appointments are required, plans should appoint the agents with whom they contract to sell their coverage, and the data bases should be populated for Medicare private plan agent activity as they are for commercial business.

Paragraph 1 Since there is no limit on the number and types of MA plans a plan sponsor may develop and get approved, many plan sponsors could have over a dozen plans available in a given area.

Question: Do we know if the plans actually have “over a dozen plans,” if so, shouldn’t we just say “currently many plan sponsors have more than a dozen plans . . .”

Paragraph 1 State regulators believe that the financial incentives encourage plan sponsors to develop the many different types of MA plans so that the can compete with their fellow plans, often to the detriment of the Medicare-beneficiary. Paragraph 2 One plan sponsor has held sales lunches for the Medicare-eligible where the only products they would discuss are the MA-PFFS products while the plan sponsor had other MA products available. Paragraph 4 Although it is agreed that a majority of agents are conducting themselves in forthright and honest manner, state regulators have reported significant agent misconduct in the area of MA sales in recent NAIC surveys. .

Paragraph 1 In fact, states provided examples where dual-eligible beneficiaries were enrolled in MA- PD plans resulting in substantially less health coverage and prescription drug coverage at a greater cost than if they had remained in their current program.

Question: Should we footnote these statements?

C. Conclusions

Suggestion: Comments received from Pennsylvania DOI

State insurance regulators and consumer groups recommend the following in response to the financial incentive issues:

1. Bring plan sponsor financial compensation for Medicare Advantage plans in line with Original Medicare. We can find no justification for the compensation being paid to the MA plan sponsors, especially for the MA- PFFS products. While MA managed care plan compensation should also be reviewed, the problems uncovered in MA-PFFS plans as a result of their compensation levels do not directly translate to the MA managed care plans.

2. Consideration should be given to Consider requiring MA plans to be guaranteed renewable. Such a requirement could justify a greater compensation level because the plan sponsors would not be able to quit the program in any given year as they can today.

3. Agent compensation should also be reviewed, Review agent compensation especially with respect to bonus levels based only on volume rather than suitability and persistency. The financial incentives illustrated above are a clear example of incentives for unsuitable sales, high pressure sales tactics and outright fraud. Bonuses should be allowed on a proper basis and at reasonable levels to address the incentives for misconduct at these higher levels.

4. Agent compensation should be limited Limit agent compensation as it is for Medicare supplement insurance (Medigap plans). Under the Medigap model, first year compensation may not be greater than twice renewal compensation and renewal compensation must be paid for at least 5 years. In addition, limit replacement commissions to may not be greater than the renewal commissions for the product.

5. Require MA plans to be guaranteed renewable in some form.

6. Consider requiring MA plans to meet a certain loss ratio over the life of the plan, similar to the requirements for Medigap plans. In addition to requiring MA plans to be guaranteed renewable in some form, consideration should be given to requiring MA plans meet a certain loss ratio over the life of the plan, much as is required of Medigap plans.

First Paragraph under A. Number of Plans

For example, in one state’s county, according to the information available on the “medicare.gov” suggestion: change to “According to information on the Medicare.gov website, a county in one state . . . .”

Last paragraph on page 27 and first two paragraphs on page 28 – suggestion: Comments received from Pennsylvania DOI

CMS and the plan sponsors argue that having a large number of plans provides more consumer choice because consumers can select the plan that suits them the best. Further, CMS and plan sponsors argue that there are resources available to consumers including the Medicare website, agents of the plan sponsors, family members, neighbors and friends, and SHIIP counselors to assist the consumers in making buying decisions.

In addition, CMS and plan sponsors argue that having more plans and plan sponsors creates a competitive market, which in turns offers more benefits and lower prices to consumers. An example given in support of this argument is that in the PDP market the benchmark premium dropped from 2006 to 2007.

State insurance regulators and consumer groups do not agree with the industry’s and CMS’s assessment of the market. While they agree that consumer choice can be a good thing, too much choice involving very complicated and technical products can result in no choice at all. This is because the typical consumer cannot, because of the large number of choices available with sometimes subtle, yet significant coverage and cost- share differences, make an informed buying decision.

Paragraphs 2 under B through paragraph 1 on page 29 Suggestion Thus, for consumers to make an informed buying decision, they must understand the myriad of benefits provided, the cost-shares contained, if the MA plan includes prescription drug coverage, and the drug formulary for each MA plan available in their geographic area. Achieving such a level of understanding is a daunting task for experts in the Medicare field and more so for consumers. In fact, state insurance regulators and consumer groups believe the marketing and sales issues, the number and variety of plans available, the differences in coverage, and cost-shares between plans, make informed decision-making impossible for consumers. Again, plan sponsors argue that more choice is better and results in a competitive market with lower costs and better coverages.

Even so, state insurance regulators have noted that MA products were sold to dual- eligibles with less coverage than they had under original Medicare. Additionally, these products had greater cost-shares and premiums and reduced prescription drug coverage. While these sales are clearly unsuitable and arguably MA plan and agent misconduct, if the coverages had been comparable, consumers could have more easily recognized that the products were not in their best interest.

However, the lack of comparability between plans is not the only issue for consumers; the premium rates, coverage levels, and cost-shares of the plans change from year to year for virtually every plan. These changes mean that the consumers must go through the same analytical process for choosing a plan every year to ensure that they have an appropriate plan.

first paragraph under C suggestion: Comments received from Pennsylvania DOI

Renewability is also a problem with the MA products. Because the contract between CMS and the plan sponsor is for only the calendar year, the plan sponsor has the right to pull its plans from the market or add plans each year so long as the plan follows the requirements set forth by the federal law and CMS guidance. This ability to pull plans each year has resulted in significant instability in the MA market. In fact, plan sponsors are allowed to withdraw plans annually from certain geographic areas, yet the plan sponsors may keep those same plans active in other geographic areas. The ability to withdraw the plans annually means that there is no true commitment to the MA program beyond the calendar year.