DOJ Suit Against Medicare Plans, Brokers Leaves Consumers Unsure

Allegations that Medicare managed care plans paid hundreds of millions of dollars in illegal kickbacks to insurance brokers that help enroll people into coverage have renewed concerns about whether the intermediaries act in the best interests of beneficiaries and new enrollees as required by federal law.

A recent Justice Department lawsuit claims that from 2016 to 2021, leading Medicare Advantage insurers CVS Health Corp., Elevance Health Inc., and Humana Inc. illegally paid insurance brokers eHealth Inc., GoHealth Inc., and SelectQuote Inc. to steer beneficiaries into their respective plans.

The government action comes amid a legal battle to scrap court-delayed provisions of a 2024 US Department of Health and Human Services rule that capped and restricted MA plan payments to agents, brokers, and third-party marketing organizations. The rule (RINs 0938-AV24 and 0938-AU96) was designed to thwart the kind of improper payments alleged in the DOJ complaint.

“Brokers repeatedly directed Medicare beneficiaries to the plans offered by insurers that paid them the most money, regardless of the quality or suitability of the insurers’ plans,” said the DOJ suit, which was initiated by a whistleblower. “They incentivized their agents to sell those plans,” and “at times ‘shut off,’ or refused to sell, plans of insurers who did not pay or did not pay enough in kickbacks.”

In press releases and statements, the defendant MA insurers and brokers have disputed the allegations and said they intend to fight them in court.

But after lingering concerns from lawmakers, regulators, and researchers about MA plans’ financial relationship with agents and brokers, the DOJ suit raises a troubling question for consumers: Are the allegations the exception or the rule in the bustling Medicare Advantage marketplace?

“Going to a random broker that you don’t know anything about can be dangerous because they might just be trying to make as much money” as possible “and not really looking at your best interests,” said Sharona Hoffman, co-director of the Law-Medicine Center at Case Western Reserve University School of Law.

Consumers seeking unbiased help in selecting an MA plan should contact their State Health Insurance Assistance Program, said Carrie Graham, director of the Medicare Policy Initiative at Georgetown University.

The National Association of Benefits and Insurance Professionals, which represents health insurance agents and brokers, declined comment on the DOJ case. But the group “supports good-faith actors” and condemns “business practices that exploit consumers or discriminate against vulnerable populations,” a press release said.

Missing the Full Picture?

Agents enroll beneficiaries into insurance products, while brokers serve as go-betweens for potential enrollees and MA insurers. Both are compensated through commissions from MA insurers tied to enrollment and plan retention. Both can also earn additional bonuses for meeting other goals.

Studies suggest MA plans often offer these additional incentives “through third-party field marketing organizations” to “prioritize enrollment into some plans over others,” the rule said. That could violate federal law, which requires that compensation create “incentives for agents and brokers to enroll individuals in the Medicare Advantage plan that is intended to best meet their health care needs.”

The Better Medicare Alliance, which advocates for the Medicare Advantage program, and America’s Health Insurance Plans both declined a request for comment.

Larger plans with “deep pockets” can “use any number of financial strategies to scoop up a lot more members,” said Ceci Connolly, CEO of the Alliance of Community Health Plans. “What really concerns us is that a lot of seniors, when they go to shop, they’re not getting the full picture,” because agents and brokers aren’t required to sell all available MA plans, Connolly said.

The alliance, which represents nonprofit health plans, brought its concerns to Congress and the Centers for Medicare & Medicaid Services. The input helped inform the disputed CMS rule, said Michael Bagel, the group’s associate vice president for public policy.

That 2024 rule barred MA-plan contracts from creating incentives that could inhibit an agent or broker’s “ability to objectively assess and recommend” the best plan for beneficiaries. The rule also capped MA-plan payments to agents, brokers, and FMOs, which provide back-office support for independent insurance agents and brokers.

And it revised the scope of items and services included within the definition of agent and broker “compensation.”

The CMS claimed some enrollment-based “administrative” payments could include “golf parties, trips, extra cash, and payments for travel,” said Neil Patil, policy director at Georgetown’s Medicare Policy Initiative. The rule placed “administrative” payments under the agent/broker compensation umbrella, which is regulated by the agency.

Rule Paused by Judge

But three 2024 lawsuits claimed the CMS overstepped its statutory authority by finalizing the rule. And on July 3, 2024, a federal judge in Texas, who’s hearing two consolidated legal challenges to the rule, delayed the scheduled October 2024 implementation of both the rule’s restrictions on fees paid by MA plans to agents, brokers, and FMOs, and the restriction on contract terms between the same entities and MA plans.

The memorandum opinion by Judge Reed O’Connor of the US District Court for the Northern District of Texas found the plaintiff FMOs were likely to prevail on their arguments that the rule’s payment changes and its restrictions on contract terms were “arbitrary and capricious.” O’Connor also held that judicial relief should be universal and not limited to just the parties in the cases.

The third suit is being held in abeyance pending resolution of the Texas cases.

Despite the litigation, Connolly and Bagel said the rule’s other provisions have improved the payment behavior of MA plans, agents, and brokers. “But we definitely need a referee in the form of more authority granted by Congress to the federal government to take action, or for the states take up their own torch to regulate these folks,” Bagel said.

In March, the National Association of Insurance Commissioners recommended that Congress amend the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 to give “states authority to oversee the advertising and marketing of MA plans.”