Congress Eyeing Broker Payments Behind Booming Medicare Sales

Lawmakers are taking a closer look at the money that changes hands between health insurers and the brokers who sell their Medicare plans, in an effort to crack down on payments that may be steering seniors to some plans over others.

(Bloomberg) — Lawmakers are taking a closer look at the money that changes hands between health insurers and the brokers who sell their Medicare plans, in an effort to crack down on payments that may be steering seniors to some plans over others.

Federal rules already limit the commissions Medicare plans can pay brokers. But a group representing nonprofit insurers says some companies are skirting these rules by offering extra payments that aren’t explicitly called commissions but can look like them. These payments can sometimes double brokers’ compensation and influence them to push plans that pay the most, said Ceci Connolly, chief executive officer of the Alliance of Community Health Plans. 

The Senate Finance Committee is examining this issue in a hearing Wednesday, according to a spokesperson for Senator Ron Wyden, the Oregon Democrat who chairs the committee.

“We all thought everyone was following the cap on commissions,” Connolly said, but some are “abusing a loophole” to inflate what brokers make. Connolly’s group looked into the issue after hearing from member plans that faced a “financial arms race” having to pay brokers higher rates to have their plans offered. 

US health insurance companies race to enroll seniors in private Medicare plans each year, with insurance agents working the phones to sell coverage during an enrollment window that starts in mid-October. About 31 million people – more than half of Medicare enrollees – opt to get their coverage through private plans known as Medicare Advantage. The plans are growing in popularity. Seniors typically have 43 Medicare Advantage plans to chose from, more than double the number in 2018. Some $450 billion of taxpayer money — just over half of all Medicare spending — flows through these types of plans.

Those who choose those plans often have lower out-of-pocket costs, but they agree to limits on the doctors they can see and what care they can get. The leading insurance companies – UnitedHealth Group Inc., CVS Health Corp. and Humana Inc. – compete hard to grow their market share because it’s so profitable.

They rely on brokers, including publicly traded online ones like eHealth Inc., Selectquote Inc. and GoHealth Inc., to attract new customers.

Ad Blitz

The industry’s marketing juggernaut switches on each October when Medicare rules permit widespread advertising. Companies run incessant TV ads, fill mailboxes with marketing brochures, and blanket websites with targeted ads.

There’s a vast web of little-known intermediaries that connect Medicare Advantage plans with American seniors. It includes websites and call centers designed to gather leads on potential customers and licensed agents and brokers who make sales in one-on-one conversations. Some in-house agents work only for one company, while others sell a variety of plans.

Brokers earn commissions at rates regulated by the Centers for Medicare and Medicaid Services – as much as $600 or so for a new member and $300 for someone renewing coverage. But the larger organizations they work for also collect payments from plans for training, compliance and support, like providing systems to record sales calls.

“It is such a highly regulated space, agents can’t do it on their own,” said John Greene, senior vice president of government relations for the National Association of Benefits and Insurance Professionals, an industry group that represents agents and brokers.

Recent concerns about payments beyond set commission rates are overblown, he said, adding smaller nonprofit health plans are pushing this narrative because they want regulators to tilt the playing field in their favor. “They either don’t have the traction or they don’t have the marketing budget to talk about their plans enough,” he said.

A few large insurers enroll the bulk of Medicare Advantage members. UnitedHealth and Humana have nearly half the market, with about 9 million and 5.5 million members respectively, according to data compiled by KFF. Plans owned by CVS Health’s Aetna unit have 3.3 million, Blue Cross Blue Shield plans, including those operated by Elevance Health Inc., cover another 4.4 million.

Lawmakers have increasingly scrutinized how the plans are marketed in recent years. A report from the Senate Finance Committee last year described deceptive marketing tactics, “fraudulent sales practices,” and instances of people being enrolled in Medicare Advantage plans without knowing it. Medicare officials tightened marketing rules after a spike in complaints.

Connolly’s Alliance of Community Health Plans, in letters to lawmakers and the Centers for Medicare and Medicaid Services, has asked for more regulation of the payments plans make to brokers beyond commissions, such as incentives for brokers to enroll people in high-quality plans. The group is also pushing for more disclosure into how much brokers get paid.

Representatives for the Centers for Medicare and Medicaid Services didn’t respond to questions.

It’s unclear how much money is changing hands beyond official commissions, or what the additional payments are for. The large, publicly traded online brokers – companies like eHealth, Selectquote and GoHealth – report revenue from both commissions and other sources.

Selectquote gets “volume-based bonuses” from some insurers for meeting sales targets, as well as “marketing development funds” and payments for lead generation, according to a company filing with the Securities and Exchange Commission. The marketing funds are “additional compensation and incentive to drive incremental policy sales” for certain customers, according to the filing. 

The company’s largest customers are UnitedHealthcare and Humana, which together made up more than half of revenue in the year ending June 30. While much of Selectquote’s business is in Medicare, Selectquote also sells other types of insurance like life and auto.

Two other web brokers, eHealth and GoHealth, also report significant non-commission revenue and say they do much of their business with the big, for-profit Medicare carriers. All three of the web brokers disclosed that they got subpoenas from the US Attorney’s Office in Massachusetts in 2022 seeking information about their arrangements with insurers. 

The companies didn’t respond to requests for comment. A Department of Justice spokesperson declined to comment.

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