As if agents didn’t have enough on their minds with the SEC’s proposed Rule 151A, the AIG bailout, and the current turmoil on Wall Street — along comes CMS to really stir things up.
On Sept. 15, the Centers for Medicare and Medicaid Services (CMS) released its final updated regulations for agents selling Medicare plans. The restrictions are an effort on the part of CMS to protect Medicare beneficiaries from deceptive or high-pressure marketing tactics during the open enrollment period. The regulations took effect immediately and left many agents wondering how they could comply before the Medicare marketing period began on Oct. 1.
Whatever your opinion of CMS’ actions, there is no doubt that the new regulations are here to stay. The following is your guide to navigating the new policies, along with ideas on how to better serve your clients while abiding by the guidelines.
Communicating with the incommunicado
Perhaps the biggest blow to agents prospecting for new Medicare clients comes in the form of more stringent policies regarding communicating with beneficiaries. Under the new regulations, agents are prohibited from the following activities:
- Outbound marketing calls, including marketing other Medicare products to existing members, unless the beneficiary requested the call.
- Calls to former members who have unenrolled or to current members who are in the process of voluntarily unenrolling.
- Calls to beneficiaries to confirm receipt of mailed information.
- Calls to beneficiaries to confirm acceptance of appointments made by third parties or independent agents.
- Approaching beneficiaries in common areas, such as parking lots or hallways.
- Calls or visits to beneficiaries who attended a sales event, unless the beneficiary gave express permission at the event for a follow-up call or visit.
Craig Ritter, president of Ritter Insurance Marketing, which specializes in marketing insurance products to seniors, said he thinks the restrictions on telemarketing in particular will be very damaging. He does, however, offer a few suggestions for alternative marketing methods.
Ritter’s first piece of advice centers on leveraging referrals.
“I think seniors tend to be very helpful if they think that you do a good job,” he said. “I think in a lot of cases, they’ll go out of their way for you. Where you wouldn’t expect a baby boomer or a Gen X-er to make five phone calls to their friends, seniors will do that if they really think you helped them.”
With the new regulations, however, your senior clients must be more proactive in their referral efforts.
“At the end of a sales presentation, you can’t just say, ‘Hey, do you have three or four friends who I can help the way I helped you?’ and then have them write down their friends’ information,” Ritter said. The senior has to be the one who contacts you, he said, so you can’t call prospects even if a client does provide their numbers.
Instead, Ritter suggested that you provide business cards, as well as CMS-approved brochures and fliers promoting the products you sell. That way, senior clients will easily be able to pass your information to friends and family.
“I think it would be a good investment to make sure that your clients have some collateral to hand out,” he said. “If you have 100 clients and you send them all five or 10 business cards or fliers that are compliant [with CMS regulations] that they could hand out to their friends, that would help. Even if you write one or two additional cases, that’s probably a good investment.”
Ritter also suggested establishing a Web site with Medicare information and said this about insurance companies’ involvement in the process:
“I’m hopeful that insurance companies will be providing their agents with CMS-approved Web pages. All the company has to do is get a template of a Web page with all their products and allow agents to fill in their contact information.”
Bob McClellan, executive vice president of United Insurance Group Inc., suggested using generic marketing materials to reach new clients. He also recommended sending letters to existing clients asking them to call you. Under the guidelines, any promotional materials that reference specific plan benefits or companies must be approved by CMS. McClellan said he’s even pulled ads that merely mention Medicare in order to avoid being censured.
“What a person would have to do is send out a very generic piece to individuals saying something like, ‘This is the time of year that would be a good time to review health insurance products,’” he said. “Then, when [the client calls], you have to be crystal clear that you would like to talk about Medicare Advantage and Medicare supplement options.”
Cross-selling and appointments
The new guidelines prohibit cross-selling of products and add further restrictions to the scope of appointment regulations.
Specifically, marketing of non-health care related products, such as annuities or life insurance, to prospective enrollees during any Medicare Advantage sales activity is prohibited. If a beneficiary requests information on other products during a sales presentation or appointment, the agent must make a separate appointment to discuss those products with the client. The new appointment has to take place at least 48 hours after the initial appointment. Agents can leave information on other products with their clients during the initial appointment, as long as they don’t leave enrollment applications.
Prior to making a Medicare appointment, the beneficiary must agree to the scope of the appointment, and the agreement must be documented. For example, if a beneficiary calls an agent and schedules an appointment to learn about their Medicare options, the agency must record the phone conversation and ensure that the scheduled appointment doesn’t go beyond the topic boundaries set during the conversation.
McClellan said CMS will randomly monitor phone calls between clients and Medicare providers to ensure that the regulations are being followed.
Marketing practices and seminars
Organizations are now prohibited from conducting any sales or marketing activities, including distributing and collecting enrollment applications, in any health care settings.
These spaces include waiting rooms, exam rooms, patient rooms, dialysis centers, and pharmacy counter areas.
Medicare seminars are still allowed, but they will be held under much higher scrutiny than ever before.
McClellan discussed some of the changes established in the regulations.
“At the seminars, you have to follow a script that CMS approved,” he said. “You can provide information on plans, but if they want to specifically consider whether the coverage is good for them, they would have to come back, and they have to initiate the appointment. For example, at a seminar you might pass out a card, ‘Would you be interested in a personal analysis to go over your options?’ to give them a chance to set up a one-on-one appointment.”
CMS will also have about 900 secret shoppers visiting seminars. McClellan noted that any seminar that is widely advertised is almost guaranteed to have secret shoppers present.
Another major change to seminar marketing is that agents are no longer allowed to provide or subsidize meals at events where plan benefits are discussed or plan materials are distributed. Producers are permitted to provide refreshments and light snacks, such as fruit, raw vegetables, pastries, cookies, crackers, muffins, cheese, yogurt, etc.
Also, educational events may no longer include any sales activities, including the distribution of marketing materials or plan applications. CMS holds that the purpose of educational events is to provide knowledge about the Medicare program in general, so any attempts to steer a beneficiary toward a certain product are not permitted.
Organizations that sponsor educational events must include a disclaimer that the event is “educational only and information regarding the plan will not be available.”
Compensation structure
The new payment structure set forth by CMS is designed to ensure that agents are enrolling beneficiaries in the plan that best fits their needs as opposed to the one that will give the highest return for the agent.
Medicare plans are not required to compensate agents for selling Medicare products. If they do compensate agents, the plan must pay on a six-year cycle, starting on the initial year and paying on each of five subsequent renewal years. Compensation includes anything from commissions to trip rewards and finders’ fees.
An agent’s first-year compensation on a plan cannot exceed 200 percent of the total compensation for each individual renewal year. For example, if a plan pays $200 in the first year, then the renewal commission would be $100 a year for the next five years, Ritter said.
Agents will receive renewal compensation for the five-year renewal period as long as the member stays enrolled in the plan, or is enrolled by the same agent in a similar replacement plan.
When a new plan is replaced by a like plan during the six-year compensation cycle, the agent may not receive payment that is greater than the renewal compensation on the original plan. A “like plan” replacement includes, for example, a prescription drug plan replaced with another prescription drug plan, or a cost plan replaced with another cost plan. But if the replacement plan is different, such as a PDP added to a Medicare Advantage-only plan, new commission is paid for enrollment in the added plan.
Ritter said that there are some problems with the way the regulation is written. If a new agent writes a plan for a like policy for a client, the new agent might still only receive a renewal commission, even though they are writing the plan for the first time.
“If I write the second case with the same client, then is CMS going to know that it wasn’t me that sold them the first time around, or am I still going to get first-year commission?” he said. “Is some other guy going to get paid and I’m not, even though I wrote a better policy? There’s a lot of confusion on this topic.”
McClellan agreed, and said that although he has been on several conference calls with companies that have communicated with CMS, no one is 100 percent clear on what the regulations stipulate. A CMS representative told the Agent’s Sales Journal on Sept. 17 that they were still working out the kinks of the guidelines and welcome any comments on areas that need clarification.
The renewal commission structure even applies when agents switch customers to like plans in different companies.
“If you’re in that first-year period and you switch from Humana to Aetna, Aetna will only pay you renewal commissions,” McClellan said. “That’s how it’s being interpreted.”
Ritter said agents need to be careful which plans they choose in order to prevent losing money because of poor choices.
“I think an agent has to be thinking longer-term about which insurance companies are going to be around, not just this year, but hopefully for the next six years,” he said.
“You’re not going to get compensated for changing people year to year, so you’re going to be basically doing the work for free if you have to make a change.”
If an enrollee leaves the plan before the fourth month, the agent will not receive compensation. If the enrollee leaves a plan during or after the fourth month, compensation is prorated based on the number of months that the enrollee was actually a member of the plan.
Ritter doubts that the compensation re-structuring was entirely necessary.
“I don’t think many agents would put a senior into a product that isn’t of benefit to them for the sole purpose of the agent’s dollar,” he said.
Agent training and testing
Beginning with sales and marketing for plan year 2009, agents selling Medicare products must be trained on Medicare rules and on plan details specific to the plan products they are selling. In addition, agents must pass a test (written or computer-based) with a score of at least 85 percent in order to sell Medicare products.
McClellan said that many companies are partnering with America’s Health Insurance Plans (AHIP) to make it easier to obtain certification to sell Medicare for multiple companies. Aetna was the first major company to sign on, followed by Humana. Others may soon follow their lead.
“Slowly but surely, more of these companies are starting to say, ‘Rather than having to get certified with each specific company, we will allow you to go to AHIP to get certified,’” he said.
The AHIP certification costs $100, but most companies are planning to reimburse agents once they enroll clients.
“Once you write five enrollments, the company will reimburse you the $100,” McClellan said.
After passing the AHIP test, agents will still have to pass a test with each company for which they intend to sell products in order to demonstrate their knowledge of the company-specific products.
CMS is accepting public comments on the regulations until Nov. 15. McClellan said that the purpose of the comment period is not to change the regulations based on agent preference, but to ensure that there are no major problems in implementation. To comment or to view the full text of the regulations, visit www.cms.hhs.gov.
Heather Strickland is the associate editor for the Agent’s Sales Journal and managing editor for Insurance Marketing, Agent’s Sales Journal’s sister publication. She can be reached at 800-933-9449 ext. 225 or HStrickland@AgentMediaCorp.com. 