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Insurers' Tactics in Marketing Drug Plan Draw Complaints
By Robert Pear, The New York Times
November 27, 2005
Bush administration officials say they have received scores of complaints about the aggressive tactics used by some insurance companies and agents to market Medicare's new prescription drug benefit.
The officials said they would take disciplinary action if they found that the tactics had broken federal rules.
Possible violations reported to Medicare officials in the past few weeks include uninvited door-to-door solicitation of business and misrepresentation of insurance products.
Federal and state officials said they had also received complaints that some insurance agents identified themselves as working for the Social Security Administration or the federal Centers for Medicare and Medicaid Services.
In addition, they said, some insurance agents have asked beneficiaries for personal information like Social Security numbers and credit card or bank account numbers.
"These steps are illegal, totally inappropriate and unacceptable," said Patricia P. Smith, who works with health plans as director of the Medicare Advantage Group at the Centers for Medicare and Medicaid Services. "They not only endanger the beneficiary. They could endanger the program. This will draw the ire of people who are legitimately looking at the program to make sure beneficiaries are protected." The federal government can take a range of compliance actions, like imposing a corrective action plan on an insurer or freezing its enrollment. States can fine insurance agents and suspend or revoke their licenses. Insurers are rushing into the Medicare market, offering drug coverage to 42 million people who are 65 and older or disabled.
The new drug benefit is heavily subsidized by the federal government, but will be delivered by private health plans and insurers. Many of the insurers have little experience with Medicare. Marketing began on Oct. 1. The benefit takes effect on Jan. 1.
Federal officials have issued rules and a 53,000-word set of guidelines for marketing the drug benefit. The guidelines allow use of insurance agents, including independent agents who represent more than one company, but stipulate that insurers are responsible for the conduct of their agents.
Christopher Eisenberg, director of health plan accountability at the federal Medicare agency, said the federal government had received "more than 100 complaints concerning misconduct by independent agents" marketing Medicare products.
"This is developing into a major compliance concern," Mr. Eisenberg said, and "it appears to be growing."
Part of the problem is that the federal government and the states share responsibility for regulating the sale and marketing of Medicare drug plans, and the division of labor is not always clear.
Insurance agents are generally licensed and regulated by state government agencies. But the federal government regulates prescription drug plans and managed care plans, known as Medicare Advantage plans. When insurers sign contracts with Medicare, they promise to comply with all federal standards.
In some cases, Mr. Eisenberg said, when the federal government tried to investigate complaints, insurers said they had little control over the agents. "We are not receptive to that argument," he said.
In some circumstances, insurers offering the drug benefit, known as Part D of Medicare, can offer other types of insurance, as well as discounts on hearing aids, eyeglasses, health club memberships and general financial services. But state officials are leery of such sales activities, sometimes called cross selling.
Christina Urias, director of the Arizona Insurance Department, said: "By its very nature, the new Part D benefit is fundamentally confusing for the Medicare beneficiary. It is inappropriate to capitalize on that confusion with an offer or sale of other insurance products that may be unsuitable for that individual."
In a recent bulletin, the National Association of Insurance Commissioners, which represents state officials, reminded agents they were subject to state insurance laws prohibiting "high-pressure sales tactics."
David G. Evans, senior vice president of the Independent Insurance Agents and Brokers of America, a trade group, said most agents adhered to the letter and spirit of the law. Agents, he said, play an important role, because they can help people understand the new drug benefit and can serve as their advocate in resolving claim disputes.
Suzi Lenker, who coordinates insurance counseling for the Kansas Department on Aging, said that agents from several companies had tried to sell Medicare drug plans door to door in high-rise apartment buildings. "We are still having problems with that," she said Friday.
Such activity appears to violate the Medicare guidelines, which say, "Prescription drug plans shall not conduct door-to-door solicitation or marketing prior to receiving an invitation" to a beneficiary's home.
Bonnie Burns of California Health Advocates, who trains state insurance counselors, said she had also heard that "some insurance agents showed up at beneficiaries' homes, unannounced, and asked for personal information they were not supposed to ask for."
Federal officials said they were investigating reports that some agents had offered cash payments to Medicare beneficiaries as an inducement to enroll in a prescription drug plan or a managed care plan. The marketing guidelines prohibit "cash inducements" and cash gifts.
The new market is intensely competitive, and many insurers say they are making greater use of independent agents. Federal rules allow insurers to pay fees, or commissions, for sales of Medicare products.
Regence Blue Shield, in Seattle, recently told insurance agents and brokers that the new Medicare program provided a "new sales opportunity."
For sale of a free-standing drug plan, Regence said it was paying agents a commission of $48 a year. For a managed care product, which includes medical and drug coverage, the commission is $192 a year.
Mr. Eisenberg, the Medicare official, said the federal government would exchange information with states and was drafting a list of "best practices" for insurers and agents. For example, he said, insurance company managers might "conduct on-the-job training for new agents by riding along with them to monitor their presentations to Medicare beneficiaries."
Since marketing began on Oct. 1, some insurance companies have accused their competitors of making grossly inaccurate or misleading statements in sales presentations. While the federal government investigates such complaints, the abuses sometimes persist, insurers said.
Insurers and agents said the Medicare marketing rules were complex. Insurance companies cannot directly compare their plans with others by name. An insurer can say that its drug plan is approved by Medicare, but cannot say the plan is endorsed or recommended by Medicare.
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