Medicare Advantage marketing ruling leaves 2025 enrollment in flux

A legal victory for Medicare Advantage insurers and marketers ironically may cause some headaches when open enrollment for 2025 rolls around.

Last week, the U.S. District Court for the Northern District of Texas ordered a stay against the final rule the Centers for Medicare and Medicaid Services published in April that prohibits insurers from offering volume-based bonuses to top Medicare Advantage marketers, thereby suspending the regulation's cap on broker fees.

This may be welcome news for Medicare Advantage carriers that take full advantage of brokers, independent agents and other third-party marketers because it allows them to resume business practices that attract customers.

“It's just nice to have somebody recognize that this is another far-reach by the federal government,” said Ronnell Nolan, president and CEO of Health Agents for America, a trade group.

But the ultimate outcome of the lawsuit is still up in the air, lending additional uncertainty to what insurers such as Humana already warned will be a tumultuous open enrollment period, said Chris Meekins, a managing director at the investment bank Raymond James.

Related: Why Medicare Advantage insurers are suing CMS

“There are a lot of moving pieces for this open enrollment period, with the rate cuts, plus the potential benefit cuts, plus the stars recalculations,” Meekins said. “Locking in exactly what's going to happen is a bit of a rolling of the dice.”

In May, Americans for Beneficiary Choice, the National Association of Benefits and Insurance Professionals, the Council for Medicare Choice, and the Fort Worth Association of Health Underwriters sued to block the rule, arguing that CMS lacks the statutory authority to limit their compensation.

Judge Reed O’Connor has not issued a final decision in the case, but wrote in his July 3 order suspending the regulation that he intends to comply with the plaintiffs' request for a ruling this month.

But no matter what O'Connor decides, either party can appeal, which would indefinitely delay a final outcome just as insurers gear up for enrollment season, which begins Oct. 15 and ends Dec. 7. Medicare Advantage insurers that opt to restore their previous compensation tactics would risk having to scrap their plans at the last minute, Meekins said.

“If a month from now, or two months from now, or Oct. 1, the appellate court comes in and is like, ‘Hey, the lower court ruling was wrong,’ then the company is left holding the bag. I don't think they’ll make strategic decisions on an uncertain court outcome,” Meekins said.

And boosting third-party marketing spending would contradict the strategies several major carriers have outlined, said Duane Wright, a senior research analyst at Bloomberg Intelligence.

Humana and CVS Health subsidiary Aetna have said they will reduce benefits and footprints in response to rising medical expenses and unfavorable regulatory changes. UnitedHealth Group subsidiary UnitedHealthcare, the industry leader, aims to grow at the market rate. Elevance Health has said it could gain market share because of competitors’ pullbacks. Cigna is in the process of exiting the Medicare Advantage market.

“If there's going to be anything, it will be retrenchment as opposed to significant expansion, which is probably where you'd rely on some of these brokers to help out,” Wright said.

The court order has disrupted contract talks between insurers and marketers, said Dan Jones, senior vice president of federal affairs at the Alliance of Community Health Plans, which represents insurance companies affiliated with providers such as Oakland, California-based Kaiser Permanente and Danville, Pennsylvania-based Geisinger.

“Uncertainty is not a friend for good business, and ensuring that consumers have an unbiased selection of health plans and agents and brokers that are selling them to choose from,” Jones said.

Yet some insurers planned to maintain their current compensation practices despite the final rule, said Tracy McMillan, president of Marketplace Insurance Exchange, a field marketing organization. “Cigna said they’re going to pay for sure, and bigwigs from a lot of the companies like Aetna and United said they’re working on some type of workaround,” she said.

The broker compensation rule is one element of a slate of recent CMS policies designed to rein in Medicare Advantage marketing. For example, brokers and agents must keep records of all interactions with prospective customers, insurers are liable for the the conduct of their marketers, and companies must submit their advertising to stricter federal oversight.

Together, these changes have led Humana and others to rely more heavily on in-house agents, and may discourage insurers from seizing on the court order to ramp up third-party marketing, Meekins said. "I'm not sure you will see a move back to where things were," he said.

CMS maintains the broker compensation rule, which was set to take effect Oct. 1, would protect beneficiaries from being steered toward policies that enrich marketers and away from plans that suit their needs, and aid smaller insurance companies that cannot afford to pay marketers as much as the major carriers.

Americans for Beneficiary Choice and the National Association of Benefits and Insurance Professionals said in statements that they were pleased with O’Connor’s order. Integrity Marketing Group, which owns one one of the field marketing organizations that sued, declined to comment. The Council for Medicare Choice and AmeriLife Marketing Group, which filed its own lawsuit in the U.S. District Court for the Middle District of Florida in May, did not respond to interview requests.

None of the insurers named in this article responded to interview requests. CMS and the Health and Human Services Department declined to comment on ongoing litigation.