Managed Healthcare Executive - January 2009 - (Page 11)

{ LETTER OF THE LAW } Broker compensation rules keep MAOs on their toes New laws respond to reports of brokers churning enrollees through plans to gain more compensation BY JOHN ERIKSEN T John Eriksen is a senior associate at Epstein, Becker and Green, P.C. in its Health Care and Life Sciences practice group and focuses primarily on health regulatory, compliance, managed care and transactional matters. he last six months have been a rollercoaster ride for Medicare Advantage Organizations and Part D sponsors (collectively, MAOs) who have been attempting to interpret and comply with the various iterations of CMS marketing regulations and guidance that have been issued prior to and later in support of provisions of the Medicare Improvement for Patient and Providers Act (MIPPA) of 2008. Generally, the guidance attempted to add to the list and clarify the existing “dos and don’ts” around marketing events and calls and encounters with potential enrollees. It requires that all internal and external sales personnel be certi ed prior to writing a Medicare Advantage (MA), Medicare Advantage Part D prescription drug plan (MA/PD) or stand-alone Part D prescription drug plan (PDP) application. The regulations provide that both CMS and the MAO should conduct audits to identify potential violations. The identi cation of violations takes on new meaning because the regulations contain the signi cant enforcement threat of nes of up to $25,000 per marketing violation and per bene ciary a ected by the MA organization’s conduct. Such nes were previously assessed per marketing violation per contract. CHURNING HALTED A particular challenge is the new regulatory scheme for external agent and broker compensation, which has undergone several iterations of clari cation in the past couple of months. MIPPA section 103(b)(1)(D) granted CMS the authority to regulate such compensation in order to “ensure that the use of compensation creates incentives for agents and brokers to enroll individuals in the MA plan that is intended to best meet their healthcare needs.” This new law and the subsequent regulation were developed in response to reports of brokers churning patients from plan to plan or even from product to product in order to obtain higher rst-year commission amounts. In brief, regulation requires that beginning in 2009, MA organizations establish a six-year compensation cycle for brokers having a rstyear initial payment and subsequent renewal year payments that are 50% of the rst-year payment for enrollees who are new to Medicare and enrollees who are making an enrollment change to a di erent Medicare plan type. Brokers who facilitate an enrollment change to the same Medicare plan type are compensated at the renewal rate only. MA organizations submitted their compensation schedules and are awaiting approval by CMS. The regulation provides that future increases in compensation can be no greater than the established Medicare in ationary rate. Compensation does not vest until the enrollee has remained enrolled with the MA organization for three months. Any payments made to broker by an MA organization must be recouped if a disenrollment occurs. Ensuring the adequate administration, enforcement and auditing around the new broker compensation schedules likely will prove logistically di cult for some MA organizations and will be a source of ongoing confusion. Nevertheless, MA organizations, which are accountable for the actions of both plan employees as well as downstream entities like brokers and agents, must implement adequate compliance and monitoring systems given the likelihood of increased enforcement by CMS as well as the potential enforcement by other agencies under false claims and other theories. MHE This column is written for informational purposes only and should not be construed as legal advice. JANUARY 2009 11

Table of Contents Feed for the Digital Edition of Managed Healthcare Executive - January 2009

Managed Healthcare Executive - January 2009 Contents Editorial Advisors For Your Benefit News Analysis Politics & Policy Letter of the Law Managed Care Outlook New Day 5 New Realities of Disease Management Pharmacy Best Practices Health Management Technology State Report: Hawaii MHE Resource Ad/Edit Index

Managed Healthcare Executive - January 2009

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