Medicare Advantage Plan Enrollments and the Potential for Fraud

Attorney RJ Connelly III

As the open enrollment period approaches, just days away, we continue our informative blog series for older Americans seeking affordable health insurance tailored to their unique needs. In our first post, we explored the financial challenges that companies offering Medicare Advantage plans currently face. Our most recent post highlighted the distinctions between Original Medicare and Medicare Advantage Plans. Today, we explore the compensation structure of insurance brokers, who play a crucial role in guiding individuals through Medicare Advantage Plan enrollments. As we navigate this landscape, we will also examine the inherent risks and opportunities for fraudulent activities that may arise within such a system. This blog aims to shed light on both the ethical implications and potential pitfalls that can occur in interactions between brokers, clients, and the insurance industry.

"Medicare Advantage Plans have emerged as a significant pillar of the U.S. healthcare system, providing a regulated yet flexible alternative to traditional Medicare for an increasing number of seniors," stated professional fiduciary and certified elder law Attorney RJ Connelly III. "Offered by private insurers under federal oversight, these plans deliver a comprehensive suite of medical services, encompassing hospital care, outpatient services, and often including prescription drug coverage as well. With the demand for thorough and cost-effective healthcare solutions on the rise, insurance brokers play a vital role in guiding beneficiaries through the complex landscape of plan options. However, this commission-based compensation model employed by brokers can occasionally give rise to questionable practices and even outright fraud."

About Broker Compensation

Insurance brokers are licensed professionals who aid individuals in navigating healthcare options, with a particular focus on selecting Medicare Advantage Plans. The expertise brokers offer is particularly essential for older adults who face complex decisions related to coverage, costs, and selecting the most appropriate provider networks. Upon the successful enrollment of a client, brokers typically receive a commission from the insurance company providing the plan.

It is essential to note that these commissions are entirely separate from any premiums, deductibles, or other out-of-pocket expenses incurred by the beneficiary. Brokers possess a financial incentive to promote enrollment in Medicare Advantage plans, as the commissions associated with these plans are generally higher than those for Medigap and Part D plans, which are designed to complement traditional Medicare.

The Centers for Medicare & Medicaid Services (CMS) regulates broker compensation by implementing annual maximums for both initial and renewal commissions. For the year 2025, the maximum agent commissions for Medicare Advantage plans have been established at $626 for initial enrollments and $313 for renewals in most states.

The federal government reimburses insurance companies for Medicare Advantage and Part D enrollments during the open enrollment period, utilizing funds primarily derived from federal taxes and general revenue. Furthermore, premiums, copayments, and deductibles paid by beneficiaries contribute to this funding, with states potentially offering additional financial contributions.

It is noteworthy that these rates may vary by state, with California, New Jersey, Connecticut, Pennsylvania, Washington, D.C., and Puerto Rico having adjusted maximums that are higher than those in other states. These figures represent federal maximums as defined by the CMS; however, the actual commissions disbursed may differ based on the individual insurance carrier and the specific contractual arrangements with the agent.

Transparency serves as a critical component in the relationship between brokers and clients. Brokers are legally obligated to disclose any financial incentives or compensation structures that may potentially influence their recommendations. Reputable brokers will furnish written documentation outlining their compensation framework and will maintain clear and consistent communication throughout the enrollment process.

Loreena's Story

Loreena, a senior individual facing the complexities of life following her divorce, found herself overwhelmed and confused during the Medicare open enrollment period. Having established her current Medicare Advantage Plan with assistance from a friend who has since moved away, she felt disoriented amidst a myriad of advertisements, inundated with colorful mailings and eye-catching television commercials.

Consequently, she reached out to her attorney's office, which recommended that she contact a SHIP (State Health Insurance Assistance Program) counselor and provided her with the relevant contact information. However, she remained distracted by the enticing promises made in those commercials.

Desperate for clarity, she decided to call one of the many advertisers that boasted enticing offers: refunds on her Medicare payments, free over-the-counter products, and a plethora of other appeals. However, the critical fine print, which indicated that these benefits were limited to individuals residing in "qualified locations," managed to escape her notice.

"After catching that ad and making the call, I suddenly found myself inundated with phone calls—sometimes three times a day—by aggressive representatives urging me to abandon my current plan for their supposedly superior options," Loreena recounted, a hint of frustration lacing her voice. "And eventually, I gave in!"

But Loreena's quest for reassurance didn’t end there. Lured once again by promises of even more benefits, she reached out to a second company. "The broker was so warm and sincere; it felt like he was truly listening to me. I really thought making another switch was the right decision," she reflected, her tone revealing the weight of her regret.

When her new plan took effect, the reality hit hard. To her dismay, her long-time primary care doctor, who had been her medical anchor throughout her adult life, did not accept her new insurance. "I found myself having to transition to an unfamiliar provider, and the thought of that was utterly devastating," she explained. Matters escalated when she discovered that several essential medications were not covered under her new plan, adding layers of stress to her already strained finances as her limited income loomed over her like a dark cloud.

To make matters worse, Loreena received another call that echoed the earlier pleas from the broker she had entrusted with her Part C plan. This time, it was a sales pitch for a pre-paid funeral plan. The representative painted an alluring picture, convincing her that the $5,000 investment was a bargain—one that would spare her daughter the heartache of planning her funeral at an already difficult time. Unfortunately, it was only after she made the purchase that her attorney reminded her that she had duplicated a service already covered by her estate plan. She had unwittingly drained a large portion of her savings as a result, leaving her to rue the day she hadn’t followed her attorney's advice to consult with a local broker instead.

Fraud Risks with Medicare Advantage Plans

While most brokers adhere to ethical standards, the structure of commission-based compensation has enabled instances of fraud and abuse. Common fraudulent practices include:

Unauthorized Enrollments: Enrolling individuals in plans without their clear and informed consent, often employing deceptive tactics such as forging signatures or presenting misleading information about the benefits of the plans.

Unwarranted Plan Changes: Encouraging beneficiaries to change their plans without any justifiable reason, solely for the purpose of creating new commissions, even when these transitions do not align with the clients' best interests or needs.

Misrepresentation of Plan Features: Intentionally exaggerating the advantages or obscuring the drawbacks to sway individuals' choices regarding enrollment.

Undisclosed Kickbacks: Accepting undisclosed incentives from insurance companies can create a significant conflict of interest for brokers, potentially skewing their recommendations. This practice not only undermines the integrity of the advisory process but also raises serious concerns regarding compliance with regulatory standards designed to protect consumers.

Such practices can result in beneficiaries losing critical coverage, incurring unexpected costs, or facing barriers to preferred healthcare providers and medications. Brokers and insurers implicated in fraudulent activities face significant legal repercussions, including fines, revocation of licensure, and possible criminal charges.

Prohibited Broker Activities

Insurance brokers cannot do the following:

Make unsolicited calls and home visits: Brokers are prohibited from engaging in cold-calling practices, meaning they cannot contact you unsolicited by phone or in person. Additionally, it is against regulations for brokers to visit your home without prior invitation or consent.

Engage in coercion and pressure: Brokers are prohibited from exerting pressure on individuals to enroll in or switch their insurance plans. They must ensure that their recommendations are made in the best interest of the client, providing clear and comprehensive information to help individuals make informed decisions without feeling coerced or rushed.

Provide inappropriate incentives: Brokers are prohibited from providing cash incentives, gifts valued over $15, or complimentary meals during a sales presentation aimed at persuading you to enroll in a specific plan. This regulation is in place to ensure that the decision-making process remains fair and unbiased, protecting consumers from undue influence.

Engage in cross-selling: During a Medicare sales presentation, representatives are strictly prohibited from discussing or selling products unrelated to Medicare, such as life insurance, annuities, or any other financial services.

Provide misleading information: Brokers are prohibited from falsely presenting themselves as representatives of Medicare or claiming that they offer Medicare supplement insurance (Medigap) policies when they do not. This means that brokers must clearly communicate their role and any services they provide, ensuring that clients are fully informed about the nature of their offerings.

Permissible Broker Activities

While cold soliciting is banned, brokers have compliant ways to engage with beneficiaries:

Contact existing clients: Agents can reach out to their existing clients, who include individuals they previously assisted during the enrollment process. This ongoing communication enables agents to provide ongoing support, address any questions, and ensure that clients are fully informed about their options and any updates that may impact their coverage. 

Respond to requests: An agent is authorized to reach out to a potential client under specific circumstances where the client has expressed interest in communication. This can occur when the client fills out a contact form, actively requesting a phone call, or otherwise providing explicit consent to be contacted.

Return calls: A broker is permitted to return calls or respond to messages from prospective clients who have initiated contact first. This policy is designed to ensure that the communication process is respectful and engaging, allowing brokers to efficiently follow up with individuals who have shown interest in their services.

Permission to contact (PTC): Agents can contact beneficiaries who have explicitly granted and documented "permission to contact" within the last 12 months. Any outreach must be limited to the products and contact methods specified in the permission.

Educational events: Agents are permitted to participate in educational events designed to enhance their knowledge and provide valuable information to attendees. However, agents are strictly prohibited from engaging in any sales activities or enrolling beneficiaries during the event.

Safeguards and Consumer Protection

In response to the significant risks associated with commission-based compensation structures, the Centers for Medicare & Medicaid Services (CMS), alongside state insurance departments, has implemented a comprehensive array of safeguards designed to combat broker fraud and protect the interests of Medicare beneficiaries. These crucial protections encompass various strategies, including enhanced transparency requirements, rigorous training and certification for brokers, and stringent monitoring of compensation practices. These measures include:

Licensing and Continuing Education: Brokers are required to maintain state licensure and complete regular training in Medicare regulations, plan offerings, and professional ethics.

Mandatory Disclosure: Brokers are required to inform clients in writing of their compensation arrangements and any potential conflicts of interest.

Reporting Mechanisms: Beneficiaries suspecting fraud can file complaints with CMS, state insurance regulators, or the Medicare Fraud Hotline. These agencies are empowered to investigate and sanction violators.

Commission Caps: CMS’s annual commission limits are designed to discourage improper plan switching and to promote recommendations based on client welfare.

To minimize the risk of fraud, consumers are advised to verify their broker's credentials, thoroughly review all plan documentation before enrolling, and refrain from disclosing sensitive personal information to unverified individuals. Seeking a second opinion or consulting official resources is prudent if any aspect of the broker’s conduct or the plan’s details is unclear or questionable.

If you suspect Medicare fraud, abuse, or errors, you can report it to the following agencies: 

• 1-800-MEDICARE: Call 1-800-633-4227.

• Senior Medicare Patrol (SMP): Use the SMP locator to find the program in your area or call 1-877-808-2468.

• HHS Office of the Inspector General (OIG): Call the fraud hotline at 1-800-447-8477 or submit a complaint online at tips.oig.hhs.gov. 

A Final Note

"Insurance brokers play a crucial role in helping Medicare beneficiaries navigate their healthcare plan options; however, commission-based compensation can sometimes result in unethical practices," points out Attorney Connelly. "By understanding and recognizing signs of fraud, consumers can protect themselves and secure suitable coverage. Professionalism and transparency are crucial for maintaining ethical behavior among brokers. Consumers should ensure they work with licensed local brokers and stay informed about plan details to make informed decisions regarding their healthcare insurance choices."

The information presented within this blog is intended exclusively for general informational purposes and should not be construed as legal, financial, or healthcare advice. The content, materials, and insights provided may not reflect the most recent developments in these fields and, therefore, should not be relied upon for personal or professional decisions. Further, this blog may contain links to various third-party websites, which are included solely for the convenience of our readers. It is essential to note that Connelly Law Offices, Ltd. does not automatically endorse or recommend the contents of these external sites. Given the complexities and nuances associated with legal, financial, or healthcare matters, we strongly encourage individuals to consult a qualified attorney, a professional fiduciary advisor, or a healthcare provider regarding any specific issues or concerns they may have. Your well-being and informed decision-making are of paramount importance to us.