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The Challenges in Choosing Medicare Brokers

The Challenges in Choosing Medicare Brokers - Who to Trust and Who to Avoid

By Don Drake, Connelly Law Offices, Ltd.

Medicaid Planning Rhode Island
Attorney RJ Connelly III

The previous blog post discussed the plethora of advertisements on television promoting Medicare Advantage plans, featuring retired athletes and actors making promises of various benefits, including monthly cashback. These commercials urge viewers to contact licensed Medicare brokers via a toll-free number. It is important to understand the role of these brokers and how they can assist you, as well as the potential risks unscrupulous individuals may pose. In this blog, we will explore the responsibilities of these brokers, how they are compensated, and how unethical brokers can create a healthcare crisis for their unsuspecting clients.

"A Medicare broker, sometimes referred to as a Medicare agent, has a vast knowledge of Medicare and can help you understand the advantages and limitations of each plan," stated professional fiduciary and certified elder law Attorney RJ Connelly III. "Based on your unique situation, such as your health status, prescription drug requirements, and budget, they can offer personalized recommendations."

Medicaid Planning Connecticut
Watching ad after ad about Medicare Advantage

"There is a significant benefit of working with a broker, which is that their services come at no cost to the consumer," Attorney Connelly continued. "The reason for this is that brokers are compensated by the insurance companies they collaborate with, so there are no additional fees or expenses for the consumer to worry about. While most brokers are honest and reputable, there are some who lack integrity and may have a financial incentive to mislead consumers. Unfortunately, our office has witnessed the impact of clients who dealt with unscrupulous brokers."

Janice's Story

Janice is a woman in her late sixties who lives alone in Connecticut and has been diagnosed with a mild cognitive disorder. She initially signed up for a Medicare Advantage plan in Southeastern Connecticut when she retired. The plan put in place by the broker met her needs, so there was no reason to change it. However, over time, as Janice's condition progressed, she became more vulnerable to making mistakes and misunderstanding information. Then came the open enrollment commercials.

"Janice saw the commercials that promised her money back, no monthly premium, and a card for a local pharmacy where she could get free over-the-counter supplies, something she did not have with her current plan," said Attorney Connelly. "As a widow living alone and on a fixed income, a promise of any additional money back was welcome. And Janice took the bait."

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Janice was confused by all the ads

She called the insurance company because she thought she could get more benefits, as promised in the commercial. However, she didn't notice the fine print that stated the policy wasn't available in all areas. The agent pressured her to switch policies during the phone call, and she did, "just to get them to leave me alone."

After weeks had passed, Janice visited her doctor for an existing medical condition, only to discover that her new policy did not include coverage for necessary lab tests. To make matters worse, the cost of many of her previously covered prescriptions had a significant co-pay. Consequently, Janice contacted another Medicare Advantage plan provider who had sent her a mailer promising "a great plan."

"Janice was promised a good insurance plan by this new provider, and she accepted the offer," Attorney Connelly stated. "She believed everything was in place until she received a call from a specialist she had in place for years informing her that she had no coverage at all, and she needed to fix her insurance. As it turned out, she had been disenrolled from her previous plans and had nothing in place."

When she contacted the second insurance company, they initially confirmed her enrollment but, later in the conversation, informed her that she was disenrolled because another plan covered her. She was told that they had sent her a letter informing her of this, but she never received it. The whole experience was confusing and frustrating, and each call she made only seemed to make things worse for her.

"Janice sought assistance from our office and was referred to a trusted Medicare colleague who helped her get a plan that matched her needs," said Attorney Connelly. "Unfortunately, this is not an isolated case. There have been numerous similar incidents where Medicare clients have been given misleading information and subjected to high-pressure sales tactics. This is a growing problem that can obviously have devastating consequences for seniors."

The Downside of Marketing

In a report published on the Fortune Well website during the 2022 Medicare open enrollment period, a Congressional inquiry uncovered that a minimum of thirty-two companies offered cash bonuses and high-end vacations to brokers who sold specific Medigap policies. The inquiry expressed concerns about the use of covert rewards, which could lead to brokers recommending policies unsuitable for seniors solely to earn the maximum credit towards rewards such as luxurious vacations or generous bonuses.

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Congressional hearings had concerns

Another Congressional investigation scrutinized complaints about Medicare Advantage marketing practices in fourteen states. The investigation discovered several issues, including insurance agents misleading prospects by falsely informing them that their doctors were covered by their plans when, in fact, the doctors were out-of-network, leaving policyholders to pay out of pocket.

The report also revealed aggressive marketing practices by agents, including one agent who called people up to twenty times a day, pressurizing them to switch their Medicare coverage. Furthermore, the investigation exposed instances where Medicare beneficiaries were disenrolled from their plans due to the misleading and aggressive practices of agents and brokers.

How They Make Money

Selling Medicare policies can be a highly profitable business, according to Fortune Well. Nevertheless, the industry is not immune to issues. One such challenge is the prevalence of short-term and transactional brokers who focus solely on closing a deal and then disappear. This leaves many seniors without the support they need to navigate the intricate world of Medicare.

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Commissions are an incentive to sell

Independent agents represent multiple insurers and work on commissions paid by the companies. In contrast, captive agents work for just one insurer and receive a salary from the company, as well as a commission with a lower rate than an independent agent. Brokers, on the other hand, allow you to choose from different Medicare Advantage, Medigap, or Part D prescription policies. Once you’ve made your decision, the broker will send you to an agent to complete the purchase. The insurers pay brokers commissions, and state insurance regulators set the rates.

Commissions for agents and brokers are a crucial consideration when it comes to selling Medicare policies. The Centers for Medicare and Medicaid Services (CMS) set maximum commissions for Medicare Advantage plans and stand-alone Part D plans but doesn’t set minimum commissions. This means that commissions can vary, depending on the insurer and the broker or agent you work with.

Commissions are significantly higher when a person signs up for a Medicare Advantage, Medicare, or Part D plan, as compared to subsequent years if the individual chooses to remain in the same plan. As per the Centers for Medicare & Medicaid Services (CMS), the national maximum initial commission for a Medicare Advantage Part D plan is $601, while it is $301 for a renewal on that type of plan. Notably, brokers and agents tend to earn comparatively higher commissions by selling Medicare Advantage plans than Medigap plans or Part D prescription drug plans. This suggests that there may be a financial incentive for unscrupulous brokers and agents to encourage individuals to switch plans annually.

The current administration has proposed a regulation to curb the marketing of Medicare plans by insurers and salespeople. However, this proposed rule does not address the issue of agent commissions.

Finding a Reputable Agent

When searching for a Medicare broker, it is critical to find someone who possesses extensive knowledge of the healthcare system. A dependable broker should have the ability to determine which healthcare providers and facilities are providing satisfactory care to patients and which insurance companies are known for providing excellent customer service.

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Know who you are dealing with

"Building trust and establishing rapport with clients is a crucial aspect of a good broker's job," said Attorney Connelly. "They should be able to provide clients with customized recommendations and guide them through the intricate process of selecting the appropriate Medicare plan."

To find a trustworthy broker, it is recommended to seek referrals from your physicians, friends, elder law attorneys, and family members. You can also review the National Council on Aging's (NCOA) Medicare Standards of Excellence list. This list includes brokers and agents who have undergone NCOA's review and training process, ensuring that they provide unbiased recommendations and excellent service.

"By following the standards set by the National Council on Aging, you can be assured that you will have access to a wide variety of coverage options and receive detailed information about each option," said Attorney Connelly. "This ensures that you will not be directed towards purchasing insurance products that are not suitable for your needs, and agents will not receive different payments based on the plan or company they recommend."

Medicaid Planning Rhode Island

Please note that the information provided in this blog is not intended and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise that you consult your attorney, professional fiduciary advisor, or medical provider for advice.

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