Ritter Insurance Marketing

July 2nd, 2009 UPDATE:  Final Guidance is IN!!!

6/17/2009 EDITOR’S NOTE:  PLEASE SEE NEW INFORMATION AT THE BOTTOM OF THIS POST BEGINNING WITH:  “NEW SECTION ADDED 6/17/2009 STARTS HERE!!”

I’m getting numerous reports and feedback on this issue that the Initial Commissions report which CMS has been putting out to Health Plans do not contain all the cases to which they should be entitled to the Initial Commission level.

I realize this is a long blog post, so I apologize in advance, but I’m trying to justify what may amount to thousands and thousands of commission dollars for many hard working, independent insurance agents who have waited 6-7 months to get paid what they are owed for the work they performed last November and December.

First of all, let me define a couple of terms.  First off, there is what I’ll be calling the “Old Report” which CMS issued on April 27th.  See my original blog post here on that.

Then, there were stories that there were errors in the file which caused a number of Managed Care Organizations (MCO’s) to withhold payment.

This resulted in what I’ll be calling the “New Report” which CMS pushed out to the MCO’s on June 4th.  See my blog post on that here.

I’ve blogged so many articles on this, that I can’t keep them all strait, but if you search on “CMS Commissions” in the search box in the upper right hand corner of this blog page, you will get the majority of them. . .

In any case, from what I’m hearing, the “New Files” DO NOT CONTAIN those Medicare Beneficiaries who were enrolled from Original Medicare into Medicare Advantage for the FIRST time if they had a Stand Alone Prescription Drug Plan (PDP).

I went back to look at the CMS Guidance on Commissions which I posted late last year.  Here is a link to the Interim Final Guidance from CMS which was issued on November 14th, 2008.

Without going through the entire document on this blog, I’ll copy and paste what I believe is the most clear portion of the guidance (this is found in the far right column on the page numbered 67408 and continues onto page 67409 (I bolded key portions for emphasis, but kept the whole passage for context):

We do not currently have the administrative capability to communicate to plans as part of our enrollment acceptance process whether an individual enrolling in a plan in 2009 is a new enrollee to Part C or Part D, or an individual who, under the compensation structure provided for in this interim final rule, is subject to the renewal compensation level rather than the initial compensation level. Thus, we are in this interim final rule, for 2009 only, initially deeming all individuals enrolling in a plan to be in the first year of the five renewal years in the six-year cycle provided for under these regulations.

This means that for enrollments with effective dates in 2009, the MA or PDP plan initially pays the renewal compensation amount to the broker or agent enrolling an individual. Several times in 2009, we will run a report identifying those beneficiaries enrolled in an MA plan or PDP who were newly entitled or enrolled from original Medicare.We will sort the report by plan and send each organization the list of enrollees in a plan offered by that organization, for which, if an agent or broker wrote the policy, that agent or broker would be entitled to an initial compensation amount. Organizations can use the report to identify the agents or brokers who are entitled to an initial
compensation amount.

Under this interim final rule, organizations will be required to adjust the compensation from renewal compensation in these cases only to the amount that would have been paid in compensation for an initial enrollment under the six year cycle in question. For the remainder of 2009, this interim final rule requires that organizations pay agents and brokers an initial compensation when a beneficiary enrolls in an MA plan during the beneficiary’s Initial overage Election Period (ICEP) or in a PDP during the Initial Enrollment Period (IEP). This approach enables organizations to compensate agents and brokers for the  additional work involved in explaining all of the attributes of an MA plan (and the Part C program generally) or a PDP (and the Part D program generally) to a beneficiary who has had no prior experience with Part C or Part D, while at the same time reducing the financial incentive for moving a beneficiary who is in a renewal cycle (and is thus already familiar with these types of products) to a new plan that may be contrary to his or her health care needs.

Now back to my comments.  First off, CMS say they will run a report identifying newly entitled OR ENROLLED FROM ORIGINAL MEDICARE.  This says nothing about whether or not they had a PDP.  Assuming these people appear on the list, the broker is ENTITLED TO AN INITIAL COMPENSATION AMOUNT.  Seems pretty clear, right??

Further, CMS explains the purpose behind the methodology that this is to compensate brokers for additional work in explaining all of the attributes of an MA plan.  Seems to me that it would be necessary to EXPLAIN ALL OF THE ATTRIBUTES of an MA Plan to someone who has Original Medicare (WHETHER OR NOT THEY HAVE A PDP!!)

Now there was further guidance given by CMS on December 24th.  I’ve affectionally labeled this MEMO, “CMS’s Christmas Present to Agents”.  (click link for the document which I uploaded late last year—>  commissionsmemo12-24

The first couple of pages outline the way which CMS established the maximum commission for each of the 50 state with Initial Commissions EXACTLY twice the Renewal commission rate.  If you go to the bottom of page 3 (the last page) you will find this sentence (Again, I’m copying and pasting and bolding for emphasis. . .)

Finally, I’ll jump back to the page 67408 of the Federal Register.  Here is the quote from the top portion of the LEFT hand column:

These rules provided that, after a beneficiary is enrolled in an MA plan or PDP by an agent or broker, a renewal compensation would be paid for five years after the initial compensation, and that if any agent or broker enrolls the beneficiary in a different plan of a ‘‘like plan type’’ during this five-year period, renewal compensation would be paid. A ‘‘like plan type’’ refers to PDP, MA or MA–PD, or cost plan (as defined in 422.2274(a)(3)(i) and 423.2274(a)(3)(i)).

So, this would infer that if you are not moving a Medicare Beneficiary to a “LIKE PLAN TYPE” you would be entitled to an Initial commission. 

In the draft CMS Marketing Guidelines, (this draft came out on May 15th, 2009 and the text is on PAGE 129), you learn that you can receive an initial commission and start if you move an enrollee to a different plan type WITHIN THE EXISTING PLAN SPONSOR.  So you don’t get an initial commission if you move someone to a different plan type with another Plan Sponsor??  That seems absurd!  Original Medicare isn’t even a “Plan Sponsor” as far as I know, so this makes no sense to me.  Is this where they are getting the Original Medicare and PDP by looking at the Plan Sponsor on the PDP plan??  God help us. . .

What is a Like Plan Type as defined in 422.2274(a)(3)(i) and 423.2274(a)(3)(i)??  I’ve tried my best to figure this out, but can’t seem to find the source, just a bunch of citations which refer to it.  Maybe a carrier can help me figure this out?!?

OK, now my brain hurts and I must get some sleep!! 

NEW SECTION ADDED 6/17/2009 STARTS HERE!!

Many, many thanks to “KT” who provided me with the resource to view 422.2274(a)(3)(i):  Also, note the following section (a)(3)(i) which states:  “Replacements between different plan types (for which a new compensation is paid) include–PDP and MA-PD, PDP and cost plans, or MA-PD and cost plans.”  That seems pretty clear as well.  Note that this says “includes” which would infer that these are some of the examples, but not an “all-inclusive” list.  Some other examples might include PDP and MA and Cost Plans and MA.  However, it seems to me that so long as you are not replacing “like plan types” which are uniquely and specificially defined in this section (PDP to PDP, MAPD/MA to MAPD/MA, and Cost Plan to Cost Plan), you are entitled to a “new compensation” which I think means “initial compensation” NOT “renewal compensation”.

So, here is how I follow the logical progression:

1.  422.2274(a)(3) Clearly says, no entity can provide comp greater than renewal if an existing policy is replaced with a like plan during the first year and 5 renewal years.

2.  422.2274(a)(3)(i) Clearly defines what a like plan is. . .(PDP to PDP), (MAPD/MA to MAPD/MA) and (Cost Plan to Cost Plan)

3.  Therefore, if you are not replacing with a LIKE PLAN (PDP to MA) or (PDP to MAPD), YOU GET PAID INITIAL COMP!!!

4.  422.2744(a)(3)(ii) states the same thing AGAIN.  Replacements between different plans = INITIAL COMP!!

Here is the entire section (422.2274 (a)) with (3)(i) BOLDED.

If a Medicare Advantage organization markets through employed or independent brokers or agents–
    (a) Agents and brokers must be compensated as follows:
    (1) An MA plan (or other entity on its behalf) may provide compensation to a broker or agent for the sale of a MA product only if
the aggregate of the first year compensation is no more than 200 percent of the aggregate of the compensation paid for selling or servicing the
enrollee in each individual subsequent renewal year, of which there must be a total of five renewal years (creating a 6-year compensation cycle).
For purposes of this section, “compensation”–
    (i) Includes pecuniary or non-pecuniary remuneration of any kind relating to the sale or renewal of the policy including but not limited to commissions, bonuses, gifts, prizes, awards and finders fees.
    (ii) Does not include salary or other benefits related to employment, except to the extent that the salary or other benefits are related to the volume of sales.
    (iii) Does not include the payment of fees to comply with State appointment laws, training, certification, and testing costs; and reimbursement for mileage to and from appointments with beneficiaries and reimbursement for actual costs associated with beneficiary sales appointments such as venue rent, snacks, and materials.
    (2) If compensation is paid in the first year, renewal compensation must be paid for no fewer than 5 renewal years (6-year compensation cycle), provided that the enrollee remains enrolled in the plan.
    (3) No entity shall provide aggregate compensation to its agents or brokers and no agent or broker shall receive aggregate compensation greater than the renewal compensation payable by the replacing plan on renewal policies if an existing policy is replaced with a like plan type during the first year and 5 renewal years (6-year compensation cycle).
    (i) For purposes of this section, “like plan type” means PDP replaced with another PDP, MA or MA-PD replaced with another MA or MA-PD, or cost plan replaced with another cost plan.
    (ii) Replacements between different plan types (for which a new compensation is paid) include–PDP and MA-PD, PDP and cost plans, or MA-PD and cost plans.
    (4) Compensation shall be earned for months 4 through 12 of the enrollment year.