Proposed Rule CMS-4205-P
CMS has proposed rule CMS-4205-P which, in the final version will amend the current regulations for Medicare Advantage and Part D programs. The proposed amendment includes new Medicare marketing and communications policies which would be put in place for the 2025 contracting year starting on September 30th of 2024. Section 1851(j) of the Act “Enhance Guardrails for Agent and Broker Compensation” is specific to Medicare agents, brokers, agencies and top of hierarchy FMO and NMO organizations.
Note: While the rule changes will have some challenges, Medicare will still be a viable profitable business for individual agents and LOA agencies. There certainly will be challenges without overrides, HRA fees, expense reimbursements and access to quoting and enrollment platforms at no cost but it can still work. The outlook is not so promising for non LOA agencies that have direct pay agents and rely on overrides for revenue and for top level uplines however.
How does the rule impact agents and brokers?
The new rule would result in significant changes to Medicare sales distribution. It would have huge implications on direct pay uplines but would impact producing agents and agencies to a lesser extent. The CMS-4205-P proposal is a 486 page document addressing a number of areas. Agent compensation is addressed on pages 6 and 236 -248. Here are the main points regarding section 1851(j)
Eliminate admin fees/overrides:
- The rule looks to be eliminating any compensation above the CMS max compensation for an individual agent/broker including overrides/admin fees paid for agency levels and higher. This would eliminate admin fee revenue for agencies up to FMO/NMO level organizations that work with agents on a direct pay basis.
In most cases, agencies and uplines would no longer be able to provide services to Medicare agents
Examples of common services provided:
- Support services to answer daily questions from agents
- Guidance with marketing plans and compliance
- Agent and agency contracting
- There are agencies that would be impacted to a much lesser extent and would be able to operate under the new rules. Producing LOA agencies, agencies with a high amount of ancillary product sales and agencies that primarily work with other products but offer Medicare on an ancillary basis would likely see a reduction in overall revenue but will still find Medicare to be a viable business model.
Marketing reimbursements and HRA fees
Proposed Rule CMS-4205-P is very clear about a number of changes. Two of them are regarding expense reimbursements to agents and HRA fees:
Reimbursement payments/marketing allowances to agents/brokers for expenses would no longer be allowed
- This would include any type of expense reimbursements from carriers, agencies and top of hierarchy FMO/NMO
Eliminate payments for completing Health Risk Assessments (HRA)
Proposed rule max allowable commission changes
Commission would be paid out at the national level bracket ($611 and $306 for 2024) with an additional increase of $31. Some have assumed the higher paying max commission states of CT,PA,DC, NJ and CA would be reduced to the national level. Some of the language of the proposed rule suggests they may be adding the $31 to the current higher max allowed in those states.
- Many agents and agencies work with uplines to process their carrier contracting. If there are no longer uplines, the contracting would then need to be completed direct with the carriers. This could cause major delays when it comes to contracting with new carriers or changes to current contracts.
- Agents often utilize uplines to answer questions about marketing, benefits, SEP’s and numerous other topics. The questions would need to be directed to the carriers in the event the proposal is finalized as is.
Accessing Proposed Rule CMS-4205-P (Link to send in comments on the new proposal)
The entire document can be accessed on Regulations.gov To find the document enter “CMS-4205-P” into the search bar. When you go to the document there is a “Comment” button. CMS is taking comments regarding the new proposal until January 5th.
IMPORTANT: Comments sent in on the proposal are public record so send professional and constructive comments only. Comments can focus on the value you provide to clients and how not having the services provided by your agency or upline may inhibit your ability to service those clients. Clients may also send in comments to explain how you work with them to find the best plan options for their situation.