Federal and state regulators are being urged to increase oversight of insurance agents and brokers selling Medigap policies, the private supplemental coverage owned by millions of people with traditional Medicare that pays out-of-pocket costs.
These brokers received paid vacations and cash bonuses for enrolling clients in plans offered by specific firms, according to a report released Wednesday by Senator Elizabeth Warren, a Massachusetts Democrat.
“Giant insurance companies have a free hand to scam millions of seniors in Medigap, offering agents lavish vacations to lure unwitting beneficiaries into more expensive plans,” Ms. Warren said in a statement. “Regulators must act to ensure that an exodus of seniors is not occurring.”
The report found that at least 32 Medigap insurers were involved with the reward programs either directly or through third parties. These incentives are legal, but can create financial reasons for agents to recommend more expensive policies or plans from a single insurer.
“Seniors may pay a higher price for these agent bonuses: Signing up for the wrong plan could cost hundreds or thousands of dollars more each year, either through higher premiums, higher out-of-pocket expenses,” the report said. Out-of-pocket medical costs, or both.” ,
Nearly half of those enrolled in traditional Medicare, about 14 million, have Medigap policies. Sold by a wide range of insurance companies, supplemental plans vary in price and the benefits they provide. They aim to fill gaps in Medicare coverage created through the program’s deductibles and co-insurance. Some plans begin paying out-of-pocket costs immediately, while others charge low premiums and require patients to cover at least some of the bills for hospital stays or doctor visits.
Senate Democrats previously raised concerns about the overly aggressive marketing tactics used to enroll people in private Medicare Advantage plans, which now make up nearly half of all coverage for people 65 and older. Older Americans have been inundated with marketing communications, some of which come from federal agencies, urging them to sign up for private coverage. Medicare has also tightened rules on how the plans are marketed.
The Warren Report details many examples of luxurious vacations and other perks that high-performing brokers receive. “Earn the sales reward trip of a lifetime,” reads one pitch, offering a paid vacation to St. Thomas in the US Virgin Islands. “Sell Cigna Supplemental Benefits to Earn Five Day, Four Night Trips.”
Brokers who sold large numbers of Aetna policies in 2020 were offered the opportunity to “unlock the magic of the Golden City” in San Francisco, but only if they retained a high percentage of customers. (The trip never happened because of the pandemic.) Cash bonuses were offered to brokers who sold Mutual of Omaha plans.
Cigna declined to comment. Aetna said it “offers a wide range of plans to meet the specific needs of Medicare beneficiaries and it is our expectation that agents sell plans that meet those needs.” Mutual of Omaha said the insurer “offers a variety of tailored, industry-standard incentives to encourage independent brokers to consider our solutions.”
In a letter to officials from the Centers for Medicare and Medicaid Services and the National Association of Insurance Commissioners, which represents state regulators, Ms Warren described these practices as “an abuse of the trust seniors place in Medicare.” She urged regulators to take steps to ban their use.
Medicare officials said they were “committed to ensuring that people searching for Medicare coverage options have peace of mind and receive honest, transparent, and accurate information about health coverage options.” The National Association of Insurance Commissioners said it was reviewing Senator Warren’s letter.
Unlike the sale of Obamacare policies, brokers and agents offering Medicare plans are under no obligation to offer every policy or tell customers how to choose plans for customers, a nonprofit group Commonwealth said Gretchen Jacobson, vice president of Medicare programs at the fund that funds health care research. This week, the fund released a report looking at the choices people make in buying schemes based on discussions with brokers and agents.
Someone may want to choose a high deductible plan hoping to lower their premiums, but a broker will usually charge clients a higher commission for more expensive plans that have more generous coverage.
Brokers also earn more when someone chooses a private Medicare Advantage plan. Individuals who choose a Medicare Advantage plan and then want to switch to a traditional program may find it difficult. In most states, insurers can either deny coverage or charge someone a higher price if they have a medical condition that is potentially costly.
While federal dollars go to help pay for Medicare Advantage, Medigap is paid for privately by consumers or employers and is largely overseen by state insurance regulators rather than the federal government. Federal officials standardize the available Medigap policies and play some role in their oversight.
People who want to be sure they know their options should check with their state insurance regulators, said Casey Schwarz, senior counsel for education and federal policy for the Center for Medicare Rights, which helps people navigate the program. helps in States disclose all Medigap plans sold and their costs, Ms. Schwarz said, and that can usually be found on regulators’ websites. “It’s not very easy to find in some states, but it’s out there,” she said.