Finalized Broker Pay Cap Appears to Exclude FMOs, But Impact Remains Unclear

Building on a sweeping set of marketing-related provisions that went into effect this year, CMS’s recently finalized 2025 Medicare Advantage and Part D rule put new restraints on agent and broker compensation, among other things. The provisions advance the Biden administration’s ongoing efforts to shield consumers from misleading marketing, but with more of a focus on activities performed by independent agents and brokers rather than the broader third-party marketing organization (TPMO) industry that was targeted in previous rulemaking. Industry experts tell AIS Health, a division of MMIT, that the finalized provisions are still open to interpretation when it comes to the role of one type of TPMO — field marketing organizations (FMO) — which often conduct lead generating and advertising on behalf of plans.

“The intent of the new rule is clear: to prevent beneficiaries from being steered into plans that are not the best fit due to the financial incentives available to agents, particularly from the large national firms, and to create a more level playing field between national and local plans,” remarks John Selby, senior vice president for strategy, sales and marketing with managed care consultancy Rebellis Group.

In the rule released April 4 — and slated for publication in the April 23 Federal Register — CMS finalized the following marketing-related policies:

Establishing a compensation cap. Effective with payments for enrollments starting on or after Jan. 1, 2025, MA plans paying agents and brokers separately for administrative services (on top of the annually adjusted fair market value [FMV] rate for enrolling an individual into an MA or Part D plan) must pay one flat fee of $100 regardless of the plan the individual enrolls in. That amount represents an increase from the $31 fee that was included in the November 2023 proposed rule. The new provision is aimed at eliminating the additional administrative payments (e.g., “overrides”) that CMS observed are more common for agents and brokers selling certain MA plans than payments made for similar activities by other MA plans. In some cases, those payments were leading brokers from large FMOs to earn up to $1,300 for a single enrollment, according to the Alliance of Community Health Plans (ACHP), which lobbied for the compensation limits and other reforms. The agency clarified that the change is for independent agents and brokers and does not “extend to TPMOs more generally.”

Clarifying the definition of “compensation” to encompass all activities associated with the sale to/enrollment of an individual into an MA or Part D plan, including “administrative payments.” CMS noted that some “administrative payments” made to agents and brokers previously “were beyond the scope and FMV of the services involved in enrolling beneficiaries” and may be steering enrollment toward one plan over another. Examples provided in the response to comments included health risk assessments, training and testing.

Barring anticompetitive contract terms between MA organizations and agents, brokers or other TPMOs “that may interfere with the agent’s or broker’s ability to objectively assess and recommend the plan which best fits a beneficiary’s health care needs.” CMS provided multiple examples of such terms, such as those dictating that renewal of a plan’s contract with an agent, broker or FMO is “contingent upon preferentially higher rates of enrollment” or setting FMO reimbursement for marketing activities based on the achievement of specific enrollment targets.

Limiting personal beneficiary data sharing by TPMOs. CMS included a similar proposal in its December 2022 proposed rule, expressing concern that when beneficiaries follow a prompt to call a phone number or click on a “generic-looking web-link,” they are not intending for their information to be shared with other entities. Moreover, a “quickly read disclaimer or…disclaimer in very small print” are insufficient notification to beneficiaries that their information will be shared. As a result, CMS finalized its initial proposal “with revisions” so that TPMOs may share personal beneficiary data with other TPMOs “for marketing or enrollment purposes only if they first obtain express written consent from the relevant beneficiary.” Further, that consent must be obtained through a “clear and conspicuous disclosure for each TPMO that will be receiving the beneficiary’s data,” which aligns with the “one-to-one consent” structure adopted by the Federal Trade Commission and the Federal Communications Commission.

Some Language Is Open to Interpretation

Since the November 2023 release of the proposed 2025 MA and Part D rule, there was concern from the broker and agent industry that CMS’s proposed compensation cap would apply broadly to TPMOs, including FMOs. Global investment strategy firm Capstone pointed out in an April 5 note that the final rule included contradictory language suggesting it intends to do away with FMO administrative payments. Capstone highlighted one sentence in particular: “The FMOs are able to provide these ‘free’ services to agents and brokers by negotiating with the MA organizations to pay the FMO the administrative fees associated with the agent or brokers’ enrollments.”

“Capstone believes that it will ultimately come down to how insurers interpret the rule unless CMS provides additional guidance. Under payor interpretation, FMO dollars may be standardized or be renamed but are unlikely to be meaningfully reduced due to payor reliance on the entities,” wrote analysts David Mohler and Grace Totman.

The National Association of Benefits and Insurance Professionals (NABIP), which had written to CMS about the critical support FMOs provide to agents, in its April 5 response to the final rule said while it “preserves the ability of FMOs to contract with carriers,” there are still “unanswered questions and assumptions made regarding national vs. regional carriers.” Moreover, NABIP expressed “concern over the $100 limit set for administrative fees such as transportation, education, and other related expenses. Especially for newer agents just entering their careers.”

“I’m surprised at how many interpretations I’ve heard as to whether or how override payments from plans to FMOs are affected,” remarks Rebellis Group’s Selby. “Instead of using plain language, CMS was ambiguous. However, it is our opinion that overrides, as we have known them, are now limited to $100 for a new sale and paid to the agent.”

He continues: “The key sentence for me is this: ‘…our current policy does not extend to placing limitations on payments from an MAO to a TPMO who is not an independent agent or broker for activities that are not undertaken as part of an enrollment by an independent agent or broker.’ I’ve seen some selective editing of that sentence, ignoring the end of the sentence regarding prohibition of payment for activities that are part of an enrollment, as overrides have been historically.

“That’s not to say FMOs still cannot be compensated by plans — or brokers — for their services, but FMOs will have to charge for [their] services in a fee or subscription basis, and plans will more easily be able to hold FMOs accountable for their services.”

As the June 3 deadline approaches for 2025 bids, which will need to consider these expenses, Selby says he hopes CMS clarifies its intentions through subregulatory guidance.

“I think a lot of people are relying on that [statement] to say the limits don’t apply,” weighs in Helaine Fingold, a member of the law firm Epstein Becker & Green, P.C. While CMS mentions independent agents, it doesn’t “say that means an individual agent, but that seems to be the implication.” In other words, it implies that individuals that have a relationship with an FMO but are working as independent contractors are impacted vs. the FMOs that employ the agents, she explains.

CMS acknowledged this finer point in the response section. “[T]here is a subset of agents and brokers who are directly employed by TPMOs — specifically FMOs and call centers — and these agents and brokers may not experience the same change in incentives because their salaried income may be directly based on the CMS-defined compensate rates,” CMS wrote. “We recognize this distinction is an important part of the agent and broker ecosystem, and one which we will continue to explore as we contemplate future rulemaking.”

Question of FMO Payments for Leads Remains

Another question raised by the aforementioned statement is what qualifies as “activities that are not undertaken as part of an enrollment,” points out Fingold. If the compensation limit doesn’t apply to FMOs, then it would seem plans can continue making payments to them for lead generation. “Unless they come out with additional guidance, it’s going to be open to interpretation….Can the FMO still generate or buy leads and use the leads to make sales…and get paid separately for generating those leads? CMS seems to be concerned about such targeted lead generation being used to generate sales” but CMS is also requiring that marketing be more targeted.

“In the final MA and Part D rule for the 2024 contract year, CMS limited generic marketing of plan benefits, requiring that such ads include the name of the plan offering those benefits and only be run in areas where those plans are available,” she continues. “Particularly where marketing is now more plan-specific, there is a question of whether the plan sponsoring that kind of marketing can pass the generated leads to its independent brokers for an add-on fee or if that falls under the definition of ‘compensation.'”

Meanwhile, the prohibition on contracts between MAOs and agents, brokers or TPMOs that interfere with a broker’s ability to objectively recommend plans — and the revised scope of services qualifying as “compensation” — pose challenges for brokers and major FMOs like eHealth, GoHealth and SelectQuote, suggested Capstone. “TPMOs that rely heavily on lead generation will experience more clearcut headwinds as CMS finalized a 2022 proposal to change the way leads are sold between companies,” wrote the firm, referring to the new limit on personal beneficiary data sharing. “Today, leads are often sold several times between TPMOs.” The need to obtain express written consent, however, “will increase the cost of purchasing and distributing leads.”

Speaking during the 15th Annual Medicare Market Innovations Forum, held April 8-9 in Orlando, Florida, Health New England’s Sarah Fernandes said one of the rule’s more concerning provisions from a health plan standpoint is the requirement to send midyear notifications to beneficiaries regarding their unused supplemental benefits. That notification will require plans to monitor this information starting in 2026 and send the first mailing out between June 30 and July 31 of that first effective year, listing the supplemental benefits the beneficiary is eligible for but has not accessed.

“For a small health plan like Health New England, this is going to be a manual process,” remarked Fernandes, who is Medicare sales manager with the regional not-for-profit plan. “So January through June, you have to run their claims history, and if they haven’t been used for supplemental benefits, you need to notify [beneficiaries] and it needs to be personal to them. So it needs to say, ‘Sarah Fernandes, you still have $200 left in your dental. Sarah Fernandes, you haven’t used your fitness.’ And so I don’t really know how we’re going to do that, to be completely honest. [We] haven’t quite figured that out yet, but I’m really, really worried about” the new requirement.

Contact Fingold at hfingold@ebglaw.com or Selby at jselby@rebellisgroup.com.

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