CMS and Congress ramp up oversight of agent and broker activities in the federal health insurance exchanges

The Centers for Medicare and Medicaid Services (CMS) and the US Congress have begun turning their attention to the activities of insurance agents and brokers enrolling individuals into plans offered through the federal health insurance exchanges (Marketplace). They are specifically targeting “bad actors” in the Marketplace related to unauthorized enrollments and unauthorized plan switches. In the first six months of 2024 alone, CMS reports that it received over 200,000 complaints of unauthorized plan switches or unauthorized enrollments. At the same time, legislation was recently introduced in the US Senate targeting agents and brokers with respect to these same activities in the Marketplace. Given the increased scrutiny of agents and brokers, insurance issuers and agencies may want to carefully scrutinize and audit their operations to ensure that their contracted and employed agents are not engaging in improper behavior that could lead to government investigations, enforcement actions, and fines or other sanctions.

CMS statements on agents and broker Marketplace activity

On May 6, 2024, CMS issued an initial statement on agents and brokers in the Marketplace expressing concerns with the activities of “some” agents and brokers regarding unauthorized plan switches and enrollments. At that time, CMS warned agents and brokers that it would increase its oversight, resolve consumer complaints, and consider using enforcement tools, including issuing suspensions and terminations of agents’ and brokers’ Marketplace agreements, and potentially imposing civil monetary penalties.

Subsequently, on July 19, 2024, CMS announced further actions that it will block agents or brokers from making changes to a consumer’s Marketplace enrollment unless the agent is already associated with the consumer’s enrollment. CMS will now block any unassociated or “new” agents and brokers until they conduct a three-way call with the consumer and the Marketplace Call Center, or direct the consumer to submit the change through HealthCare.gov or via another approved consumer pathway.

Concurrent with this block, CMS suspended 200 Marketplace agreements for “reasonable suspicion of fraud or abusive conduct related to unauthorized enrollments or unauthorized plan switching.” Suspended agents and brokers are prohibited from participating in the Marketplace enrollment process and may not receive commissions for enrollments via the Marketplace.

Newly introduced legislation in the US Senate

On July 24, 2024, a number of US senators, led by Senate Finance Committee Chairman Ron Wyden (D-OR), introduced a bill targeting the same activities. As introduced, the Insurance Fraud Accountability Act proposes to amend the Patient Protection and Affordable Care Act as follows:

• Establishes civil penalties for fraudulent Marketplace enrollments of not less than $10,000 to up to $50,000, including criminal responsibility under certain circumstances.
• Requires the Secretary of the US Department of Health and Human Services (Secretary) to establish a consent verification process for new enrollments and coverage changes no later than January 1, 2028.
• Imposes a duty on agents and brokers in the Marketplace to act in the “best interests” of enrollees.
• Requires field marketing organizations and third-party marketers to register with the Secretary and to maintain state and federal marketing standards.
• Requires periodic audits of agent and broker enrollments to investigate complaints and enrollment patterns that suggest fraud.
• Mandates that the Secretary regularly share a list of suspended and terminated agents and brokers with issuers of qualified health plans, exchanges, and states.

Regulatory scrutiny in the Medicare Advantage and Part D market

The Marketplace is not the only market where agent and broker (as well as plan) marketing is subject to ongoing CMS and Congressional scrutiny. Over the past few years, CMS has issued a variety of new rules addressing marketing and sales of Medicare Advantage and Medicare Part D products. At the same time, the US Senate issued a scathing report on Medicare Advantage marketing activities by agents and brokers. See our alerts on some of these efforts by CMS here and here. The Senate report is available here.

What to expect next

Given the regulatory oversight push by CMS, more suspensions and terminations of Marketplace Agreements with agents and brokers are anticipated. It is possible that CMS will also seek to impose civil monetary penalties. Likewise, while it remains too early to predict if the Senate legislation will become law, the legislation demonstrates that the Senate is no longer only focused on these activities in Medicare Advantage, but in the Marketplace as well.

Given the ongoing regulatory scrutiny of marketing activities in Medicare Advantage and the Marketplace, payors, agents, and brokers should expect continued CMS investigations and enforcement activities, as well as continued oversight efforts from Congress. Agents and brokers may want to carefully scrutinize and audit their marketing and sales operations to identify, remediate, and seek to prevent any improper behavior that could lead to government investigations, enforcement actions, fines, or other sanctions.

DLA Piper continues to monitor these CMS initiatives and legislative developments. For information or questions about this alert, please contact the authors or any member of our Healthcare Regulatory practice group.