DRAFT



Testimony on

Medicare Advantage Marketing and Enrollment Requirements

By

Catherine Schmitt

Vice President, Federal Programs

Blue Cross Blue Shield of Michigan

Before the

National Association of Insurance Commissioners

September 11, 2007

I. Introduction

My name is Catherine Schmitt and I am Vice President of Federal Programs at Blue Cross and Blue Shield of Michigan. I appreciate this opportunity to testify on Medicare Advantage.

Blue Cross and Blue Shield of Michigan (BCBSM) is a non-profit health plan that serves nearly five million members, of which 440,000 are enrolled in programs for Medicare beneficiaries. Nearly 70 years ago, Blue Cross Blue Shield of Michigan started with a purpose to provide people with the security of knowing they have health care coverage when they need it. Today, that nonprofit mission is the same.

Blue Cross Blue Shield of Michigan is committed to offering Medicare products that meet the needs of the individual members, employers and unions that we serve. We offer a range of plans to Medicare beneficiaries in every county of the state of Michigan, including Medicare Advantage (MA) Private Fee-For-Service (PFFS) options, Medicare Part D coverage, and Medigap supplemental coverage. The BCBSM enterprise also offers a Medicare Advantage HMO product in counties where an adequate network could be developed. Our Medicare Advantage plans play an important role in providing comprehensive, coordinated benefits for seniors and disabled members who might not otherwise have affordable alternatives in Michigan.

In my testimony today, I will focus on recent concerns raised about marketing and enrollment practices of MA plans, and the appropriate roles of federal and state regulators addressing these concerns.

II. Responding to Concerns About Marketing and Enrollment Practices

Over the last few months, a number of criticisms have been leveled against the marketing of MA plans – in particular private fee-for-service (PFFS) plans. The most disconcerting concerns involve instances of unscrupulous and even fraudulent sales tactics involving sales of individual PFFS plans. These incidents were appalling and should never have happened. While the rapid growth of this relatively new product – which enrolled 1.7 million people in a very short time – is likely a contributing factor, the industry must do better.

Properly trained and regulated agents and brokers play an important role in educating beneficiaries about their coverage options. This role is particularly important in states like Michigan that have a widely dispersed population. At BCBSM, we ensure appropriate conduct of agents through strict training requirements and a zero tolerance policy for agents that do not follow the rules. I have attached a detailed outline of our existing agent training requirements. We are also implementing a new training module to further improve agent training and testing.

We support implementation and enforcement of CMS marketing guidelines and efforts to strengthen enforcement of these requirements. We also support improved coordination between the states and CMS to regulate agent and broker conduct, as I will discuss later in my testimony.

It is important to note at the outset that the sales issues profiled in past Congressional testimony by Insurance Commissioners and beneficiary advocates are not an issue with employer and union accounts. Group PFFS plans do not involve the use of agents or brokers for enrollment of their members. Employers and unions work with us to ensure that retirees understand these products.

III. Role for State Regulators

BCBSM and the Blue Cross and Blue Shield Association have a long history of supporting the state regulation of insurance. However, we have always opposed dual regulation, where two or more governmental entities have the ability or regulate a company’s practices for the same product. Dual regulation is a recipe for regulatory confusion that makes it difficult for both companies and consumers.

We believe it is entirely appropriate for states to regulate broker and agent licensing and conduct. We also believe that better coordination between state regulators and CMS will help address agent and broker issues. We applaud steps that have already been taken in this direction – specifically, the Memorandum of Understanding (MOU) between states and CMS to improve sharing of information about market conduct. In testimony before the House Energy and Commerce Subcommittee on Oversight and Investigations in June of this year[1], MA program director Abby Block testified that 26 states and Puerto Rico had signed this MOU.  Under these agreements, CMS can immediately share specific agent/broker complaints with State Departments of Insurance, and states are able to share with CMS their findings from Market Conduct reports.  CMS noted in its testimony that they are working with NAIC and the States to complete a full implementation of the MOU.

We also support increased state input during the development of CMS regulations. There are a number of avenues already available for state input during the CMS regulatory development process. Throughout the year, CMS issues a number of documents for comments from stakeholder groups.  Examples include the Medicare and You Handbook, new reporting requirements, chapters of the Managed Care Manual, and audit and compliance documents. We strongly encourage the NAIC to comment and provide feedback to CMS on issues of interest in these documents.   We have found CMS open to suggestions in many areas when we have reviewed their draft documents and would encourage the NAIC to do the same to allow for their comments on important issues and policies.

However, BCBSM has significant concerns regarding any initiative that would subject our Plan to both state and federal regulation under Medicare Advantage. As a program financed by federal funds, MA requirements are best regulated at the federal level, just as other federal programs, including TRICARE and FEHBP. Allowing states to enforce marketing requirements for MA plans would return to a failed policy of dual regulation.

Prior to enactment of the Medicare Modernization Act (MMA) in 2003, the scope of federal preemption of state laws and regulations with respect to Medicare Advantage (then-called Medicare+Choice) plans was not clear, resulting in dual regulation by federal and state governments. This dual regulation led to conflicts and inconsistencies in state oversight and Plan operations. Unless an area was specifically mentioned in legislation or M+C rules as being preempted (such as state benefit mandates or limits on cost sharing), some states decided that meant that they could regulate M+C plan operations such as marketing, appeals, or utilization review or some other area that created an inconsistent regulatory environment. In the late 1990s, the Health Care Financing Administration sought to clarify the roles of the federal and state governments with respect to the M+C program, an effort that ultimately failed.[2]

Finally, in 2003, the MMA clarified that federal preemption applies to all aspects of a Medicare Advantage organization, saving licensure and solvency, which would continue to be regulated at the state level. The main reason for the preemption in the MMA was to settle the confusion and inconsistencies and allow Plans to operate in a consistent regulatory environment in all 50 states. States also currently (as in the past) have the ability to license, regulate and oversee agents and brokers. As a result of the MMA, MA plan requirements, except for licensing and solvency, are now uniform, allowing MA plans to operate on a day-to-day basis under federal regulatory rules and regulations.

Current proposals would change the preemption provision and provide for state oversight of Medicare Advantage organizations in marketing and result in a return to dual regulation by both states and the federal government. This is not a workable proposal.

Specific concerns with a return to dual regulation include the following:

1) Uncertainty for Consumers

Consumers concerned or troubled over some marketing or enrollment questions would have to wade through a regulatory quagmire of state and federal agencies. They might have to call their state Department of Insurance or CMS, or both.

Today’s regulatory environment for MA and Part D plans is relatively easy for consumers to navigate. All requirements directly impacting consumers are regulated by the federal government, so beneficiaries with problems simply call CMS at 1-800-MEDICARE or their plan. H.R. 3162 would dramatically complicate this regulatory environment by permitting states to regulate and enforce marketing and enrollment requirements. Consumers in states that choose to adopt such requirements will not know whom to call to resolve their questions.

2) Significant Variations in Actual Requirements Enforced from State to State

Permitting dual regulation of marketing and enrollment requirements would pose particular challenges for plans that operate across state lines. Instead of having one regulator overseeing and enforcing a single set of marketing rules in a consistent manner, these plans could face two or more sets of regulators enforcing different requirements. Even if the federal government and states were to agree on a common set of basic requirements, the interpretation of these requirements or methods of enforcement could create inconsistencies. The end result could easily be significant variations in the actual requirements enforced from state to state.

Thus, regional PPOs, Part D plans, and local plans operating in areas that cross state boundaries could face a maze of overlapping and differing state and federal regulations. For example, a plan operating in the Boston metropolitan area may be held to one set of marketing regulations for beneficiaries living in Massachusetts, and another, different set for beneficiaries living in Rhode Island. Group plans can actually include members in all 50 states and could theoretically have different requirements for operations like appeals in each state.

We need to keep in mind the legislative history of the preemption provision and why it was inserted in the MMA. The fact that plans, especially Regional PPOs and Part D sponsors, frequently operate in multiple states as a federal program means that returning to the inconsistent and confusing past is not the way to solve issues but only creates more problems in MA and Part D.

3) Increased Administrative Complexity and Compliance Costs

Potential differences in interpretations between the federal and state governments and variations in requirements from state to state would require plans to devote potentially significant additional resources to compliance efforts to address the resulting web of overlapping and differing state and federal requirements.

This additional complexity is especially troublesome considering the very tight timelines within which MA and Part D plans must get products ready for the annual open enrollment period, which is only 47 days long (November 15th – December 31st). The timeframe between when final benefit packages are approved by CMS (generally August or September) and when marketing can begin on October 1st would likely be too tight to permit multiple sets of review and approval. Any confusion over whether a plan is in compliance with marketing requirements, for example, could lead to delays in approval of its marketing materials, delay proper training of agents and brokers and negatively impact that plan’s ability to enroll new members for the following plan year.

CMS already has a process in place for reviewing and approving marketing materials and other requirements for MA plans. Requiring plans to go back and forth between multiple sets of regulators reviewing marketing materials or enrollment processes would be impossible to manage within the narrow window in which MA plans can market their products. Even if there were uniform standards, the federal government and the states could disagree on the interpretation of a requirement or impose different methods of insuring compliance that could interfere with the ability of plans to bring products to market. Who would be the final authority in areas of conflict? Would disagreements need to be decided by the courts? How would we avoid double jeopardy, where both the federal government and the states would have the ability to sanction MA plans over the same incident?

Some advocates of state oversight of MA marketing and enrollment point to Medigap as a successful example of combined state and federal oversight. This is a misleading comparison; there are important differences between Medigap and Medicare Advantage. Medigap is a state-regulated insurance product that is entirely financed by the consumer, whereas MA is a federal program financed almost entirely by the federal government. Medicare Advantage is also one of the most complex and highly regulated products – incorporating a unique bidding structure, complex payment formulas, risk adjustment, benefit justification and review procedures and beneficiary protections – that differentiate it from Medigap and other products regulated by state insurance departments. Trying to standardize regulation of Medicare Advantage along the Medigap model simply would not be feasible given the marked differences between the two products.

IV. The Solution is Better Coordination Between State and Federal Regulators, Not a Return to Dual Regulation

BCBSM believes that the solution to current marketing concerns lies with better coordination and information sharing between state and federal regulators, increased state input during the development of CMS regulations, and improved state efforts to regulate agent and broker conduct.

We support ongoing dialogue between CMS and the NAIC and all stakeholders to make sure that beneficiaries have the right protections in place for any health coverage product they purchase.

We encourage all states to sign the current Memorandum of Understanding with CMS to allow for formal information sharing on marketing issues-- this is clearly a step in the right direction for all concerned.

We also continue to support state efforts to enhance agent and broker licensing and certification and/or training requirements in the Medicare marketplace.  Training in Medicare Parts A, B, C, and D as well as Medigap will strengthen sales training efforts and hopefully lead to more informed beneficiaries who rely on agents and brokers for the information they need to make sound decisions.

These recommendations rely on expertise available at the state level to address current concerns about sales and enrollment practices while avoiding the pitfalls of dual regulation.

V. Conclusion

Thank you for considering my statement on the Medicare Advantage program. I appreciate this opportunity to testify about the most appropriate way to address plans’ marketing and enrollment practices.

Appendix:

Blue Cross Blue Shield of Michigan

Federal Programs Business Unit

2007 Individual Medicare Advantage and Prescription Drug (Part D)

Independent Agent Training and Compliance Program

I. Introduction – BCBSM Marketing and Training Practices Utilized for Agents for Individual Medicare Advantage (MAPD) and Prescription Drug Plans (PDP)

A. 2006 BCBSM marketing and sales campaign of MAPD and PDP products are conducted through the following BCBSM distribution channels (prior to agent and broker implementation):

1. Direct Mail

2. Advertising

3. Pre-Enrollment Call Center

4. BCBSM Employees through Community Outreach Programs

5. Statewide Walk-In Centers

B. 2007 Campaign – BCBSM utilized independent agents as a value added distribution channel across Michigan.

C. Individual Agent Distribution Channel includes:

1. Managing Agents (MA) – exclusively market BCBSM MAPD and PDP products.

2. General Agents (GA) – market BCBSM MAPD and PDP products in addition to other MAPD and PDP private health care insurer plans across Michigan.

D. In 2006, trained nearly 2000 independent agents and support staff; over 1500 agents certified for 2007 MAPD and PDP campaign period.

II. Agent Training

A. Requirements for Agent Certification Process:

1. Attend a BCBSM MAPD and PDP training session

a. Training sessions conducted throughout the state – 31 sessions completed

b. Agent must be trained and renewed annually

2. Sign attestation indicates that agent:

a. Received training

b. Understands Medicare Laws and Regulations

c. Understands BCBSM Federal Programs Business Unit commitment to marketing and selling MAPD and PDP products

d. Agrees to read updates, attend additional required training as needed, communicate with MA/GA regarding compliance issues

e. Understands that failure to comply with compliance guidelines and requirements will result in disciplinary action

3. Completion of Compliance & Product Knowledge Test

a. 80% pass rate is required

b. Below pass rate, one opportunity to retest

4. Sign Producing Agent Agreement

5. BCBSM conducts background check

6. BCBSM notifies MA/GA weekly of agents that are certified and denied through the agent certification process; MA/GA notifies respective agents directly:

a. Agent’s certification effective date, followed by letter of notification

b. Agents that are denied certification; followed by letter of notification

7. Certified agents and brokers receive all BCBSM MAPD and PDP enrollment kits directly from MA/GA

B. Agent Compliance Training Encompasses

1. Overview of Medicare Parts A, B, C (Medicare Advantage), & Part D

2. BCBSM Relationship & Commitment to CMS

3. BCBSM contract to offer Medicare Private Fee For Service

a. Works differently than a Medicare supplement plan

b. Doctor or Hospital must agree to accept the plan’s terms and conditions prior to providing healthcare services, with the exception of emergencies (i.e., incorporation of CMS provider deeming requirements)

c. Providers can find the plan’s terms & conditions of reimbursement on BCBSM’s corporate website at

4. BCBSM Compliance with Medicare Laws & Regulations

5. Agent protection of Individually Identifiable Health Information

6. CMS Definition of Marketing (examples of what is/is not

allowed)

a. Cannot represent themselves as agents of Medicare or the Federal Government

b. Must not fill out the application for the enrollee unless they are disabled and ask them to do so

c. Must not say BCBSM is recommended or endorsed by CMS

d. Must not quote rates other than those provided by BCBSM

e. Must not make unsubstantiated comparisons with other plans

f. Must not make statements, claims or promises that conflict with

or alter CMS approved materials

g. Cannot accept plan applications in provider offices or other

places where health care is delivered

h. Cannot accept applications before November 15th

i. Must not collect names/addresses of potential enrollees without

enrollee’s permission for follow-up

j. Must not engage in discriminatory marketing practices, such as

attempting to enroll individuals from higher income areas,

without a similar effort in lower income areas

k. Must not offer cash, gift cards or monetary rebates

l. Can offer gifts of a nominal value, not to exceed $15 to potential

enrollees if they attend a marketing presentation, as long as such

gifts are provided whether or not the individual enrolls in the plan

m. Cannot lead potential enrollee to pick a specific plan; can only

provide information of the plans for the individual to decide

for their own personal situation

7. Discuss Medicare Marketing Guidelines & Medicare Managed

Care Manual – complete version available on BCBSM’s corporate

website

8. Agent’s Contractual Obligations

a. Must be licensed for Accident & Health Insurance under Chapter 12 of the Insurance Code of 1956, Section 500.1201 et seq. of the Michigan Compiled Laws in good standing and not subject to any disciplinary status

b. Must notify BCBSM immediately of any expiration, termination suspension, or other action affecting his/her license

c. Must disclose in writing to all prospective enrollees that they:

- Are contracted by BCBSM

- Are compensated upon enrollment

9. Agent Compensation

a. Commissions will not vary or depend on value of the book of business generated by agent

b. No commissions outside of those set forth on commission schedules will be paid

c. Commissions shall be paid regardless of beneficiary’s risk profile or upon any other factor

d. BCBSM will withdraw any agent if its determined that the agent is misleading beneficiaries, cherry picking based on beneficiary health or churning beneficiaries between competing products

e. Rapid Disenrollment

- BCBSM will withhold or withdraw payments if an enrollee

disenrolls in less than 60 days after initial enrollment and

180 days for re-enrollments

10. Agent Record Keeping

a. Accurate and timely records

b. confidentiality and disclosure of health information

c. Maintain records for ten years

d. Shall provide records to BCBSM as necessary to comply with reporting requirements of CMS

11. BCBSM Oversight & Monitoring of Agents

a. Performance & Compliance will be monitored on an on-going

basis (e.g., BCBSM plan representative to drive along with

contract/certified agent; application processing, etc.)

12. Disciplinary Action

a. If agent is unable to perform in a satisfactory manner, BCBSM

has the right to place on probation, suspend, revoke or terminate

that agent

b. BCBSM has the right to institute corrective action plans or seek

other remedies or curative measures with respect to that agent’s

services

13. Pre-Enrollment

a. Definition – All information requested prior to enrolling in plan

b. Pre-Enrollment Marketing Materials

- Can only distribute the entire enrollment kit

- All marketing materials must be approved through BCBSM and by

CMS

- Includes direct mail, sales presentations, sales scripts, advertising

ads, web sites

c. Enrollment Process & Form

d. Provider Deeming – communicates detail explanation

e. Comparisons to Other Plans

14. Product Overview

a. General Description of MAPD and PDP Plan Offerings

b. Monthly Premiums variation by Region

c. Part B Contribution continues through Social Security Administration

15. Eligibility

a. As determined by CMS

b. BCBSM is required to abide by federal non-discrimination rules

c. BCBSM cannot deny or limit coverage based on health status

16. Enrollment Process

a. Enrollment Forms need to be complete

b. Explanation of Enrollment Periods and exceptions

17. Post-Enrollment

a. Member receives communications on:

- Benefits

- Various membership operational rules

- Appeals rights

- Policies & Procedures

b. Post-Enrollment Materials include:

- Identification Cards

- Evidence of Coverage

- Summary of Benefits

- Plan Pharmacy Formulary

- Various other notification forms & letters

C. Product Training

1. MAPD

2. PDP

D. Sales Aids (enrollment periods and exceptions)

E. MA/GA staff clarification meetings

F. Refresher Training – conducted 13 webinar sessions with testing in March 2007

1. 13 webinar sessions

2. Overview included:

a. Election Periods

b. Effective dates

c. Enrollment form processing reminders

d. Compliance

e. Documentation on obtaining customer leads

f. Complaints

g. Creditable coverage

3. Require Refresher Training for agents with compliance issues, i.e.,:

a. delay in sending in applications

b. missing information on applications

4. Agents able to ask questions directly

5. Testing – must pass by 80%

G. Agent Alerts – Updates / Action Required

III. Monitoring

A. BCBSM Monitoring of Managing Agents and General Agents

1. MA/GA Adherence to Agency Agreement and Policies & Procedures Form

2. MA/GA Enrollment Application Audit Form

3. MA/GA Corrective Action Form

B. BCBSM Monitoring of Producing Agents

1. Agent Adherence to Producing Agent Agreement and Policies

Procedures Form

2. Agent Enrollment Application Audit Form

C. Managing Agents / General Agents Monitoring Responsibilities

1. Monitor Enrollment Applications before sending overnight to BCBSM

2. Notify agents who are certified / decertified

3. Notify agents when they are noncompliant / follow through with corrective action

4. Provide Lead follow-up information to BCBSM bimonthly

-----------------------

[1] Statement by Abby L. Block, Director, on Marketing of Medicare Advantage Plans, June 26, 2007

[2] “Guidelines to be Used Between HCFA and State Insurance Departments for the Medicare+Choice Program,” posted on the HCFA website in December 1999.

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