Draft 2 - National Association of Insurance Commissioners



Testimony of Mary Beth Senkewicz

Deputy Commissioner

Florida Office of Insurance Regulation

“Medicare Advantage Marketing and Sales Practices”

Before the

NAIC Senior Issues Task Force – Medicare Private Plans Subgroup

Public Hearing on Regulation of Medicare Private Plans

September 11, 2007

Hall of the States

444 North Capitol Street NW

Room 333

Good afternoon Mr. Chairman and members of the Subgroup. My name is Mary Beth Senkewicz, Deputy Commissioner with the Florida Office of Insurance Regulation (OIR). I am delighted to appear before you today and truly appreciate the opportunity to express the OIR’s concerns about the deplorable practices that have been reported in the marketing and sales of Medicare Advantage and Medicare Part D prescription drug plans. This issue is utmost importance to Florida. A society is judged by the way it treats its most vulnerable population, and at this time, our society should be shamed by the way we have allowed our elderly citizens to be victimized. We must solve the problems associated with these plans. We are pleased that you are taking action to address this issue.

Florida is the fourth most populous state, with over 17.8 million citizens. Florida ranks number one in the percentage of its citizens who are elders with over 4.1 million persons age 60 and older. Since 1990, Florida’s elder population has increased by almost one million – a 29 percent increase. The oldest age group increased the fastest. During the last ten years, the number of persons age 85 and older grew four times faster than persons age 60 to 84. (End Note 1) This growth is significant for policy makers and planners as the oldest old are four times more likely to need health care services.

We currently have thirty-seven (37) carriers marketing and selling over 300 different Medicare Advantage plans in our state. This number does not include standalone prescription drug plans (there are 57). (End Note 2)

Our primary obligation is to protect our insurance consuming citizens. We take this responsibility very seriously. We act swiftly and aggressively on behalf of all policyholders against any carrier, agent or broker that has acted unlawfully or otherwise not delivered on their promise to policyholders. While we applaud the recent efforts of CMS to gain control of the marketing activities, its efforts are no substitute for the longstanding experience of state regulators that has resulted in our extensive knowledge and incomparable understanding of insurance products. We put this expertise to use every day. Why should our seniors not reap the benefit of this expertise, of our assistance and of the protection we can offer?

Our experience has been that the split regulation between the state and federal governments has been confusing and frustrating for both state regulators and our consumers.  We have consumers who have been bounced between CMS and our office, with each telling the consumer that the other has jurisdiction to handle their problem.  In cases where we attempt to assist the consumer with a Medicare Advantage non-agent issue, we cannot take administrative action for violations because we do not have the authority to do so.   We can only refer our elderly consumers to the 1-800-MEDICARE number. It is unacceptable that we should be kept on the sidelines watching our elderly citizens suffer financially, from an unintended change in plans, and in some cases, physically, because they may not be able to obtain needed medical treatments and prescriptions.

At least one Medicare Advantage company has attempted to thwart our solvency oversight by using the Federal preemption contained in the Medicare Modernization Act as a basis to enter into Federal court to challenge state authority. Delays in the Federal court system allow an entity in questionable financial condition to continue to collect hundreds of millions of dollars in Medicare payments while the authority of the state to act is stayed for months, pending a hearing in Federal court.

The federal waivers granted for certain companies in regard to state licensing have also created confusion and doubts regarding the programs. With the number of entities participating in the programs, the waiver provisions appear unnecessary and create risks that could be avoided if state licensing processes were followed.

The majority of consumers may not understand the financial incentives agents are given to sell these plans.  First year commissions can and are generally paid to the writing agent, the general agent, the special general agent, and the senior agent. This first year pay-out of commissions may be well over $1,200 by the time each agent receives a piece of the pie. Some companies allow the agent to receive the first full year commission as long as the beneficiary keeps the plan for at least three months. (End Note 3) Medicare Advantage plans offer generous commissions, which may be five times higher compared to an enrollment in a stand-alone Part D drug plan. (End Note 4) In their rush to capitalize on the lucrative Medicare Advantage market, some agents have enrolled mentally incapacitated individuals and seniors with limited English proficiency who do not understand what they are buying; even deceased beneficiaries have been enrolled.

In traditional Medicare, beneficiaries can go to any provider who accepts Medicare; their health care providers bill Medicare directly. In Medicare Advantage, a plan usually limits a beneficiary’s choice of providers, and may alter the existing Medicare benefits package. While plans may provide benefits beyond what is covered by traditional Medicare, they also are permitted to scale back existing Medicare benefits or increase the cost-sharing related to such benefits. Our experience shows that many beneficiaries are not fully aware of the limitations in Medicare Advantage, particularly in private fee-for-service.

Medicare Advantage plans have grown rapidly in the past several years. Today, about 8.5 million Medicare beneficiaries nationwide are enrolled in some form of private Medicare plan – nearly 20 percent of all Medicare beneficiaries, and a 60 percent increase from 2003. The Medicare Payment Advisory Commission (MedPAC) and the Congressional Budget Office both estimate that nationwide, Medicare Advantage plans are paid on average 12 percent per person more than it would cost to provide the same care to a beneficiary in traditional Medicare. (End Note 5) These levels are expected to rise over time. This growth is the result of substantially increased subsidies being paid to private insurance companies. We can expect more problems to occur as the program grows.

Here are some examples of problems experienced by consumers that we are powerless to address:

1. Disenrollment issues – The consumer purchased the plan and then changed her/his mind within hours or days but could not get the application voided. Consumers experienced great difficulty in getting disenrolled.

2. Conflicting enrollment/disenrollment information between CMS and the plans – There have been many complaints in which the consumers came to our office frustrated because CMS would tell the consumers their plan status was one thing and the plans would tell them it was something else. The consumers were caught between CMS and the plan and they could not get the medical services they needed because the computer records did not match.

3. Lack of provider or hospital networks –A large number of inquiries indicated seniors could not find a provider and/or hospital to accept their insurance (usually a PFFS) plan. This is causing quality of care issues as well as causing seniors to experience unnecessary anxiety.

4. Agents promising to hold applications – Agents will have the consumer sign the application even if the consumer has indicated he or she wanted to think about it or needed medical services in the near future and did not want the coverage to go into effect until a later date. CMS guidelines do not allow agents to hold applications.

5. Claim handling delays or denials – We receive consumer and medical provider complaints because of claim handling delays or denials. We attempt to assist the consumer, but our prompt payment and unfair trade practices laws are not applicable to these products due to federal preemption.

Investigations of Florida agents selling Medicare Advantage plans have increased by 515 percent from 2006 to 2007. (End Note 7) Companies and agents have capitalized on the confusion associated with these products and the end result has been increasing aggressiveness and stronger tactics designed to cheat our elderly. The tactics are misleading at best and fraudulent at worst. This trend is extremely disturbing. 

Let me give you some general examples of agent abuses:

1. Consumers are solicited as Medicare beneficiaries for the Prescription Drug plan coverage, but are actually sold Medicare Advantage Plans instead.

2. The agent assures the consumer enrollment in the plan will not affect his or her Medicare coverage.

3. The agent fails to mention to consumers that they may not be able to see their own doctor or receive treatment at their preferred hospital. When continuing to use their own doctor, unexpected bills for services become their responsibility, which places many elders in dire straits.

4. Consumers are enrolled without their knowledge while at a "free-lunch." When asked to register as an attendee, they are actually signing an enrollment form. Agents tell beneficiaries they have to sign the form in order to get more information or state it is only an attendance sheet when in reality, the signatures are used to enroll them in a Medicare Advantage plan.

5. Agents are portraying themselves as representatives of Medicare. The agent has the consumer’s personal information, so the consumer believes the agent is truly from Medicare. In these instances, the agent shows his identification to the consumer very quickly and has it turned upside down.

6. Consumers are shown a list of providers and their provider is on the list. The consumer purchases the plan and sees the doctor; the consumer then finds the doctor does not have a contract with the plan. Many times the consumer does not find out until the bills remain unpaid.

7. After purchasing the plan, the consumer discovers the coverage is not as extensive as what was promised, and less than what the consumer had before the change in plans.

8. Aggressive agent sales – Many consumers report cases where an agent is overly aggressive, refusing to leave the home, or using high pressure sale tactics in order to get them to sign forms. Consumers often sign the form just to get the agent to leave.

9. Medicare Supplement versus Medicare Advantage – Consumers attempted to obtain information about a Medicare supplement policy and the agent sold them a Medicare Advantage plan. There are many cases where the consumer had an existing Medicare Supplement policy and specifically told the agent they did not want a Medicare HMO plan but somehow ended up in one.

Specific examples of complaints are attached as Exhibit A.

Mr. Chairman and members of the Subgroup, thank you again for holding this hearing today. This issue affects millions of seniors nationwide and this problem must be solved now. Clearly, the piecemeal approach to enforcement is not working, nor is it realistic to expect that it will. As a legislative solution, we urge NAIC to work to restore and expand state regulatory authority over these programs. To protect our citizens from abuse and neglect, we need to fulfill our obligation by fully deploying the substantial and immediate resources of our office. I hope the information I have shared will be of help to you. I look forward to working with you to strengthen state oversight over these companies.

End Notes

1 - Florida Department of Elder Affairs, “The State of Aging in Florida – A Monograph and Needs Assessment” December 2006, elderaffairs.state.fl.us

2 - U.S. Department of Health & Human Services,

3 – Pyramid Life Insurance Company, General Agent Agreement - Schedule of Commissions and Fees for Enrollments with an effective date in 2007

4 – Testimony of Sean Dilweg, Wisconsin Insurance Commissioner, before the Senate Special Committee of Ageing, May 16, 2007.

5 – Medicare Payment Advisory commission, Report to the Congress: Medicare Payment Policy (Washington: Medicare Payment Advisory Commissions, March 2007)

6 – Peter Orzag, The Medicare Advantage Program: Enrollment Trends and Budgetary Effects (Washington: Congressional Budget Office, April 11, 2007) (testimony to the Senate Finance Committee).

7 – Florida Bureau of Agent and Agency Investigations, Florida Department of Financial Services, Medicare Cases Report, June 2007.

Exhibit A

Specific examples of consumer complaints:

1. An elderly consumer attended a seminar sponsored by a MA plan. When the seminar concluded, a woman approached each individual with an enrollment form, advising that this was not to enroll in the plan; it was only for the purpose of guaranteeing they would receive an informational packet. This consumer asked if he could have a packet without signing any forms, and he was told no, he needed to fill out the form. He was also told that once the packet was received, if he wanted to sign up for the plan, he could call and an agent would come to his home to complete enrollment. When the packet arrived, it was followed shortly thereafter by ID cards and welcome letters. The consumer had not intended to sign up for the plan. The consumer sent numerous letters to CMS explaining the situation. Our office and the consumer made calls to Medicare and Social Security to advise of the situation and have the Part B benefit reinitiated. After more than six weeks, the consumer was allowed to disenroll.

2. An agent going door-to-door explains to the consumer that he can enhance his Medicare Part D coverage, and all the consumer needs to do is sign his name. The agent failed to explain that the consumer is enrolling in a Medicare Advantage private fee-for-service plan. The consumer is unable to disenroll and is denied necessary medical treatment because none of his medical providers accept the plan.

3. A consumer had an appointment with an agent to look at a Medicare HMO Advantage Plan. She decided she did not want the coverage, but would maintain coverage with her current insurer. The agent, however, refused to leave her home (for over 2 1/2 hours) until she signed the papers. The elderly consumer was frightened and coerced by the agent. She now has the plan, but was told there was no co-payment for primary care and that her current doctor was on the plan. Neither statement was true.

4. The Florida Department of Children and Families referred an agent to our office because she sold a plan to a 76 year old, disabled senior who was already covered under Medicare and Medicaid as well as a secondary health insurance. He was hospitalized for four days and then placed in a skilled nursing facility. The new policy only provided coverage for 3 days. His Medicare coverage would have paid 100 days. As a result the consumer now owes $5,300.

5. A consumer has power of attorney for her great uncle who is 95 years old and has double hearing loss. Her uncle was enrolled in a Medicare HMO, which has since been terminated. The consumer is concerned with how her uncle became enrolled in the plan since he could not have done so and she has power of attorney.

6. An elderly consumer was approached by a woman in a car driving through his neighborhood and asked him if he wanted to get information about a Medicare plan where he could be refunded his Part B Medicare premium. The consumer provided this woman with his personal information in anticipation of receiving the promised information. He later discovered he had been disenrolled from his current policy and was enrolled in a Medicare Advantage plan. He called 1-800 MEDICARE, explained his situation, and was told he had exhausted his election options and would be "stuck." He was eventually given the opportunity to disenroll from the Medicare Advantage plan but would have to pay back premiums for Part B to re-enroll, and pay an additional premium for a Part D plan. Living on a fixed income, he could not afford to do this.

7. An insurance agent called the consumer and asked to come by and see her while he was in the neighborhood. She told him that she did not want him to come over because HOSPICE was there to help her with caring for her dying son. The agent told her he was from Medicare and he just needed to see her Medicare card to see if she had the red, white and blue card. He came by and simply wrote down the number listed on her card. She does not remember signing anything. The consumer later discovered she had been enrolled in a Medicare Advantage plan. She did not intend to change plans and now she is experiencing a hardship because she has to pay $25.00 co-payment every time she goes to her doctor.

8. A consumer reports her 80 year old Mother is caretaker and legal guardian for the Mother's sister, age 73, who is mentally incapacitated, deaf and physically handicapped. An agent came to the Mother's home, represented himself as a Medicare agent, and persuaded her to sign enrollment forms for the aunt to be changed to a Medicare Advantage plan. The consumer was told there would be no charge. As a result of this, in addition to losing Medicare, the aunt lost Medicaid coverage, is now unable to get treatment, and is unable to pay for the needed prescriptions.

9. A consumer was solicited by an agent while attending a medical appointment. The agent had a table set-up in a diagnostic clinic lobby and was touting the benefits of the HMO program. The agent stated how well it would suit patients of the clinic, since all of the providers at the clinic were in-network. Within weeks of the effective date, consumers received a letter advising that their primary care physician was being changed due to the fact that the clinic was no longer a participating provider in the network. This caused great distress among the insureds. Further exacerbating the issue was that representatives of the clinic indicated they played no role in the cancellation of the provider contract and asserted they cannot obtain any response from the plan as to the reason for the cancellation.

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