Brokers and agents report misleading advertising for selling higher-premium Medicare plans

A new report finds that brokers and agents say that carriers are incentivizing the sale of certain types of Medicare plans over others, and that the brokers and agents would likely choose a different plan if they were shopping for themselves.

The report by The Commonwealth Fund is based on focus groups held last September with more than two dozen agents and brokers who sell Medicare Advantage plans, Medigap supplemental coverage plans, and Part D prescription drug plans.

Higher commissions for Medicare Advantage

The report found that most focus group participants said they receive higher commissions for enrolling people in Medicare Advantage plans, compared to traditional Medicare with Medigap supplemental plans that are another option for Medicare enrollees.

“One broker recalled getting paid three times more to sell a Medicare Advantage plan. Even with the commission for stand-alone prescription drug plans added to the Medigap commission, most brokers and agents said Medicare Advantage commissions were much higher,” the report says. “Brokers and agents also said relative commissions differ for new enrollments versus renewals, with some reporting that the latter can be higher, and more reliable, for Medigap.”

One broker in the focus groups said that the result of the commission structure could be that a broker or agent would push a Medicare Advantage plan, rather than a supplemental (Medigap) plan that would give enrollees more freedom in choosing their own physician.

Many brokers and agents also said they personally preferred Medicare and Medigap policies over Medicare Advantage plans. “When asked, most said that they believe traditional Medicare, with the addition of Medigap supplemental plans, offers better health care coverage and choices, particularly as people age. One broker explained their choice, “If I ever have a medical issue, I’d want to be able to go to any physician I want.” A few participants, however, said Medicare Advantage plans would meet their needs.

Different levels of Medigap plans = different incentives

The report noted the plan structures can be complex; for example, most Medigap beneficiaries are on higher-premium plans (Medigap G and F) that provide comprehensive coverage. However, Medigap beneficiaries on a tight budget might be better served by K or L plans, which feature higher cost sharing and lower premiums, along with limits on out-of-pocket payments.

Those lower-premium plans result in lower fees for agents and brokers, since commissions for these plans are often a percentage of the plan premium. The report quoted a broker as saying: “If I was to [enroll in Medicare] today . . . I might be inclined to take a Medicare supplement — but one that I offer rarely to my clients, which is a high-deductible plan.”

Another issue identified by the report is that enrollees may have trouble switching from Medicare Advantage to traditional Medicare with Medigap supplemental plans. One broker noted that advertising may lead enrollees to mistakenly believe they can switch to a Medicare supplement any time they want. The agents and brokers reported that extensive underwriting can be a barrier in switching from Medicare Advantage to Medigap plans. “Beneficiaries who are older or sicker can be denied coverage or forced to pay higher rates,” the report says. “Most focus group participants said there are few options for these clients, and brokers and agents said they often enroll these beneficiaries in a Medicare Advantage PPO, which offers more provider choice.”

Marketing is not the same as educating

The focus groups said that marketing efforts did not present a full picture to consumers and did not fully inform people of options and trade-offs that may be pertinent to decisions about Medicare plans.

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“Beneficiaries are often unaware of potential underwriting from Medigap insurers, and advertising seemed to confuse and mislead beneficiaries into believing incorrect information about coverage options,” the report says. It also found that focus group participants used words like “relentless,” “overwhelming,” and “misleading” to describe marketing, especially in the case of Medicare Advantage commercials. “Brokers and agents said Medicare plan advertising requires them to spend a lot of time resetting client expectations,” the report says. “In some cases, they even lose clients who don’t believe them or want everything the ads promise.”