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Government & Legal Update
Recent Regulatory Changes to Medicare, Annuity Sales
As part of our ongoing efforts to monitor the regulatory landscape and its impact on independent agents, we wanted to draw your attention to two recent regulatory developments.
In May, the Centers for Medicare and Medicaid Services (“CMS”) issued a final rule for the Medicare Advantage and Part D prescription drug programs. According to a CMS press release, the rule, “advances CMS’ strategic vision of expanding access to affordable health care and improving health equity in Medicare Advantage (“MA”) and Part D through lower out-of-pocket prescription drug costs and improved consumer protections.”
Among numerous changes included in the roughly 200-page final rule, the new regulations rewrite existing marketing requirements for both Medicare Advantage and Part D planmarketing requirements as part of an effort to “protect Medicare beneficiaries by holding plans accountable to detect and prevent the use of confusing or potentially misleading marketing tactics by third-party marketing organizations.”
Of particular interest to independent agents, the new rule broadly defines third-party marketing organizations (“TPMOs”) to include “independent agents and brokers.” The effect is that all agreements between MA plans and agents “must ensure the [agent]:
(i) Discloses to the MA organization any subcontracted relationships used for marketing, lead generation, and enrollment. (ii) Records all calls with beneficiaries in their entirety, including the enrollment process. (iii) Reports to plans monthly any staff disciplinary actions or violations of any requirements that apply to the MA plan associated with beneficiary interaction to the plan. (iv) Uses the TPMO disclaimer as required under § 422.2267(e)(41).”
A number of industry groups representing agents, including our national IIABA (“Big I”), have expressed significant concern over subdivision (ii), the call-recording requirement. In a recent letter, IIABA (along with the National Association of Health Underwriters (NAHU), National Association of Insurance and Financial Advisors (NAIFA), National Association of Professional Insurance Agents (PIA), and The Council of Insurance Agents and Brokers (CIAB)) made the following appeal to CMS:
“This new requirement will add an additional burden to licensed and certified agents attempting to assist Medicare beneficiaries when choosing a suitable health and drug plan. The new regulations will discourage many licensed and certified agents and brokers from representing Medicare Advantage and Prescription Drug Plans, leaving millions of Medicare beneficiaries without access to professional assistance in their enrollment. Independent agents and brokers are often small businesses without the financial resources to implement the recording requirements included in the final rule. The cost of setting up a HIPAAcompliant audio recording system with adequate and protected storage capabilities far exceeds the abilities of many of these licensed and certified agents, who are now facing a decision as to whether to participate in this fall’s [annual enrollment period].”
The letter went on to warn that compliance with the final rule prior to this year’s annual enrollment period (AEP) would be “nearly impossible” and potentially “leave thousands of Medicare beneficiaries without the help of licensed agents and brokers and may leave them in the hands of the bad actors that this rule seeks to regulate.” As a result, IIABA and the other agent industry groups requested an implementation delay of six to 12 months, in order for CMS to “work with stakeholders to develop marketing regulations that will protect beneficiaries while allowing them access to their trusted licensed independent agent or broker.”
Whether CMS grants the request for delay remains a question as this magazine goes to print. Insurors of Tennessee along with our Big I colleagues in Washington, will continue to keep you informed on any CMS decisions regarding the final rule.
Insurors of Tennessee Opposes TDCI’s Proposed Model Annuities Rule
On August 4, the Tennessee Department of Commerce and Insurance (TDCI) held a rulemaking hearing on new set of proposed rules to regulate the sale of annuities by insurance producers. The rule is based on a model regulation approved and promoted by the National Association of Insurance Commissioners (NAIC). NAIC’s Suitability in Annuity Transactions Model Regulation overhauls the standards and procedures required of agents when making recommendations to consumers for annuity products.
The proposed revisions to the existing rule address insurance agent conduct in annuity transactions and would establish a wide range of new requirements for producers who recommend an annuity to a consumer. The new obligations are comprehensive and robust, but Insurors’ central concern is the inclusion of a so-called “best interest” obligation on
agents who recommend annuities. As we outlined in a letter to TDCI, such a standard creates unnecessary ambiguity. Indeed, the rule is substantially similar to one recently overturned by a New York appellate court for lacking sufficient clarity.
In a lawsuit brought by IIABA of New York, a five-judge panel of the Supreme Court Appellate Division unanimously ruled that the regulation was unconstitutionally vague. Notably, the court said, “while the consumer protection goals underlying promulgation of the amendment are laudable, as written, the amendment fails to provide sufficient concrete, practical guidance for producers to know whether their conduct, on a day-to-day basis, comports with the amendment’s corresponding requirements for making recommendations and compiling and evaluating the relevant suitability information of the consumer.”
New York regulators have appealed the decision to the state’s highest court, and the case is still pending.
TDCI is still considering the exact language of Tennessee’s proposed rule after an extended public comment period that closed on August 11. A number of life insurance industry interests, which played a supporting role in shaping the rule at NAIC, have encouraged TDCI’s adoption of the model language. The Tennessee Farm Bureau and Insurors have raised concerns with the rule as initially proposed and requested changes, which TDCI will have an opportunity to consider
Whatever the final decision, the rules must be examined and approved as to legality by the Attorney General prior to being finalized and filed with the Secretary of State. The rule would then need to be formally approved by the General Assembly in the upcoming legislative session.
We will keep you updated in these pages on any developments.
About the Author—Trey Moore is the government and legal consultant for Insurors. He operates Trey Moore Consulting in Nashville and formerly served as senior public policy counsel for one of Nashville’s largest law firms. Trey has over a decade of experience in representing clients before the Tennessee General Assembly and state government. u
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