42 CFR 422.2274 - Broker and agent requirements.

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§ 422.2274 Broker and agent requirements.

If an MA organization uses agents and brokers to sell its Medicare plans, the following requirements in this section are applicable.

(a) Definitions. For purposes of this section, the following definitions are applicable:

Compensation (1) Includes monetary or non-monetary remuneration of any kind relating to the sale or renewal of a policy including, but not limited to -

(i) Commissions;

(ii) Bonuses;

(iii) Gifts;

(iv) Prizes or Awards; or

(v) Referral or Finder fees.

(2) Does not include -

(i) Payment of fees to comply with State appointment laws, training, certification, and testing costs;

(ii) Reimbursement for mileage to, and from, appointments with beneficiaries; or

(iii) Reimbursement for actual costs associated with beneficiary sales appointments such as venue rent, snacks, and materials.

Like plan type means one of the following:

(1) PDP replaced with another PDP.

(2) MA or MA-PD replaced with another MA or MA-PD.

(3) Cost plan replaced with another cost plan.

Unlike plan type means one of the following:

(1) PDP replaced with an MA-PD or an MA-PD replaced with a PDP.

(2) PDP replaced with a cost plan or a cost plan replaced with a PDP.

(3) MA-PD replaced with a cost plan or a cost plan replaced with an MA-PD.

Plan year means the year beginning January 1 and ending December 31.

Renewal year means all years following the initial enrollment year in a like plan type.

(b) Compensation rules. An MA organization must compensate independent brokers and agents, if compensation is paid, only according to the following rules in this section.

(1) Compensation amounts.

(i) For an initial year enrollment of a Medicare beneficiary into an MA plan, the compensation must be at or below the fair market value of such services, published annually as a cut-off amount by CMS.

(ii) For renewal years, compensation may be up to 50 percent of the current fair market value cut-off amounts published annually by CMS.

(iii) If the MA organization contracts with a third party entity such as a Field Marketing Organization or similar type entity to sell its insurance products, or perform services (for example, training, customer service, or agent recruitment) -

(A) The total amount paid by the MA organization to the third party and its agents for enrollment of a beneficiary into a plan, if any, must be made in accordance with paragraph (b)(1) of this section; and

(B) The amount paid to the third party for services other than selling insurance products, if any, must be fair-market value and must not exceed an amount that is commensurate with the amounts paid by the MA organization to a third party for similar services during each of the previous 2 years.

(2) Aggregate compensation.

(i) An entity must not provide aggregate compensation to its agents or brokers greater than the renewal compensation payable by the replacing plan on renewal policies if an existing policy is replaced with a like plan at any time.

(ii) An agent or broker must not receive aggregate compensation greater than the renewal compensation payable by the replacing plan on renewal policies if an existing policy is replaced with a like plan type at any time.

(iii) The initial compensation is paid for replacements between unlike plan types.

(3) Compensation payment and payment recovery.

(i) Compensation may only be paid for the enrollee's months of enrollment during a plan year.

(ii)

(A) Subject to paragraph (b)(3)(iii) of this section, compensation payments may be made at one time for the entire current plan year or in installments throughout the year.

(B) Compensation may not be paid until January 1 of the enrollment year and, if paid at all, must be paid in full by December 31 of the enrollment year.

(iii) When a beneficiary disenrolls from an MA plan, compensation paid to agents and brokers must be recovered for those months of the plan year for which the beneficiary is not enrolled. For disenrollments occurring within the first 3 months, the entire compensation must be recovered unless CMS determines that recoupment is not in the best interests of the Medicare program.

(4) Compensation structure.

(i) The MA organization must establish a compensation structure for new and replacement enrollments and renewals effective in a given plan year. Compensation structures must be in place by the beginning of the plan marketing period, October 1.

(ii) Compensation structures must be available upon CMS request including for audits, investigations, and to resolve complaints.

(c) Annual training. The MA organization must ensure that all agents and brokers selling Medicare products are trained annually on the following:

(1) Medicare rules and regulations.

(2) Details specific to the plan products they intend to sell.

(d) Annual testing. It must ensure that all agents and brokers selling Medicare products are tested annually, to ensure the following:

(1) Appropriate knowledge and understanding of Medicare rules and regulations.

(2) Details specific to the plan products they intend to sell.

(e) Upon CMS' request, the organization must provide to CMS, in a form consistent with current CMS guidance, the information necessary for it to conduct oversight of marketing activities.

(f) It must comply with State requests for information about the performance of a licensed agent or broker as part of a state investigation into the individual's conduct. CMS will establish and maintain a memorandum of understanding (MOU) to share compliance and oversight information with States that agree to the MOU.

(g) A plan sponsor must report annually, as directed by CMS -

(1) Whether it intends to use independent agents or brokers or both in the upcoming plan year; and

(2) If applicable, the specific amount or range of amounts independent agents or brokers or both will be paid.

(h) Finder's (referral) fees. Finder's (referral) fees paid to all agents and brokers -

(1) May not exceed an amount that CMS determines could reasonably be expected to provide financial incentive for an agent or broker to recommend or enroll a beneficiary into a plan that is not the most appropriate to meet his or her needs; and

(2) Must be included in the total compensation not to exceed the fair market value for that calendar year.

[73 FR 54250, Sept. 18, 2008, as amended at 73 FR 67412, Nov. 14, 2008; 76 FR 21569, Apr. 15, 2011; 76 FR 54634, Sept. 1, 2011; 77 FR 22168, Apr. 12, 2012; 79 FR 29960, May 23, 2014; 80 FR 7962, Feb. 12, 2015]

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