[Senate Hearing 110-207] [From the U.S. Government Publishing Office] S. Hrg. 110-207 MEDICARE ADVANTAGE MARKETING AND SALES: WHO HAS THE ADVANTAGE? ======================================================================= HEARING before the SPECIAL COMMITTEE ON AGING UNITED STATES SENATE ONE HUNDRED TENTH CONGRESS FIRST SESSION __________ WASHINGTON, DC __________ MAY 16, 2007 __________ Serial No. 110-8 Printed for the use of the Special Committee on Aging Available via the World Wide Web: http://www.gpoaccess.gov/congress/ index.html U.S. GOVERNMENT PRINTING OFFICE 38-618 WASHINGTON : 2007 _____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800 Fax: (202) 512�092104 Mail: Stop IDCC, Washington, DC 20402�090001 SPECIAL COMMITTEE ON AGING HERB KOHL, Wisconsin, Chairman RON WYDEN, Oregon GORDON H. SMITH, Oregon BLANCHE L. LINCOLN, Arkansas RICHARD SHELBY, Alabama EVAN BAYH, Indiana SUSAN COLLINS, Maine THOMAS R. CARPER, Delaware MEL MARTINEZ, Florida BILL NELSON, Florida LARRY E. CRAIG, Idaho HILLARY RODHAM CLINTON, New York ELIZABETH DOLE, North Carolina KEN SALAZAR, Colorado NORM COLEMAN, Minnesota ROBERT P. CASEY, Jr., Pennsylvania DAVID VITTER, Louisiana CLAIRE McCASKILL, Missouri BOB CORKER, Tennessee SHELDON WHITEHOUSE, Rhode Island ARLEN SPECTER, Pennsylvania Deb Whitman, Staff Director Catherine Finley, Ranking Member Staff Director (ii) ? C O N T E N T S ---------- Page Opening Statement of Senator Herb Kohl........................... 1 Panel I Abby L. Block, director, Center for Beneficiary Choices, Centers for Medicare and Medicaid Services (CMS), Baltimore, MD........ 3 Panel II Sean Dilweg, Wisconsin Office of the Commissioner of Insurance, Madison, WI.................................................... 14 Kim Holland, Oklahoma Insurance Department, Oklahoma City, OK.... 43 Sherry Mowell, Georgia Office of the Commissioner of Insurance, Atlanta, GA.................................................... 55 Albert Sochor, vice president and director of Marketing, Old Surety Life Insurance, Oklahoma City, OK....................... 60 Panel III Karen Ignagni, president and CEO, America's Health Insurance Plans, Washington, DC.......................................... 70 Heidi Margulis, senior vice president, Humana Inc., Louisville, KY............................................................. 86 Peter J. Clarkson, senior vice president, Distributions Operations, UnitedHealth Group, Minnetonka, MN................. 108 Gary Bailey, vice president, Medicare Operational Performance, WellCare, Tampa, FL............................................ 116 APPENDIX Prepared Statement of Senator Robert P. Casey.................... 143 Responses to Senator Kohl's Questions from Abby Block............ 143 Responses to Senator Smith's Questions from Abby Block........... 144 Responses to Senator Lincoln's Questions from Abby Block......... 149 Responses to Senator Smith's Questions from Commissioner Dilweg.. 157 Responses to Senator Lincoln's Questions from Commissioner Dilweg 159 Response to Senator Kohl's Question from Commissioner Holland.... 160 Responses to Senator Smith's Questions from Commissioner Holland. 160 Responses to Senator Smith's Questions from Sherry Mowell........ 161 Responses to Senator Smith's Questions from Albert Sochor........ 162 Responses to Senator Smith's Questions from Karen Ignagni........ 163 Responses to Senator Smith's Questions from Heidi Margulis....... 167 Responses to Senator Lincoln's Questions from Heidi Margulis..... 174 Responses to Senator Smith's Questions from Peter Clarkson....... 176 Responses to Senator Smith's Questions from Gary Bailey.......... 188 Additional information submitted by the Oklahoma Insurance Department..................................................... 206 Statement submitted by Janet Stokes Trautwein, executive vice president and CEO, National Association of Health Underwriters. 260 National Insurance Producer Registry User's Guide................ 263 (iii) MEDICARE ADVANTAGE MARKETING AND SALES: WHO HAS THE ADVANTAGE? ---------- -- WEDNESDAY, MAY 16, 2007 U.S. Senate, Special Committee on Aging, Washington, DC. The Committee met, pursuant to notice, at 11:49 a.m., in room SD-106, Dirksen Senate Office Building, Hon. Herb Kohl (chairman of the committee) presiding. Present: Senators Kohl, Wyden, Whitehouse, and Smith. OPENING STATEMENT OF SENATOR HERB KOHL, CHAIRMAN The Chairman. I thank you all for being here today, and I apologize for having kept you waiting an hour. As you know, there were a series of votes on the floor of the Senate, which delayed the beginning of this hearing. Nevertheless, we would like to welcome you all here today. We particularly want to thank our witnesses for taking time out of their busy schedules in order to be with us. Today, we will examine the sales and marketing practices involving Medicare Advantage plans. I want to make it clear at the outset that we are not taking any position on the benefit or relative cost of Medicare Advantage. These plans may be appropriate and beneficial for many individuals under the right conditions. Rather, this focus and our concern today is with the numerous and widespread complaints involving the sale and marketing of Medicare Advantage plans, which are being aggressively promoted all around our country. For those of you not familiar with Medicare Advantage plans, they are private-plan options ranging from managed care to private fee-for-service plans, which are offered to Medicare beneficiaries as an alternative to traditional Medicare. While they have been in existence for some time, Medicare Advantage plans are now the fastest growing segment of the Medicare world and are an increasingly profitable enterprise for many plan sponsors. Unfortunately, widespread confusion and, in some cases, outright misrepresentation and even fraud, have been associated with the sale of these plans. Complaints appear to be nationwide and a troubling pattern has emerged. So today we will hear from two distinguished State insurance commissioners, Sean Dilweg of Wisconsin and Kim Holland of Oklahoma. They will outline the problems associated with Medicare Advantage plans and tell us what some States, as well as the National Association of Insurance Commissioners, are doing to address them. Our investigation has revealed a disturbingly consistent picture, one which only seems to be growing. Countless seniors purchasing Medicare Advantage plans have been preyed upon and unwittingly taken advantage of by insurance agents. Seniors have been removed from traditional Medicare without their knowledge, signed onto plans that they cannot afford, mislead regarding coverage and told that their doctors accept these plans when, in reality, they do not. This, of course, is not acceptable. One of the most troubling problems that we have seen involves insurance agents misrepresenting and marketing Medicare Advantage plans in inappropriate manners in place such as within nursing homes. We will hear more about that from Sherry Mowell, an investigator from Georgia. Just as seriously, many insurance-sales agents simply do not understand the important differences between traditional Medicare and the multitude of other plans available to seniors, including the Medicare Advantage plans that they are peddling. Too many of our seniors are paying a terrible price for those frauds, misunderstandings and outright ignorance. We will also be learning about the sales training received by the insurance agents selling Medicare Advantage plans. At our request, plan sponsors have provided the Committee with an array of well-developed and impressively written training manuals and programs required for those who sell Medicare Advantage. Sadly, what is on paper does not always translate into the real world. In this case, not by a long shot. Last, we will examine the details of the Federal-State oversight partnership, as it concerns Medicare Advantage sales and marketing. Based on current law, CMS has exclusive authority to investigate and discipline plans marketing and selling Medicare Advantage products. The States have been permitted to investigate and enforce violations against insurance agents only. This unusual arrangement, which some might call a ``preemption of authority,'' seems to have left a sizable enforcement gap that has exacerbated the problems found by the Committee. To address this, I have begun working with the National Association of Insurance Commissioners and other stakeholders to develop legislation that would give States expanded authority to oversee plans and agents. We are not suggesting today that CMS has done nothing to address these problems or that CMS officials are unconcerned about them. According to some State officials, CMS regional offices have made legitimate efforts to lend a hand, as they should, particularly when fraud and confusion have left our seniors with health-insurance gaps and unnecessary additional costs. Nevertheless, it is clear that a major disconnect in oversight exists; one that needs to be addressed immediately. I am pleased that today's hearing is already having a positive effect. In the last weeks, Medicare Advantage plans announced initiatives to reform their marketing-and-sales practice guidelines. The Americas Health Insurance Plans, AHIP, is here today to discuss its new initiative to strengthen training for its member agents and brokers. This is a good start, but it is only a start. As we know, the number of Medicare Advantage plans being offered to beneficiaries is growing rapidly. So we must remain vigilant in our oversight of these plans, and I intend to do so. If more hearings are necessary to hold feet to the fire, then we will do that. Cleaning up these marketing-and-sales practices is a high priority of mine. So let me be clear: This issue will not go away after this hearing; and, of course, neither will I. We look forward to hearing from our witnesses today, with whom we will work to identify and address and shortcomings in the marketing and selling of Medicare Advantage plans. At this time, we would like to call our first panel witness, who is Abby Block. She is from the Centers for Medicare and Medicaid Services, CMS. Ms. Block is the director of the Center for Beneficiary Choices at CMS. Prior to assuming her current responsibilities, she was a senior advisor to the CMS administrator. She has worked extensively with the States' health plans and beneficiary advocacy groups on Medicare Advantage plans and the issues we are discussing today. She is a very well-versed, very knowledge expert. We are very pleased to have you with us today, Ms. Block, and we would be pleased to receive your testimony. STATEMENT OF ABBY L. BLOCK, DIRECTOR, CENTER FOR BENEFICIARY CHOICES, CENTERS FOR MEDICARE AND MEDICAID SERVICES (CMS), BALTIMORE, MD Ms. Block. Thank you for inviting me to discuss Medicare Advantage and, in particular, marketing compliance. Medicare Advantage is a valued, important option for millions of people with Medicare. Working closely with Congress, we have refined Medicare Advantage over the years to promote strong plan participation across the country. With a vibrant marketplace of plans for 2007, beneficiary enrollment is now at an all-time high. I am proud of these successes and stand committed to work with you in the days ahead to preserve choice for people with Medicare. I am pleased to report that this year, beneficiaries selecting a Medicare Advantage plan are receiving, on average, an estimated $86 per month in benefits over and above what original Medicare provides. Such additional benefits vary by plan, but can include: lower cost-sharing, enhanced Part D prescription drug coverage, Part B and D premium reductions; and, access to items and services like hearing aids, routine physicals or vision exams that original Medicare does not cover. Regardless of the programs' successes, CMS takes recent reports of aggressive marketing of some products very seriously. We have stepped up supervision. I want to talk today about some of the ways that CMS is building upon lessons learned and information gathered during 2006. CMS enforcement for marketing violations ranges from issuing a warning letter or corrective action plan to suspending enrollment and even, ultimately, terminating a plan from the program. This year alone, we have fined plans more than $400,000 in civil monetary penalties for failing to provide information to beneficiaries in a timely manner. Also, at present, 98 Medicare plans are on a corrective action plan to fix identified problems and allow CMS to monitor their progress. Our experience shows that, on occasion, private fee-for- service plans have not been clear about what they offer our beneficiaries and what they don't provide. Therefore, for 2008, we will require plans to include specific, unambiguous language in all marketing materials, enrollment materials and sales presentations laying out what a beneficiary can expect if he or she signs up for a plan, and call all new applicants to confirm that they do, in fact, understand the features of the plan and wish to enroll. In fact, in some of our corrective actions underway now, we already have those requirements in place. Our utmost concern is to aid and protect the beneficiary. Therefore, beneficiaries and enrollees mislead by a plan are given an opportunity to switch to another plan. In addition, during the first quarter of every year, all enrollees already have the opportunity to switch out of private fee-for-service plans or any other MA plan for any reason and select another option. Marketing complaints are handled differently, depending on the nature of the issue. For example, CMS handles violations of our marketing guidelines. Issues involving fraud and abuse go to the medics, our program integrity contractors. Allegations of fraudulent marketing and enrollment go to the OIG. Finally, States handle complaints about licensed agents and brokers. CMS is taking many steps to identify organizations in need of compliance intervention, including monitoring complaints by conducting secret shoppings of sales events across the country. In addition, stressing relationships with State regulators are key to ensuring that marketing is conducted appropriately. Specifically, CMS works cooperatively with the National Association of Insurance Commissioners and State departments of insurance to develop a model compliance and enforcement Memorandum of Understanding. So far, 20 States and Puerto Rico have signed the MOU that will enable us to share information about non-compliant marketing activities. CMS plans to issue soon a proposed rule that will facilitate oversight for Medicare Advantage plans and Part D prescription drug plans. The rule proposes new provisions to strengthen and reinforce Medicare's compliance provisions for detecting, preventing and correcting fraud, waste, and abuse. These are only the initial steps we are taking to ensure that Medicare beneficiaries are not being misinformed, misled or defrauded. We are holding plans responsible for the actions of both employed and independent agents selling their products. This includes requiring documented training of marketing agents and brokers. Finally, I want to assure you that the vast majority of seniors who bought Medicare Advantage products are satisfied with their plans and the services they are receiving. I am confident we will see continued high levels of plan compliance with marketing requirements, along with significant improvements where necessary on this critical front. Thank you again for the opportunity to speak with you today. I look forward to answering your questions. The Chairman. Thank you, Ms. Block. Before we get to questions for you, we would like to hear from our Ranking Member, Senator Smith, as well as Senator Whitehouse. Senator Smith. Thank you, Senator Kohl, for calling this important hearing on a very vital issue. I want to apologize to our witness. You have heard me complain in the past that the leadership of the Senate should check with the Aging Committee before they schedule votes. We apologize to the witnesses. We thank you for your indulgence and your time. We respect it deeply, especially this particular issue. I want to make a distinction, which I hope folks who are interested will understand. I find abhorrent the stories which I have recently read, particularly, in the New York Times, that talk about marketing and abuse. These things must be routed out. All stakeholders who would like to see this program continue need to understand that, if left unchecked, this will undermine confidence in the program. Having said that, I want to make clear my belief that Medicare Advantage and Medicare Part D are not bad simply because they are private delivery systems. These programs are working. They can work better. But to all who have an interest in the continued success of these programs, it comes to each of us individually to do all that we can to fix the problems and to fix them fast. What I did when I was Chairman and now, as Ranking Member-- and I share the Chairman's concern--what I began to do in the 109th Congress is to provide oversight. Some of what I am learning, I don't like. It needs to change. So we will continue that oversight with the view, at least, from my view, to preserving and strengthening these programs that do so much good, help so many people, particularly, in rural places. So any company with an interest in either prescription drugs or Medicare Advantage: Get on top of this and get on top of it fast. The Chairman. Thank you very much, Senator Smith. Senator Whitehouse. Senator Whitehouse. Mr. Chairman, I just want to say thank you for holding this hearing. I think it is very important. I am glad that you and the Ranking Member are leading on this issue. As an attorney general in Rhode Island, I saw over and over again how seniors were targeted for all sorts of scams and fraud and abuse; how lists of seniors were traded among people who played in this arena. I saw firsthand how easy it is to target the senior population. The other thing that I have seen is a senior population that depends on the provision of healthcare services--any risk to that is extraordinarily frightening for them. When you combine those two together--the fear that so many seniors have related to their continued provision of healthcare coverage, and their vulnerability as well, this kind of marketing hits in a particularly dangerous area. So I think it is really important that we are doing this, and I appreciate the testimony of all the witnesses. The Chairman. Thank you very much, Senator Whitehouse. Ms. Block, in a front-page article in the May 7th New York Times, you were quoted as saying, concerning Medicare Advantage sales and marketing, that, quote, ``Providers and people with Medicare clearly do not understand this product,'' unquote. I would like to ask you what you meant by that comment and what is CMS doing to ensure that beneficiaries and insurance- sales agents do understand the Medicare Advantage product before they purchase it. Ms. Block. Well, the comment was addressed specifically to the private fee-for-service product and not the Medicare Advantage product, in general. I truly believe that many people, including providers, as well as beneficiaries, have found the private fee-for-service product confusing. Some of that confusion, unfortunately, has been perpetuated in the way that product has been marketed. So we are taking a number of very meaningful steps, including and in addition to the specific things that we have specific plans doing, under Corrective Action Plans (CAPS) that are already in place because of marketing violations that have occurred in 2006 and 2007. But we have added some very specific requirements, including documentation of training programs by the plans and disclaimer statements. I even have some examples with me of drafts of what those statements will look like. These statements, which are for both beneficiaries and providers, explain very clearly what a private fee-for-service plan is and, more importantly, what it is not, which is what I think is what confuses beneficiaries. We are going to require all of the plans in every presentation in all of their materials to include these statements--these very clear statements--for both beneficiaries and providers so that there will be true transparency, true accuracy of information. We are also requiring all of the plans to do callbacks to people who enroll in one of the private fee-for-service plans to make sure that, in fact, they, first of all, actually chose that plan--that they actually signed the application--and then, second, that they truly understand the provisions of the product they have purchased and that they truly intend to be in that plan because they believe it meets their needs. The Chairman. Thank you. Senator Smith. Senator Smith. Thank you, Mr. Chairman. Ms. Block, thank you again for being here. I believe we will hear from members of the second panel that States are frustrated by the preemption provision in the Medicare Modernization Act. This prohibits them from taking action against Medicare plans in their States that may be engaged in inappropriate and often-illegal marketing and enrollment actions. I believe we will also hear from the second panel that CMS is not living up to its responsibilities to police these plans. So with this in mind, is there value in considering rolling back the preemption policies, creating a better partnership between the States and CMS; or, at a minimum, reestablishing the State appointment laws? Ms. Block. Well, I can't tell you how critical I believe it is that CMS and the States work closely together. We are strong advocates of a partnership between CMS and the States on this issue. We understand that we share the concern for the well- being of Medicare beneficiaries. For that reason, we worked with the National Association of Insurance Commissioners to develop the Memorandum of Understanding, which, now, will help us to communicate better, to share information, to make sure that each of us is holding up our end in terms of what needs to be done to make 100 percent sure--and you will hear again and again today--and I said it at the last hearing that I was at--there is zero tolerance for Medicare beneficiaries being deceived in any way about the products that they are being sold. We are in total agreement on that. Senator Smith. But does the Medicare Memorandum of Understanding--is that sufficient, or do we need to roll back this preemption provision? Ms. Block. I think that the Memorandum of Understanding needs to be given a chance to work. We have 20 States that have signed the memorandum so far, and Puerto Rico. I would like to see the rest of the States do that as well. We have a group working closely with the NAIC to work through how this is going to work in terms of processes, procedures and so on. I think that, clearly--and I know the comparison has been made to Medigap and the State supervision of Medigap. However, Medigap is something that beneficiaries purchased with their own money. The Medicare Advantage plans are heavily federally funded. So I believe it is critical that the Federal Government maintain supervision and oversight of those plans. They are our contractors. There are huge amounts of Federal funds going into that program. It is a Federal program. I think we need to work as closely as possible with the States, and I can't emphasize that enough. But I think the Federal Government, rightfully, has the supervisory authority. Senator Smith. Would there be value, then, in reestablishing the State appointment laws in the interim? Ms. Block. Well, I think that is something that we could go back and think about. I understand that there has been some confusion about the appointment laws and, also, I understand that some of the plans actually do appointments voluntarily. So that is something that we could, certainly, go back and look at and talk with NAIC and the States and the Committee about. But the critical point, I think, is that this is a Federal program and we want to work as closely as possible through the mechanisms that we have developed to do this jointly with the States in a way that, basically, achieves our common goal, which is to protect the beneficiaries. Senator Smith. Well, one plan that I believe is testifying today has an excerpt from a document that reads, ``Now is the time to sell aggressively. Use the urgency of the impeding deadline to drive decisions with a 'Buy now or miss out' sales proposition.'' I am wondering if, in your view, Ms. Block, this is standard-operating sales pitch. Is this common: ``Buy now or miss out''? Are their agents unable to answer beneficiaries' questions? Does any of this violate CMS guidelines? Ms. Block. Well, certainly, agents are required to be able to answer beneficiaries' questions, and that is the point of the documented training. It is absolutely critical that everybody who is out there selling this product--whether the agent is actually employed by the plan or whether it is a contract broker or agent--first of all, understands the Medicare rules clearly and, second, fully understands the product that they are marketing. So that is something we are monitoring very, very carefully. Again, we stepped up our supervision of the training programs for the coming year to make sure that the people who are out there selling know the product that they are selling. Senator Smith. Does CMS have a sense of urgency that some of the unscrupulous things that may be going on may be undermining the whole effort? Ms. Block. Absolutely. We share the sense of urgency. We believe very strongly that we need to get this under control, that we need to make sure--and I do want to say I think we are talking about some bad apples. Bad apples cannot be tolerated. I don't want to see the whole program disparaged as a result of the really unacceptable behavior of---- Senator Smith. Well, I don't either. I don't want to see that happen either. Ms. Block [continuing]. Some actors. Senator Smith. I think we we will see it succeed. Many of the beneficiaries who were enrolled in policies that don't meet their needs, they are going to end up returning to traditional Medicare. Doing so, I am wondering what the unanticipated impact might be on the Medicare program; that is, if beneficiaries, who have been stuck in an unsuitable MA plan for an entire year due to lock-in provisions, go without needed medical care due to lack of provider access and/or cost and then return the Medicare during the next enrollment cycle, are we going to be dealing with a sicker and more costly patient--a patient population that is just cycling back in? I mean, this is the danger. We are not making it better. We are making it worse if the bad apples aren't harvested real quick and thrown out. Ms. Block. Senator, just let me say about that if any beneficiary has enrolled in a Medicare Advantage plan because they have, in any way, been misled or deceived, they can immediately request that they be returned either to original Medicare or have the option of electing a different Medicare Advantage plan. That is in place. We give a special enrollment period to any beneficiary in that situation. Senator Smith. Great. Thank you. The Chairman. Just one additional question, following up on one of Senator Smith's points--later on this morning, one of our State insurance commissioners will testify that a letter on the Medicare Advantage sales and marketing practices, representing the views of the National State Commissioners Association, took 10 months to be answered by CMS. This was during a period when the sales problems were growing rapidly in the States. How do you account for that fact that it took almost a year to respond to a complaint regarding sales practices, when, at the same time, you are saying that you attach a great sense of urgency to prevent these kinds of practices? Ms. Block. Well, Senator, let me say that you all are aware--and we have stated repeatedly that we had some startup issues at the beginning of the program, mostly systems issues, that needed to be addressed. So during the initial period, probably the time that you are talking about, we were very much focused on those issues and those issues that involved enrollment and making sure that we got the enrollments right and that people ended up in the plan that they had selected and so on. Much of that, of course, was connected with the new prescription drug program and the fact that we were moving about 6 million from Medicaid coverage to Medicare coverage, so my apologies for any delay in responding to correspondence. Believe me. I hope we are doing better now. I think we are. But if there was an inordinate delay at one point in time, I am sure it was because we were caught up in trying to solve a lot of problems that, fortunately, in 2007, have diminished dramatically so that we are not in that situation now. That is one of the reasons that we can now turn our attention to these marketing issues and focus on them with the same attention that we gave to the systems issues that we had at the beginning of last year. The Chairman. Well, we thank you very much, Ms. Block. You have been a very good witness. Obviously, you are more than willing and eager to cooperate in improving the program. We look forward to working with you. Ms. Block. Thank you, sir. The Chairman. Thank you. [The prepared statement of Ms. Block follows:] [GRAPHIC] [TIFF OMITTED] T8618.001 [GRAPHIC] [TIFF OMITTED] T8618.002 [GRAPHIC] [TIFF OMITTED] T8618.003 [GRAPHIC] [TIFF OMITTED] T8618.004 The Chairman. We would like to call the second panel at this time. Our first witness on the second panel will be Commissioner Sean Dilweg, who is from my homestate of Wisconsin. Commissioner Dilweg heads up the Wisconsin Office of the Commissioner of Insurance. Following Mr. Dilweg, our second witness will be Commissioner Kim Holland of the Oklahoma Insurance Department. Following Commissioner Holland, we will hear from Special Agent Sherry Mowell, of the Georgia Office of the Commissioner of Insurance. Finally, we will hear from Mr. Albert Sochor, who is the vice president and director of marketing for Old Surety Life Insurance. We welcome you all here this morning. We will commence with your testimony, Mr. Dilweg. STATEMENT OF SEAN DILWEG, WISCONSIN OFFICE OF THE COMMISSIONER OF INSURANCE, MADISON, WI Mr. Dilweg. Senator, thank you for the opportunity to appear before you today. I am happy to see you in the Chairmanship and look forward to working with you and your Committee on this very important issue. My name is Sean Dilweg, and I am commissioner of the Wisconsin Office of the Commissioner of Insurance. I also currently serve as the Chairman of the Senior Issues Task Force of the National Association of Insurance Commissioners, which represents chief insurance regulators from 50 States, the District of Columbia and five U.S. territories. Although I am not testifying in my NAIC capacity today, I will be supplementing some of my views with the collective views of the Nation's insurance commissioners on today's topic. We are still working this issue through our organization, but we have been surveying our States on the number of complaints that we have seen over the last year. Today, I will touch upon those marketing complaints. We have surveyed all of our members and have responses from 43 States and find a pervasive similarity in what we are seeing throughout the Nation. In addition, I would like to focus on one potential solution, which was mentioned earlier, in order to solve the problems that seniors are facing today with the program. That is the Medigap solution. As I turn and look as to what model might be on the shelf to take off and look at, I turn the Medigap. This is a program where the States work very well with CMS and the plans and the consumers. We worked well with CMS to develop minimum standards for Medigap. That was delegated to the States to meet those minimum standards. It allowed seniors stability--something that they seek. Right now, under the Medicare Advantage plans, we have changes that occur from year to year. You have the potential for almost product-dumping in one year, where a plan has zero cost and gets ramped up in the next year. That is not the type of continuity that we like to see in our world of insurance. To start out, the primary objective of State insurance regulation is to protect the consumers. My office was vested in our State constitution because consumers throughout our State were facing very complicated products. Let me say that the Medicare Advantage is one of the most complicated products we have seen to date. All health-insurance products are very complicated. These are not, simply, term-life policies that we wrestle with. Annually, in Wisconsin, we receive over 8,000 complaints. We take all of those seriously. Senator, I have a family with two young children. If I were to sit down and fill out a three- page complaint, I would hope that that would be taken seriously by the agency that handles it. In our complaint process in our State, the company is required to respond in 10 business days to the consumer. An average case in Wisconsin lasts 40 days before it is resolved. I would say that about 50 percent of those--this is across the board--this is not only in health plans--but I would say that, on average, 50 percent of those go in favor of the consumer and 50 percent in favor of industry. In this role across the Nation, insurance departments receive the whole spectrum of consumer complaints about the Medicare program. As I stated before, the NAIC has surveyed the experience of all department across the country and we have found a common theme as it relates to high-pressure sale tactics and tactics that, under our State laws, are considered unethical at best, and fraud at worst. We have seen sales by unlicensed agents and brokers; agents improperly portraying that they were from Medicare or from Social Security to gain people's trust, seniors who were merely asked for information about a plan or filled out a sign-in sheet at a health fair and later discovered they were dis- enrolled from their old plan and enrolled in a new plan without consent, mass enrollments and door-to-door sales at senior centers, nursing homes or assisted-living facilities. Under other circumstances, these types of marketing practices I have described are either prohibited by State laws or unfair or deceptive practices in the business of insurance or would be questioned by watchful State regulators and controlled by the State regulatory structure. However, since these cases involve Medicare Advantage and Medicare Part D, our hands are tied as it relates to the companies. We obviously have oversight of the agents. But when my Governor turns to me and says, ``What do we need in our regulatory toolbox to handle these issues?'' I say that, as a State regulator, we have all the tools that we need. We are simply preempted. We do not have the authority over the companies. You and the Federal Government need to decide if the Medicare Advantage plans are either insurance products or, simply Federal contracts with a number of vendors. I would argue that these should be treated as insurance products. As I stated before, when I look at a potential solution, I turn simply to the Medigap solution as a model. You have a number of seniors in our State--over 800,000 seniors--who are wrestling with very complicated products. As I go through my complaints, I see sons and daughters of these seniors who have PhDs and legal degrees who are having trouble navigating these products. In conclusion, in order for these programs to be successful and valuable to the marketplace, this issue needs to be resolved as soon as possible. The baby boomers will hit the market in full force by 2010, and the fastest growing segment of our senior population is over 85. I look to you for action and I hope that we can all work together--Congress, State regulators, CMS, the insurance industry, agent groups and consumer advocates--to provide products that our seniors can utilize. Chairman Kohl, thank you again for this opportunity to testify today. [The prepared statement of Mr. Dilweg follows:] [GRAPHIC] [TIFF OMITTED] T8618.005 [GRAPHIC] [TIFF OMITTED] T8618.006 [GRAPHIC] [TIFF OMITTED] T8618.007 [GRAPHIC] [TIFF OMITTED] T8618.008 [GRAPHIC] [TIFF OMITTED] T8618.009 [GRAPHIC] [TIFF OMITTED] T8618.010 [GRAPHIC] [TIFF OMITTED] T8618.011 [GRAPHIC] [TIFF OMITTED] T8618.012 [GRAPHIC] [TIFF OMITTED] T8618.013 [GRAPHIC] [TIFF OMITTED] T8618.014 [GRAPHIC] [TIFF OMITTED] T8618.015 [GRAPHIC] [TIFF OMITTED] T8618.016 [GRAPHIC] [TIFF OMITTED] T8618.017 [GRAPHIC] [TIFF OMITTED] T8618.018 [GRAPHIC] [TIFF OMITTED] T8618.019 [GRAPHIC] [TIFF OMITTED] T8618.020 [GRAPHIC] [TIFF OMITTED] T8618.021 [GRAPHIC] [TIFF OMITTED] T8618.022 [GRAPHIC] [TIFF OMITTED] T8618.023 [GRAPHIC] [TIFF OMITTED] T8618.024 [GRAPHIC] [TIFF OMITTED] T8618.025 [GRAPHIC] [TIFF OMITTED] T8618.026 [GRAPHIC] [TIFF OMITTED] T8618.027 [GRAPHIC] [TIFF OMITTED] T8618.028 [GRAPHIC] [TIFF OMITTED] T8618.029 [GRAPHIC] [TIFF OMITTED] T8618.030 The Chairman. Thank you very much, Mr. Dilweg. Ms. Holland. STATEMENT OF KIM HOLLAND, OKLAHOMA INSURANCE DEPARTMENT, OKLAHOMA CITY, OK Ms. Holland. Mr. Chairman, thank you for allowing me to be here today, Senator. My name is Kim Holland, and I am the Oklahoma State insurance commissioner, an elected office I have held since January of 2005. The primary obligation of my agency is to protect the consuming public. I and my staff of over 150 dedicated individuals take this obligation very seriously, and this is the main reason I am here today. The Oklahoma Insurance Department is responding to an unacceptable number of complaints caused by the inappropriate and sometimes fraudulent marketing of Medicare Part C and Part D products by certain insurance companies and their sales producers. Over the past year, we have received hundreds of complaints from our citizens, who have been misled or deceived during a sale. The Medicare Modernization Act of 2003's preemption of States' authority to oversee the licensure, market conduct and financial solvency of Medicare Part D agents and carriers and the marketing practices of Medicare Advantage carriers has led to virtual lawlessness in Oklahoma. Unlicensed agents are setting up shop in pharmacies and Wal-Marts and nursing home lobbies to prey upon seniors' confusion and concern over their medical-care coverage. Certain insurers are exploiting their exemption from regulatory oversight with aggressive and frequently misleading advertising, agent financial incentives that encourage high- pressure sales tactics, lack of responsiveness, if not outright neglect, of a vulnerable population caught in the middle of an unbridled free market. As insurance commissioner, I currently have greater authority to address a consumer's problem with pet insurance than I do ensuring the protection of the 500,000 Oklahoma senior citizens covered under a PDP or Medicare Advantage plan. Since the rollout of Medicare Part D in November 2005, we have communicated with CMS on numerous occasions, attempting to forge a partnership in educating and protecting our senior citizens. Yet, at the earliest stages of the program rollout, we found ourselves challenged by the inadequacy of CMS's resources in providing the necessary support to our seniors and by further attempts to preempt our authority over agent licensure. Senators, I am grateful to Congress for the passage of the MMA, as it has made access to affordable medications possible for 20 percent of my population, a large measure of whom depend solely on Social Security for their livelihood. The creation of new and affordable programs under Medicare Part C and D means that many of our seniors no longer have to choose between a meal or their medication. But it is this reality--a pressing demand for coverage and a growing supply of available plans--that necessitates adequate regulatory oversight to ensure what insurance commissioners across the Nation strive for: a healthy marketplace, wherein robust competition and vigorous consumer protections are balanced to create choice and value. While I can offer you many examples of how our seniors are now dangling on the short end of this teeter-totter, I would like to use my remaining few moments to focus on a recent targeted examination we conducted on one of America's largest providers of Medicare Advantage plans, which will illustrate clearly the inadequacy of Federal oversight. In June 2006, we initiated a targeted examination of Humana, due to the escalation in number and nature of unresolved complaints involving the sales tactics of agents selling their product. The examination report, submitted with our written testimony, provides numerous examples that illustrate the scope and gravity of the types of complaints made against this company. When finally completed, the examination exposed chronic and blatant disregard for State regulation and for senior policyholders. Advantage plan products were sold throughout our State by untrained, unlicensed individuals, in violation of Oklahoma law and similar laws enforced in every State in the U.S. Our appointment process, which creates a critical accountability link between insurer and agent was consistently circumvented by guidelines promulgated by CMS prohibiting States from enforcing this important consumer protection. The examination illustrated the company's indifference to complaints and concerns registered by senior consumers, leaving some Medicare beneficiaries waiting months for any kind of response. It is important to note that throughout the past year and a half, we--Oklahoma, individually and collaboratively, through the NAIC--have made numerous requests of CMS to act to address company sales-and-marketing issues. We have made beneficiary-complaint referrals, as required, provided information, negotiated and entered into a Memorandum of Understanding for information sharing--whatever we could do to encourage a swift and appropriate response to these unnecessary and unlawful activities. The senior citizens of my State are still waiting for that response from CMS. In August of last year, we made a Freedom of Information request to CMS regarding a company selling Part D products under a CMS waiver, without having been licensed in their homestate or any State, as required by Federal law. We are still waiting for that information from CMS. Due to the gravity of the findings from the Humana exam, I traveled to DC to meet with CMS officials in March of this year. I provided a copy of the examiner's draft report and voiced my concerns and frustration over our ongoing and unresolved issues. I left CMS with no assurances and with the impression that they are more concerned with protecting the program than the people. I am still waiting for a response from CMS. So now I appeal to you, sir. Allow me to do the job I do every day to ensure the financial solvency of companies selling health plans in my State. Allow me to fully deploy the substantial and immediate resources of my office to protect the interests of all policyholders, regardless of their age and regardless of the private health plan that they have purchased. For the safety and security of all Oklahomans, I have not failed to act. I have not failed to respond. Yet, I am encumbered by unproductive, unnecessary and dangerous preemptions that expose my citizens to the neglect and abuse I have described. Please allow me to do my job. Thank you. [The prepared statement of Ms. Holland follows:] [GRAPHIC] [TIFF OMITTED] T8618.031 [GRAPHIC] [TIFF OMITTED] T8618.032 [GRAPHIC] [TIFF OMITTED] T8618.033 [GRAPHIC] [TIFF OMITTED] T8618.034 [GRAPHIC] [TIFF OMITTED] T8618.035 [GRAPHIC] [TIFF OMITTED] T8618.036 [GRAPHIC] [TIFF OMITTED] T8618.037 [GRAPHIC] [TIFF OMITTED] T8618.038 [GRAPHIC] [TIFF OMITTED] T8618.039 The Chairman. Very good statement. Thank you very much, Ms. Holland. Ms. Mowell. STATEMENT OF SHERRY MOWELL, GEORGIA OFFICE OF THE COMMISSIONER OF INSURANCE, ATLANTA, GA Ms. Mowell. First of all, thank you, Senator, and the Committee for inviting me here. My name is Sherry Mowell. I have been employed with the Georgia Insurance and Safety Fire Commissioner, John Oxendine, since 1994. During the last year--I am just going to give you some examples of the types of fraud and abuse that we have found in the State of Georgia. Agents are allowing untrained sub-agents to sell the Medicare Advantage product. This is very problematic because the sub-agents have not been through the required training of CMS. By using the untrained sub-agents, the agents can later disclaim knowledge of any wrongdoing. Agents have obtained personal, identifying information from the agencies that they are affiliated with, which have the information on record from previous Medicare Part D sales. This personal information is being transferred to a Medicare Advantage plan application, with clients unwittingly signing. This is how it works: Agents ask potential clients to sign a form to prove to their boss that they have been to visit the client. When the client signs the form, they are unaware that they are signing the back page of a contract to purchase a Medicare Advantage product. Agents without prior appointments solicit individuals that have not requested any information on a Medicare Advantage program. Agents are soliciting door-to-door in areas of high elderly population. Agents have told potential clients that Medicare is closing down or running out of money, and if the customers do not sign up for the Medicare Advantage plan, they will lose all healthcare benefits. Some agents are even telling the potential customers that the Medicare Advantage product will not go into effect until Medicare actually closes down. Agents are not clearly and concisely explaining the benefits of the Medicare Advantage program. Agents have misled prospective enrollees by telling them that they are going to receive free eye care and free dental care for signing up, and that enrolling in a Medicare Advantage plan will not change their benefits. Individuals misrepresent that they are insurance agents. They have told prospective enrollees that they are from Medicare or that they are sent by the Georgia Department of Family and Children's Services. Agents in our State have signed up deceased individuals prior to the enrollment period using the deceased individuals' personal identifiers. Agents call on patients in personal-care homes without prior approval of the patients or their guardians. Agents misrepresented their identity and affiliation to the staff in the personal-care homes. They have told staff members that they are from Medicare. On one occasion, two agents called on a personal-care facility outside the normal operating hours. Agents have asked staff of healthcare facilities to visit patients in their room and not in the common areas. They have also asked the staff members not to accompany them to the rooms. Consumers have been signed up for Medicare Advantage Programs even though they have never met with an agent or they have never discussed signing up for the program. We showed a group of elderly victims' applications with their purported signatures and none of the victims had signed the application, nor had they met with an agent. One agent who previously signed up individuals under Medicare Part D went to a mentally challenged facility and switched these patients, without their knowledge or their guardians' knowledge, onto a Medicare Advantage product. These individuals were also dual-eligible. Agents signing up Medicare Advantage to the dual-eligible: They are already eligible for both Medicaid and Medicare. Under the Medicare Advantage, they are charged co-pays up to $30 and $40 per doctor visit. We are talking about individuals who make less than $300, $400, $500 a month. Agents, on numerous occasions, have claimed that they were trained by the company to solicit customers in the manner in which they are operating or they were approved to conduct business in this manner by their field management office. Since January 2006, our office has received over 300 written complaints from the public concerning the Medicare Advantage. This does not include the hundreds of telephone calls our office has received. Also, this office has received numerous complaints on the companies that offer the products, which allege the companies are not paying the claims, nor are they processing the cancellations that have been requested. Our office is trying to work hand-in-hand with the Centers for Medicare and Medicaid Services, trying to get these individuals the help they need. Our office has found, in some instances, the companies that have been contracted by Medicare to provide the coverage are not adequately prepared to handle the flow of business that has been written by the company. The State regulators do not have the authority to regulate the company or the product. The result is consumer frustration and dissatisfaction. Commissioner Oxendine's staff has arrested three agents on these fraudulent acts within the past 6 weeks and we have more investigations that we are working on at the present. [The prepared statement of Ms. Mowell follows:] [GRAPHIC] [TIFF OMITTED] T8618.040 [GRAPHIC] [TIFF OMITTED] T8618.041 [GRAPHIC] [TIFF OMITTED] T8618.042 The Chairman. Thank you very much, Ms. Mowell. Mr. Sochor. STATEMENT OF ALBERT SOCHOR, VICE PRESIDENT AND DIRECTOR OF MARKETING, OLD SURETY LIFE INSURANCE, OKLAHOMA CITY, OK Mr. Sochor. Thank you, Senator Kohl, for having this meeting. I feel honored to be here. I am vice president of Old Surety Life Insurance Company. Old Surety is an Oklahoma-based insurance company. It has been in business since 1932. We have been operating for 20 years in the Medicare arena--helping seniors make choices and helping to train agents about Medicare. I have been invited to speak here because of my personal involvement with some of these problems and on behalf of companies and other agents out there that are running into problems with these Medicare Advantage plans and the marketing tactics that they are using to promote these plans. I want to make it clear: I am not against the Medicare Advantage plans. But, I am against how they are marketing the plans and the tactics that they are using. What I am going to share with you today is what is happening in the field and what beneficiaries and agents are dealing with on a day-to-day basis. It has already been mentioned that seniors go to enroll in a prescription-drug plan; yet, they come to find out that they really didn't enroll in a prescription-drug plan only. They were actually enrolled in a Medicare Advantage plan. But frequently they find out too late. They don't find out what they have done until they go to a provider and then the beneficiary receives a claim several months later. That's when beneficiaries discover they were actually disenrolled from Medicare. That is when they find out. Sometimes, it is too late. The senior, or the enrollee, will then contact CMS or the Medicare Advantage company and ask for help or assistance. CMS and the Medicare Advantage companies tell these seniors that they can't do anything and the are locked in until the next enrollment period. I have helped many seniors resolve this problem by referring to page 60 of the ``Guide to Medicare'' supplement that CMS distributes. I tell CMS and these MA companies to ``Look at page 60.'' These beneficiaries, in their trial period, have the right to try these plans and get out; but it is taking my intervention to get that done. Some Medicare beneficiaries have been told by agents that with Medicare Advantage plans--''You can go to any physician,'' ``It works the same as Medicare,'' ``It works the same as a Medicare supplement,'' ``You can use it and you won't notice any difference with your plan,'' but the beneficiaries can lose benefits. Consequently, many Medicare recipients join the plans only to find out that their doctors don't accept the plan. Even if a doctor does accept the plan, he can opt out. What happens, is that it leaves some people without coverage unless they want to travel a long distance, to where a provider is located. Many doctors and facilities choose not to accept these Medicare Advantage plans. In rural areas, provider access is limited. I am aware that CMS and the MA companies know that these beneficiaries can get out of the lock-in period but they aren't informing consumers. At no time in the history of Medicare have recipients been locked in any plan where they couldn't make a choice. I have actually called CMS and MA companies and spoken to their customer service and have been told that the beneficiaries were locked in. It has taken me an hour, in some cases, to get to the right person to be able to ask them to-- ''Look at page 60 of the Medicare guide.'' I have talked with CMS customer service, which is actually outsourced. They are outsourced! They are not really employees of CMS. These service reps have a list of SEPs that CMS tells them they can use and I have argued with them about the Medicare guide. They do not even have the ``Guide to Medicare'' booklet available to them to look at. Now, a 70-year-old senior is not going to be able to push the buttons that I can; to get to the right person; to find out that they need to submit a letter to the regional office to do a retroactive dis-enrollment or get dis-enrolled because of their trial period. Most seniors are afraid to push the buttons. If they are told, ``No,'' they stop. Many agents and companies are negligent they don't always take into consideration what is best for the beneficiaries, I feel. Agents do not fully disclose how the plans work. They fail to tell the beneficiaries about the downfalls of the plan and all the co-pays and co-insurance the beneficiaries will be required to pay. They fail to explain the potential out-of- pocket costs for many of the plans benefits and how much they could be at risk for, if the plan has no out-of-pocket max. They leave out the part that plans can, and probably will, change benefits, co-pays and premiums each year. I have found that if agents give full disclosure to those who are interested in the plans, that many individuals choose not to enroll. Once they are told everything about the plan, they usually stay with original Medicare; not because the plans are bad, but because the plans do not fit their needs. Medicare Advantage companies have training--a certification process--that agents have to go through to sell the plans. This meets the CMS requirements. The certification process covers laws, marketing practices and product knowledge. However, they tend to leave out a lot about ethics, about consumer interests and how to handle the problems that I have discussed. I have been to these certification meetings. I am a licensed agent. I have sat there and been told that if I don't get onboard, that I will lose my Medicare-supplement business that we have with clients. It is more motivated by commissions than it is by compliance. The driving force behind this confusion, I feel, is money; not the cost of the product, but what companies and agents can make selling the product. Almost every day, I receive solicitations to appoint with agencies to sell Medicare Advantage plans, telling me how much money I can make. First-year commissions run as high as $700 per enrollee-- and these agents are advanced these commissions every time they enroll someone in a Medicare Advantage plan. Agents have made hundreds of thousands of dollars in a very short time. Each year, these agents can enroll the beneficiaries in new plan to again gain access to that first year's commissions. I never understood how much money could be made until we, as a company, started being solicited to sell our company at more-than-market value. There is a lot of money to be made by both the companies and the agents in this plan. We at Old Surety Life have not accepted any offers. It brings back memories of why Congress established OBRA 1990. Companies would bring out new Medicare supplement products every year to try to ``wine and dine'' and have people to enroll in their plans. There wasn't any way to compare apples to apples it was very confusing for beneficiaries. Agents would go out and move beneficiaries every year just to get those high first-year commissions. So Congress standardized Medicare-supplement plans. This stopped the confusion. They levelized commissions. Agents lost their motive to churn the business. The market became stable and complaints dropped considerably. In conclusion, we all know--we looked in the newspaper this morning--in the Washington Post--there are problems going on with the Marketing of Medicare Advantage plans. The marketing concepts have seniors ending up in situations they weren't aware of. We can't keep saying things are going well when it seems like it is getting worse. CMS, the industry and the industry sales force need to understand that they are dealing with one of the most vulnerable segments of our population--our seniors, our poor and our disabled. If we, as an industry, do not do our jobs in a professional and ethical manner, we are doomed. If CMS doesn't respond quickly to help Medicare beneficiaries, trust will diminish. CMS should stand up and be an advocate for Medicare beneficiaries against these plans when they don't fit the client's needs or they didn't understand what they were getting into--not tell them they are locked in! Have 1-800-Medicare service reps ask questions to determine if this beneficiary is eligible for any of these enrollment options. Get rid of the lock-in. Give beneficiaries freedom to choose. Make CMS be an advocate and help Medicare recipients who have made a mistake and need to change coverage do so!. Have them become more like counselors than they are, not just robots. Hold companies and agents accountable for unlawful or deceptive sales practices. Standardize the Medicarae Advantage plans, the Medicare Advantage Prescription Drug plans and the Prescription Drug plans to help stop the confusion. Levelize commissions to stop the unnecessary churning of business. These are our parents--our moms, our dads, our friends--is this how we want to treat them? I thank you for your time. I appreciate it. Have a great day. [The prepared statement of Mr. Sochor follows:] [GRAPHIC] [TIFF OMITTED] T8618.043 [GRAPHIC] [TIFF OMITTED] T8618.044 The Chairman. It is pretty hard to do that after your testimony. Very good. Before we call on Senator Wyden, I will ask just a couple questions. Mr. Dilweg, CMS has informed the Committee that they consider the Memorandum of Understanding a working document; that the agency has already begun to supply additional information to States. As a result, is that your view of the status of this document? In fact, why haven't 30 States signed on as yet? Mr. Dilweg. I think, Senator, when we look at it-- obviously, this has arisen out of how we handle confidential information between CMS and the insurance commissioners as well. But as we looked at it and surveyed our States, some simply don't have all the problems that Wisconsin may have seen or Oklahoma may have seen. They don't have the driving force to get involved or they are simply taking their time in getting around to it. Part of the problem is we have been told that we would have a secure Web site that we could deal with and have not seen that Web site. So before you get involved in exchanging confidential information between State agencies and Federal agencies, you want to kind of see the environment you are going to be operating in. So it is a work-in-progress. The Chairman. Many of the agents who are operating in the State of Wisconsin are operating in a manner which you would describe as scandalous, fraudulent? Is that true? Mr. Dilweg. We have surrounding Medicare Part D and Medicare Advantage--we have about 400 complaints over the last year. To put that in perspective, when something like credit scoring came out for automobile or home insurance, we had 42 complaints. So this is quite high---- The Chairman. But you have the right to crack down on every one of them, right? Mr. Dilweg. On every one of the agents. The Chairman. You do? Mr. Dilweg. Yes. The Chairman. All right. I just want to make that--you know, understand so that we don't only look at the company or CMS. We all are involved in this together, including this Committee. Mr. Dilweg. Right. The Chairman. But in terms of the responsibility--clear responsibility--to deal directly with agents who are acting in ways which are fraudulent, misrepresentative or crooked, you have the opportunity, the right, if you had enough personnel. But the right to crack down on them is centered in your office? Mr. Dilweg. Correct. The Chairman. Ms. Holland, how would you respond? You have the right---- Ms. Holland. We certainly have that right. As you can tell from my testimony, we have exercised that right immediately and deliberatively. One of the challenges, however, Senator--first of all, in my State, what we identified from our examination is we had unlicensed agents--numerous unlicensed agents--selling product. I have no way to track--unless I go to the company and demand that information, I don't know that there is an unlicensed person there. As we discussed in testimony, we are dealing with folks, oftentimes, that are fragile and may not get all the information they need, may have gotten a business card that has misleading information or inadequate information. So it is very difficult for my office to track down someone who is an unlicensed agent. Additionally, with the absence of an appointment, again, that creates that critical link where the agent is actually an agent for the company--he is not a freewheeling person out here. He may act like one, but he is an agent for the company. That creates that tie that allows me to go back to the company and hold them responsible as well and help me to crack down on an agent that is not performing the way we would have them do so in our communities. The Chairman. So you have the right to do that? Ms. Holland. I have the right to address an agent that is misbehaving. Under the current circumstances, I am somewhat challenged in going back to the company and holding them accountable because the absence of appointment doesn't create that direct link. Hopefully, I am going to compel the insurer to step up anyway. But it creates a difficulty in us creating that contractual link between the agent and the company to hold the company responsible for the performance of their agents in the field. The Chairman. OK. Ms. Mowell, you talked movingly and very well about the misrepresentations and fraud that are going on in your State. Again, you do have the opportunity and the responsibility and the opportunity, again, to deal with them--each and every one of these individual misrepresentations--don't you? Ms. Mowell. We have the authority over the agents, yes, sir. But, there, again---- The Chairman. That is a considerable authority, isn't it? Ms. Mowell. It is a considerable authority. However, there are only six investigators for the entire State of Georgia for all types of insurance fraud. Right now, we cannot keep up with all the problems on this and our other duties. The Chairman. That is fair enough. It would also be very helpful, wouldn't it, if the companies themselves could be held severely accountable for their representatives out there, selling fraudulent packages? Ms. Mowell. Yes, it would make it much nicer for us to be able to go to the companies and say, ``What are you doing about it?'' because at this point in time, we do not have that authority to go to them and make them speak for their agents and bring their agents in, or to even look at the allegations. The Chairman. Very good. Mr. Sochor, what do we need to do to eliminate this problem? Mr. Sochor. The problem is when agents never really appoint with many of these Medicare Advantage companies. These companies set up independent-marketing organizations that contracts the agent. The contract is between the agent and that marketing organization. That is why the States have no way of knowing who is appointed with whom and have not been able to try to track down agent records. These companies advance commissions to the agents. The marketing organizations are actually responsible for the payment. Then, later, the marketing organization get-- reimbursed--by the Medicare Advantage companies. This is how the payment system works. I think allowing the agents to appoint with the MA companies and licensing the agents with the State insurance departments, has to be done. Then there is some kind of record where you can track of the agents and develop a database, because without that, there is no way to know what is going on. The Chairman. Very good. Senator Wyden. Senator Wyden. Thank you very much, Mr. Chairman. It has been an excellent panel. I commend all of you for it. I am going to spend most of my time with you, Commissioner Dilweg and you, Commissioner Holland. I was the principal author of the Medigap law in the early 1990's and, essentially, came to it after, really a 15-year history. I have been the director of the Oregon Gray Panthers for about 7 years. I ran a legal aid office for the elderly, and then I was on the Aging Committee in the House and spent a lot of time on it. I have been struck by the number of parallels between the climate before Medigap was enacted and which you all are describing today. In fact, what is so helpful about the wonderful service you are performing, Ms. Holland and you, Mr. Dilweg, is we really got it going in the late 1980's because a handful of insurance commissioners like yourselves really spoke out and blew the whistle. In fact, the language you are using today--the language of lawlessness--is exactly what a handful of insurance commissioners said back then. We talked about how the Medigap market was pretty much like Dodge City before the marshals showed up. In fact, when you think about it, the situation between the Medicare Advantage abuses you are describing today and Medigap back then--other than the fact that in the Medigap market, you could sell these multiple policies and it was common for a senior back then to have a shoebox full of policies--you know, 15, 20 policies--and they would have these subrogation clauses, and, eventually, they wouldn't be worth the paper they were written on--there is pretty much a parallel here between the Medicare Advantage abuses and what went on in Medigap. Now, my question to you--my first one--is back then, what we essentially did was bring in the National Association of Insurance, you know, Commissioners, led by a handful of commissioners like yourselves, and we used the National Association of Insurance Commissioners to develop a model so that the States would have aggressive tools to deal with the abuses and we would have these uniform, standardized kind of policies. Then, it would be backed up by Federal authority. In other words, if a State didn't go forward and there was a specific, you know, timeline, then the Federal Government could step in. It strikes me that most of that model makes sense today. They are different products, obviously. Medicare Advantage is a different product than Medicare supplement. But most of what made sense back then for Medigap looks like a pretty good model today for us under Chairman Kohl's leadership to proceed with. I would like to get your views on the record on that. Then I want to ask some other questions with respect to how it would go forward. Commissioner Dilweg and then Commissioner Holland. Mr. Dilweg. Thank you, Senator. Your reputation is quite well-known as it relates to Medigap. I appreciate that. When I turned to my staff and said, ``What could work here?'' it was, really, that model. It is really--you know, with other Federal agencies in the State of Wisconsin--we have the EPA--delegates their authority to our natural resources department over the environment. This is really a very similar situation. How does CMS delegate their authority to the insurance commissioner's office, which is on the front lines of complaints? It was that regulators--where NAIC worked with CMS and built those minimum standards. Then States were given, I believe, 12 months or 18 months to adopt the standards. Now, some States, they don't want to, and so the power remained with CMS. But I think it is a good model to look at. It may have to be tweaked. Senator Wyden. Eventually every State came around, I think. Mr. Dilweg. Yes, I believe so. Senator Wyden. So you feel it is a pretty good model. Commissioner Holland. Ms. Holland. I would concur, Senator Wyden. I think that it demonstrates the kind of partnership that we are looking for between the States and the Federal Government. It creates a framework that gives the States the opportunity and authority to respond quickly to the needs of our consumers in our State and to hold the insurers accountable for the products and the activities that are being rendered. I am the Vice Chair of the Healthcare and Managed Care Committee, of which your commissioner, Joel Ario, serves as Chair. We work very closely. I can tell you that the Healthcare Committee, which also supports the Seniors' Issues Task Force, of which Commissioner Dilweg is a Chair, would welcome the opportunity to work with you and to work with CMS is revising and re-looking at guidelines and regulations to more model Medigap. Senator Wyden. My understanding--and you correct me otherwise--is that Chairman Kohl, to his credit, has already begun some of these efforts with NAIC. I am going to support him in this because I don't think we have to reinvent the wheel. I think the idea is to get with NAIC, give the States the opportunity to indicate what tools, specifically, they need, as it relates to this market. You have given us valuable information about the advertising abuses. I am going to ask about the companies in a second--and try to turn this around quickly. I mean, it took us, literally, 12 years--I mean, in terms of actively working for the Medigap, you know, law--to get it done. I don't think seniors and their families can afford to wait for another decade in order to get the tools in your hands to protect them and their well-being. Now, on this question of the companies and the sort of line of demarcation about how you all don't have the authority with respect to companies themselves, let me make sure that I understand this. You can go after brokers and agents even under the limited authority that came out of the Medicare Advantage program. Is that correct? Mr. Dilweg. Yes. They are licensed in our States. Senator Wyden. Are there any limits at all with respect to your ability to go after the agents and brokers? Mr. Dilweg. No, I deal with enforcement action every day on agents and brokers, and---- Senator Wyden. Yes, please. Ms. Holland. The only thing I would add to that is the issue with the appointment, Senator. That does create a limitation for us. Senator Wyden. So what you all would like, essentially, as it relates to the companies, is some ability along the lines of what was done with Medigap to make sure that the companies would have to come in advance and, essentially, show you their materials, show you their marketing kind of practices. From that point on, you would have authority--oversight authority and regulatory authority--over the companies. Is that essentially what you want? You seemed to touch on that Commissioner Dilweg, on page five. You have got a variety or points with respect to tools that come out of the Medigap law that you would like to have in Medicare Advantage. But aren't those the key points? Mr. Dilweg. Yes, page six of my written testimony shows a crosswalk---- Senator Wyden. Oh, yes. Mr. Dilweg [continuing]. Of what authority we have under Medigap. This is not--you know, with private health insurers, we look at their marketing aspects, we look at their representations. We are then able, as complaints come in, to really perform market-conduct studies and look at--you know, if we see an outlier of 30 complaints coming in on an issue, we can then get in there with the companies and, ``How are they treating their agents?'' We audit that relationship with their agents and have full access to that. So these types of tools are--like I said, we don't need to reinvent the tools that the States currently have. I believe we have them. Senator Wyden. OK. Well, you all have been very helpful. Bouquets to you, Special Agent Mowell and Mr. Sochor, for you all speaking out as well. This is exactly the kind of thing that has to be done so we don't have to wait another decade to make sure that the government and regulators are on the side of seniors. I really thank our two commissioners, because this doesn't happen unless people like yourselves who, under McCarran- Ferguson, essentially have the primary responsibility to kind of step in and advocate for people. We wouldn't even know about this for the most part, other than angry folks--you know, going to senior centers--unless you all had those toll-free lines and the capacity, at least, to find out about brokers. So I am very much committed. I hadn't even seen page six. It has been a crazy day, here, Commissioner Dilweg. But I am especially committed to taking the Medigap model, which we know has worked--it worked better than I could have dreamed of. I mean, it really drained the swamp. It is very rare today that you get a complaint about a Medigap practice. I would be curious if your offices are picking up something else. But it happened almost overnight, because the fact that there was uniformity, the fact that there was standardization, the fact that you had authority over a company--essentially what we saw is the sleazy operators, essentially, couldn't go in that kind of environment; and people who could make a marketplace work, sell a private policy that was responsible and of good quality, did just fine under it. So it worked for seniors. It worked for responsible people in the industry. I am glad Chairman Kohl is taking the lead with the National Association of Insurance Commissioners and the States, because we don't have to wait forever to get this done again. Thank you, Mr. Chairman. The Chairman. That was very good, Senator Wyden. I think you succinctly and clearly highlighted the problems as well as pointing out the things we can do to not only rectify, but, maybe, to eliminate most of these problems. We thank you all for being here. Your testimony and your ability and willingness to respond to our questions have been very helpful and we will continue to be in touch with you. Our first witness on the third panel will be Karen Ignagni of the American Health Insurance Plans. She serves as AHIP's president and CEO. Second witness on this panel will be Heidi Margulis of Humana. Ms. Margulis is a senior vice president for that company. Third, we will hear from Peter Clarkson, Senior Vice President of distribution operations for United Health Group. Finally, we will hear from Gary Bailey of WellCare. Mr. Bailey is vice president for Medicare operational performance at WellCare. Ms. Ignagni. STATEMENT OF KAREN IGNAGNI, PRESIDENT AND CEO, AMERICA'S HEALTH INSURANCE PLANS, WASHINGTON, DC Ms. Ignagni. Thank you, Mr. Chairman. Good morning. Good morning, Senator Wyden. It is a pleasure to be here. We thank you for the opportunity to testify. You will hear shortly that our members are strongly committed to the long-term success of the Medicare Advantage and Part D programs. Today at AHIP--and we represent all of the companies at the table and, virtually, all of the members who are participating in both programs--we are announcing a new initiative that will be giving beneficiaries additional peace of mind by strengthening protections against improper conduct in marketing Medicare plans to beneficiaries. I would like to tell you, Mr. Chairman, what we did and what we didn't do. First, we did not try to size the problem and get a sense of, ``If this was a small problem, we would act in such a way; if it is a larger problem, we would act in such a way.'' In our view, this issue that is now occurring, that you have been talking about for the last several hours--any abuse is one too many. So we approached it through that prism. What I am going to tell you about is what our members have committed to do. In this endeavor, we are going to be partnering not only with CMS, but with the State insurance commissioners. I will outline specifically where. First, we are going to be requiring core competency training that meets standards that we are going to be urging CMS to establish. We think it is very important, as the insurance commissioners stated, that we have core standardized requirements for specific training. We are going to be requiring that threshold scores be achieved so that training not only is adequate, but the performance and efficiency and proficiency are there. Second, we are going to be ensuring that continuing- education credits are available for the core competency training. We are going to be partnering with the broker organizations and with beneficiary groups to make sure that those objectives are achieved. Fourth, we are going to be requiring achievement of threshold scores on specific plan training; not only on the program itself, but specific plan training. Fifth, we are going to be requiring annual recertification through achievement of threshold scores. Sixth, targeted re-training throughout the year on specific topics required by CMS for special attention. Seventh, we are going to be requiring a new beneficiary attestation on enrollment applications to confirm that individuals understand the program that has been chosen. Eighth, we are going to be conducting oversight to verify the beneficiary's intent to enroll. We are not going to stop with an attestation. We are committing, for all products, to do post-enrollment outbound calls to confirm the intent and to make sure that we are doing systematic monitoring of intent-to- enroll. Next, we are going to be requiring that plans proactively track and analyze the performance of brokers, agents and plan- marketing staff in such areas as beneficiary satisfaction, rapid dis-enrollment and complaints. We are going to be requiring that individual plans address verified complaints through an inbound call system to make sure that if there is any kind of a pattern that is being observed, that that is taken care of. Finally, we are going to be working with CMS and the NAIC to urge the establishment of a uniform process and criteria for broker, agent and staff misconduct--reporting of that misconduct to State agencies. Right now, we have a very uneven system. It is not clear. It is not the same in every State. We have been working very closely with the insurance commissioners. We think they can play an important leadership role here. We want to partner with them, partner with beneficiary groups and partner with CMS to make sure that the fabric of rules and oversight is there and it is consistent. We, then, will know what the rules are, how to report bad practice, practice that is sub-par, and we commit to doing that. Mr. Chairman, you also heard today considerable discussion about the issue of lock-in. I would like to make a comment about this. This is a new program, but we have a number of plans at the table who have been in this program, serving seniors for a number of years. In the old days, it was called the Medicare Plus Choice program. Now it is the Medicare Advantage program. At that time, the rules of the road were as follows: If an individual joined a plan and realized and found out that he or she was not happy in that plan, they were allowed to dis-enroll. We did not support the movement toward lock-in. We would be very comfortable and would endorse and support the idea of taking a look at that to go back to the way it used to be. We had very low dis-enrollment. But it did provide a safety net for beneficiaries and for advocacy organizations, knowing that, sometimes, people make the wrong choices. We are very comfortable with that. We are comfortable with what we put on the table. We intend to stand by it. We spent a great deal of time in 2006 working on a range of operational initiatives responding to pharmacy issues, physician issues. I just want you to know our personal assurance--my personal assurance--that we are going to make this a major priority so that when you have your next hearing, as you indicated earlier that you intend to do, we can give you a very positive report about specifically what actions have been taken. Thank you, Mr. Chairman. [The prepared statement of Ms. Ignagni follows:] [GRAPHIC] [TIFF OMITTED] T8618.045 [GRAPHIC] [TIFF OMITTED] T8618.046 [GRAPHIC] [TIFF OMITTED] T8618.047 [GRAPHIC] [TIFF OMITTED] T8618.048 [GRAPHIC] [TIFF OMITTED] T8618.049 [GRAPHIC] [TIFF OMITTED] T8618.050 [GRAPHIC] [TIFF OMITTED] T8618.051 [GRAPHIC] [TIFF OMITTED] T8618.052 [GRAPHIC] [TIFF OMITTED] T8618.053 [GRAPHIC] [TIFF OMITTED] T8618.054 [GRAPHIC] [TIFF OMITTED] T8618.055 [GRAPHIC] [TIFF OMITTED] T8618.056 [GRAPHIC] [TIFF OMITTED] T8618.057 The Chairman. Thank you, Ms. Ignagni. Ms. Margulis. STATEMENT OF HEIDI MARGULIS, SENIOR VICE PRESIDENT, HUMANA INC., LOUISVILLE, KY Ms. Margulis. Thank you, Mr. Chairman, Senator Wyden. Thank you for the opportunity to testify. I am Heidi Margulis, senior vice president, Government Relations for Humana. Humana has contracted, for over 20 years, with CMS to offer Medicare beneficiaries affordable, comprehensive health-plan coverage. We offer MA products in all 50 States and Puerto Rico. We know you have valid consumer-protection concerns about the marketing of plans to Medicare beneficiaries. We share those concerns. Humana knows that CMS placed trust in us to provide health- plan options for beneficiaries, many who are vulnerable with special needs. Our long-term success comes directly from satisfied beneficiaries who remain with us and trust us. Over 8 out of 10 renewed with us this past year. We have zero tolerance for misconduct in sales practices. Last year, we terminated 78 agents. We are serious about wrongdoing and take action when found. We understand our responsibility to meet Federal and State requirements. Today, I will describe our marketing, training and oversight program, what has worked, how we can improve, suggest ways in which CMS States and plans can strengthen the program. All of our employed and contracted agents must comply with our marketing code of ethics. For years, we have had a verification process so beneficiaries understand the plan that they are enrolling in, that their plan is not a Medicare supplement plan, and that their providers accept Humana. Humana employs 2,000 sales reps who are licensed, appointed and certified to sell our MA product, and about 600 tele-sales agents. These Humana employees accounted for about 82 percent of agent-assisted MA sales in 2007. For these agents, we have a formalized process that includes extensive background checks, 12-part classroom and field training on everything from Medicare and ethics to plan suitability and communicating with seniors. We test, coach and recertify. We field-monitor and investigate all specific complaints, taking appropriate corrective action ranging from coaching to termination and regulatory reporting. We now track dis- enrollment rates. Commissions are not paid to agents if a member dis-enrolls in 90 days. Humana contracts with about 14,800 independent agents through agencies. These agents were responsible for about 18 percent of our MA sales last year. These agents are licensed, appointed and certified to sell our products. These agents are also trained, monitored and overseen. As mentioned, we investigate every specific allegation we get, regardless of source. During 2006, we investigated about 1,612 allegations, considerably less than one percent of sales. Of those, 304 were founded and corrective action was taken, with 78 agents terminated. In terms of oversight, in 2005, CMS identified an unapproved marketing piece and identified changes needed in our verification script and expressed concerns about sales complaints and marketing practices. Humana implemented and CMS accepted several corrective actions, including enhanced verification scripts, revised training, increased oversight and complaint-resolution staffing. Since 2006, Humana has reported findings from sales investigations on a bi-weekly basis to CMS. Last year, the Oklahoma Department of Insurance conducted a modified market- conduct examination. They identified issues relating to licensure and appointment of agents. Even though CMS authority preempts State laws on appointments, we maintain that all but six of our agents were appointed consistent with Humana policy. Sixty-eight of 950 agents failed to have non-resident licenses. Specific action was taken with these agents. Also, the department has been concerned about sales practices in the use of delegated agents. We share this concern, have made changes and decreased the use of delegated agents. In addition, we had 30 specific beneficiary sales complaints in Oklahoma investigated and took action on each. Nonetheless, we can all improve the system. Aside from more rigorous training and oversight efforts, some additional actions should be considered. First, there is Federal legal authority to implement changes. Federal laws do not need to change for all parties to improve efforts to eliminate sales-and-marketing violations. Second, we strongly support AHIP's principles to protect beneficiaries. In part, they call for CMS and the States to work together for uniform consumer protections. We believe a watch list, early detection registry, should be established similar to that in the area of information sharing for healthcare fraud, containing information on both agents terminated for cause and those who demonstrable trend in complaints. Humana does not want to contract with an agent who has been terminated by another plan or vice-versa. Humana continues to implement improvements. Plans for secret-shopper efforts and callbacks to new members to solicit their feedback on sales visits are in progress. Violations have occurred. While Humana's founded allegations are small in comparison to the number of sales, there is clearly room for improvement. You have our unqualified commitment to that objective. Humana strives daily to earn the trust that consumers place in us when they select our health- plan coverage. I thank you and look forward to your questions. [The prepared statement of Ms. Margulis follows:] [GRAPHIC] [TIFF OMITTED] T8618.058 [GRAPHIC] [TIFF OMITTED] T8618.059 [GRAPHIC] [TIFF OMITTED] T8618.060 [GRAPHIC] [TIFF OMITTED] T8618.061 [GRAPHIC] [TIFF OMITTED] T8618.062 [GRAPHIC] [TIFF OMITTED] T8618.063 [GRAPHIC] [TIFF OMITTED] T8618.064 [GRAPHIC] [TIFF OMITTED] T8618.065 [GRAPHIC] [TIFF OMITTED] T8618.066 [GRAPHIC] [TIFF OMITTED] T8618.067 [GRAPHIC] [TIFF OMITTED] T8618.068 [GRAPHIC] [TIFF OMITTED] T8618.069 [GRAPHIC] [TIFF OMITTED] T8618.070 [GRAPHIC] [TIFF OMITTED] T8618.071 [GRAPHIC] [TIFF OMITTED] T8618.072 [GRAPHIC] [TIFF OMITTED] T8618.073 [GRAPHIC] [TIFF OMITTED] T8618.074 [GRAPHIC] [TIFF OMITTED] T8618.075 [GRAPHIC] [TIFF OMITTED] T8618.076 [GRAPHIC] [TIFF OMITTED] T8618.077 The Chairman. Thank you, Ms. Margulis. Mr. Clarkson. STATEMENT OF PETER J. CLARKSON, SENIOR VICE PRESIDENT, DISTRIBUTIONS OPERATIONS, UNITEDHEALTH GROUP, MINNETONKA, MN Mr. Clarkson. Thank you, Mr. Chairman. Thank you, Mr. Chairman, for the opportunity to testify today. I am Pete Clarkson. I am the senior vice president of distribution operations for Secure Horizons, which is part of UnitedHealth Group. I was raised in rural America, and I have spent the past 20 years working in healthcare. I am personally committed and UnitedHealth Group is personally committed to making sure seniors have access to quality coverage and that they have the information they need to make informed decisions. Today's hearing focuses on concerns about the sale and marketing of healthcare plans to people with Medicare. For UnitedHealth Group, the overwhelming majority of the issues that arose last year involved private fee-for-service plans, and these plans account for less than one percent of our overall Medicare business. In late 2005, UnitedHealth Group acquired PacifiCare Health Systems, which was ramping up its private fee-for-service business. At the time, no one could have predicted how fast this market was about to grow. The entire industry had about 200,000 private fee-for-service beneficiaries then, but PacifiCare alone enrolled 178,000 new members for 2006, nearly as many as the entire industry had before. In early 2006, it became apparent that the systems and procedures that were put in place by PacifiCare were not keeping pace with the rapid growth. We added staff to our customer service and other support operations and we moved the administrative support for the plan in-house, to our shared- services group. PacifiCare relied heavily on external brokers to sell private fee-for-service plans. There were reports of misconduct in 2006 and we took aggressive action. Between January and July of 2006, we terminated more than 80 individual brokers, including two entire agencies. After these events, the Centers for Medicare and Medicaid Services sent PacifiCare a letter on August 16th describing shortcomings in the sales and operation of private fee-for- service plans. The letter directed PacifiCare to address each area of weakness and to demonstrate rapid improvement. We inherited these issues and we accept full responsibility for them. We have been working closely with CMS to address them. Among other things, we created a post-sale verification process in which we call new members to make sure they understand private fee-for-service and agree to be enrolled in the plan. Now, CMS plans to require all plans to make similar calls in the next annual enrollment period. In February, CMS provisionally accepted our corrective- action plan and they continue to closely monitor our performance. Meanwhile, we continue to make improvements. Early this year, we launched a national quality-assurance team, which works full-time with brokers and sales agents to make sure members get the information that they need. If we find that a broker may not be explaining the plan well enough, depending on the situation, the quality team can do everything from providing additional training to making site visits and going out with the broker on sales calls. If the broker's performance doesn't improve, we impose sanctions up to and including termination. UnitedHealth Group is working with AHIP and others in the industry to develop best practices, but Congress and CMS could do two things to improve the overall structure of the private fee-for-service marketplace. The first involves the process known as deeming, which means accepting the terms and conditions of the plan. Unlike an HMO, private fee-for-service generally has no network. A member is free to seek treatment from any Medicare- eligible provider, but the physician has to agree to the terms of the plan. A physician can decide not to provide services on any given office visit, even if the physician previously agreed to treat that same patient. We need a deeming structure that is good for both physicians and members to increase satisfaction and improve continuity of care. For our part, we will work with physicians and CMS to address the physicians concerns and help them become more willing to accept private fee-for-service plans. The second suggestion relates to the fact that whenever one company terminates a broker, that same person often starts selling for another competitor. The Federal Government could help by creating a national registry of sanctioned brokers, along with an appeal process to protect honest brokers. At UnitedHealth Group, we want only well-trained and highly ethical brokers selling our plans. We are committed to working with Congress, State and Federal regulators, health advocates in the industry, to enforce that standard. Thank you. [The prepared statement of Mr. Clarkson follows:] [GRAPHIC] [TIFF OMITTED] T8618.078 [GRAPHIC] [TIFF OMITTED] T8618.079 [GRAPHIC] [TIFF OMITTED] T8618.080 [GRAPHIC] [TIFF OMITTED] T8618.081 [GRAPHIC] [TIFF OMITTED] T8618.082 [GRAPHIC] [TIFF OMITTED] T8618.083 The Chairman. Thank you, Mr. Clarkson. Mr. Bailey. STATEMENT OF GARY BAILEY, VICE PRESIDENT, MEDICARE OPERATIONAL PERFORMANCE, WELLCARE, TAMPA, FL Mr. Bailey. Mr. Chairman, Senator Smith and other members of the Committee, I appreciate the opportunity to testify about the marketing of Medicare Advantage programs. I am Gary Bailey, vice president, Medicare Operational Performance for WellCare Health Plans. At WellCare, I am responsible for monitoring and improving our Medicare Advantage and prescription-drug plans. Previously, I spent over 30 years at CMS, working to improve the operations of the Medicare program and the services delivered to Medicare beneficiaries. Today, I am proud to be working at WellCare, a company committed to providing top-notch services to Medicare beneficiaries. WellCare has a strong corporate compliance program and prides itself on continuous improvement, and I have seen this firsthand in our approach the Medicare Advantage sales and oversight. Today, I will speak about WellCare's efforts to go above and beyond the law to protect Medicare beneficiaries in the marketing of Medicare Advantage plans. WellCare has developed a corporate-wide compliance program known as the Trust Program. This has a zero-tolerance policy for the unethical marketing of our products, including Medicare Advantage. But first, let me tell you about WellCare. WellCare is a leading provider of managed-care services, with a longstanding commitment to Medicare and Medicaid. Founded in 1985, our team of over 3,000 associates currently serves more than 2.2 million Medicare and Medicaid members nationwide. We offer Medicare Advantage plans in 39 States and DC Because of this national scope, WellCare contracts with over 8,000 State-licensed agents. These sales agents are carefully screened by WellCare before they interact with beneficiaries. Prior to contracting, agent must prove they are State- licensed. Agents must pass a criminal-background check. Agents must be trained on product benefits, marketing guidelines and other important issues. Agents must pass a test with a 100 percent score. Agents are monitored in the field. Agents are retrained and retested on plan terms and marketing guidelines. Agents must follow all Federal and State laws and must follow our own code of conduct. Agents are immediately investigated and subject to rapid resolution of any identified compliance issues. Also, in today's Washington Post: A situation involving unethical behavior of an agent was raised in the State of North Carolina. The Department of Insurance notified us on March 20, 2007, that an agent was conducting inappropriate marketing in a low-income senior-housing complex. We terminated that agent the next day. We worked with the State to eliminate the bad apple. We paid no commissions to that agent that was terminated. Our new inbound real-time enrollment-verification process will prevent these situations. Finally, creation of a national database will assure us and others that agents like this will not work with other health plans. This is but one of several instances where our communication between State insurance officials and the plan worked. The Trust Program's compliance process works. Over the past 6 months, WellCare has terminated 16 sales agents for marketing-conduct violations. Our program exposes and punishes unethical behavior. For example, in monitoring Medicare Advantage enrollment applications, we discovered an agent in Georgia submitted applications for deceased individuals. Working with the Georgia Department of Insurance and others, aggressive action was taken against the agent. This agent and his accomplice have been arrested. WellCare is continuing to improve and strengthen its compliance program. First, WellCare is developing an inbound real-time enrollment and verification process. This will allow prospective enrollees an opportunity to verify their understanding of plan benefits. It will also allow Medicare beneficiaries to tell us what information they received--that they needed to make an informed health care decision. This new and improved enrollment and verification process will confirm that the sales agent treated the beneficiary appropriately. The next improvement is a secret-shopper program. WellCare will use an independent organization to monitor the compliance of Medicare Advantage sales agents. This program is being launched in five States and will be rolled out nationwide. All results of WellCare's secret-shopper program will be reported directly by this independent organization to WellCare's corporate compliance department. We support even more improvements. We strongly support our trade association's draft principles to enhance oversight of sales-and-marketing efforts. We believe all private Medicare Advantage plans should adhere to these issues. We believe there should be a national training program for agents who sell Medicare Advantage products. We also support greater coordination and communication between the Centers for Medicare and Medicaid Services, the State departments of insurance, private Medicare Advantage plans and licensed agents. There should be no barrier to communication. We support the creation of a national database to share information about those agents and brokers who have been sanctioned by a State or terminated by a health plan. We do not want to be associated with an agent or broker who has been terminated by another plan because of their noncompliance with State or Federal rules. This should be done immediately. It will help our current efforts. So thank you again for this opportunity to testify. WellCare is committed to the long-term success of the Medicare Advantage program. No one should accept behavior that results in a Medicare beneficiary being inappropriately treated or enrolled in a product that is not suitable to their needs. We appreciate the support the Committee has demonstrated for Medicare Advantage, and I look forward to answering your questions. [The prepared statement of Mr. Bailey follows:] [GRAPHIC] [TIFF OMITTED] T8618.084 [GRAPHIC] [TIFF OMITTED] T8618.085 [GRAPHIC] [TIFF OMITTED] T8618.086 [GRAPHIC] [TIFF OMITTED] T8618.087 [GRAPHIC] [TIFF OMITTED] T8618.088 [GRAPHIC] [TIFF OMITTED] T8618.089 [GRAPHIC] [TIFF OMITTED] T8618.090 [GRAPHIC] [TIFF OMITTED] T8618.091 [GRAPHIC] [TIFF OMITTED] T8618.092 [GRAPHIC] [TIFF OMITTED] T8618.093 [GRAPHIC] [TIFF OMITTED] T8618.094 [GRAPHIC] [TIFF OMITTED] T8618.095 [GRAPHIC] [TIFF OMITTED] T8618.096 [GRAPHIC] [TIFF OMITTED] T8618.097 [GRAPHIC] [TIFF OMITTED] T8618.098 The Chairman. Mr. Bailey, as recently as April 19, CMS cited your company in a corrective-action plan for inadequate oversight of your Medicare Advantage sales-and-marketing operations--your company's response and your public rebuke from CMS Acting Administrator, Leslie Norwalk, on the front page of the New York Times, May 7, as you know. She indicated that your response to CMS's review was inadequate; caused concern. Does Ms. Norwalk know what she is talking about? Mr. Bailey. Well, actually, we were pleased to have CMS visit our corporate operations. On March 12, they spent almost a week with us--the CMS staff from the Atlanta regional office and from the central office staff. They conducted an extensive documentation review. They talked to the WellCare staff. They talked to WellCare senior officials. They pulled a number of multiple--and varied samples. As a result of their work, they gave us preliminary findings in areas relating to marketing, in terms of managing our brokers and making sure that our beneficiaries totally understand the product for which we are responsible for selling. The formal report did come to us on April 19. Those particular findings relating to marketing were in the report we received later. We are now in the process of developing a corrective-action plan that is due to CMS by June 3. I am confident that they will accept the recommendations that we have in there. Much of the work we had already done in implementing our proactive compliance program, our zero-tolerance program, was already underway before this CMS review. The Chairman. Well, when you say the report covered the areas of proper training of the people who represent you out there and it also covered the need to be sure that people who enroll in your program know what they are enrolling in, I mean, isn't that the ABCs of your business? Mr. Bailey. It is. The Chairman. Well, wait, wait, wait. If those are the ABCs of your business, aren't you responsible to be sure and scrupulous--totally scrupulous--to be sure that these things are not happening? Isn't that your job? Mr. Bailey. That is our responsibility. The Chairman. Well, then---- Mr. Bailey [continuing]. Quite seriously. The Chairman [continuing]. Why do you--I mean, how is it you come here today and talk about, ``Well, we are doing this, we are doing that,'' and, ``Absolutely, we would like to have a national registry,'' when, in fact--yes, it would be helpful and I think it is a good idea and I think we are going to see if we can't do that--but it is your job to be sure that the people you are hiring have been background-checked---- Mr. Bailey. That is right. The Chairman [continuing]. In a complete manner so that if they do have things in their past that should deny them employment in your company, it is your job to do that. Isn't it? Mr. Bailey. Yes. There are a number of action we take. In fact, we do a very extensive screening process before we contract with a broker. We check the excluded lists of the OIG and the GSA. We do a rigorous examination for appropriate State licensure. We have to make sure they are licensed by a State. We do Federal criminal background checks, as well as in the county of residence. We also train, train and retrain our agents. We also do field management. There has been---- The Chairman. But if you do all of these things and do them carefully, properly and well, then infractions would be very, very rare. Wouldn't they be? Mr. Bailey. Yes, they would. I think the infractions are very rare. There are a few infractions. There are some bad apples that we have been dealing with. We have established systems along the lines of what I was describing, as well as new ones, in my oral testimony that will provide for a very strong compliance program. We are proud of this compliance program. But in those instances where something happens and someone becomes a ``bad apple'', we also have processes in place to immediately identify that agent and terminate that agent, such as the one I had mentioned in the North Carolina case, and in the Georgia case. Both of those situations had been brought to our attention by the DOIs and we acted swiftly to terminate the brokers and work with those particular States. The Chairman. Mr. Clarkson, last August CMS wrote to your company that your firm's sales of Medicare Advantage plans had drawn hundreds of complaints. The CMS letter was a pretty firm indictment of your sales-marketing and outreach activities. In the same way that I asked Mr. Bailey, I ask you: How do these things--recognizing nobody is perfect, you know; and I understand that. I have been in business all of my life and I understand imperfections. But I have always, in my own businesses, taken personal responsibility for anything that had gone wrong, and felt it was my job to be sure that those people who represented us were as thoroughly checked out and trained, you know, as was humanly possible and that any infraction was a severe indictment of my companies, as well as my management. It was just not acceptable for people to act unscrupulously or fraudulently or intentionally misrepresenting a product. I mean, that was beyond the pale. Now, if that is the position in your company, why aren't we almost perfect, recognizing that we can't be perfect? But why aren't we almost perfect? Mr. Clarkson. Senator, I can appreciate your question and your comments. We have made progress as an organization, but we are not perfect. There were several factors that contributed to the corrective-action plan: Our relative newness to using brokers in a marketplace--we moved to a condensed selling cycle, so there were shorter periods of open enrollment; the relative newness of the private fee-for-service plan--it was introduced in 2003, but really didn't begin to get or gain momentum until the fourth quarter of 2005. The market response was immense. As we described, we went from relatively no enrollment to 178,000 members in 2006. That is explosive growth for any type of product. We had challenges with our integration with PacifiCare and we had infrastructure issues. We made modest projections of enrollment that we, quite frankly, Senator, blew right past, and did not have some of the infrastructure in place to manage the business. The Chairman. Ms. Margulis, in your testimony, you outlined a very impressive regimen of training and education program for your sales representatives and broker agents at Humana. That being the case, how did you get into such difficulty with CMS, winding up in a corrective-action plan and also have serious problems with the State of Oklahoma, as was outlined by the commissioner who testified before you? Ms. Margulis. Mr. Chairman, first, any violation is an issue. As I mentioned in my testimony, Humana has been in the Medicare business for 20 years. Likewise, we are not perfect and we seek continuous quality improvement. The CMS audit of us occurred in 2005. We did make extensive changes to our program. As the last witness mentioned, we, too--while we have a very large employed sales force, we also contract with independent agents primarily through agencies. As a result of increased complaints, we took corrective actions. We are responsible for both our employed agents and also our contracted agents. They are all appointed. We set up a compliance contract with agencies after that CMS audit and after we received significant numbers of complaints. We established a compliance agreement with our delegated agencies that specified what was required of us and them. We even terminated one agency in the process. Furthermore, we worked with a former NAIC staffer for the Senior Issues Committee to develop a suitability assessment, since many of the complaints stemmed from the fact that people did not know they were buying a Medicare Advantage product and not a Medicare-supplement product. We have had a verification process in place since 1991. That verification process has been modified over time. Based on complaints that we receive, we modify our processes. We also, based on both what happened with the Oklahoma Department of Insurance as well as CMS, have implemented within our internal audit department at Humana a complete internal audit of all of the areas. We seek to improve each day. Ways in which we are are in my testimony. Again, the sales allegations and those that are founded are a very small percentage; considerably less than one percent of all sales. Even so, that is more than we want. We give you our commitment, as we have the States, to work to find a way that it is even less than what it is today. The Chairman. All right. Before I turn it over to Senator Wyden, I just want to make the point that this Committee, just like you, wants to do its job well. You know our job is consumer protection. Without trying to be unfair, our job is consumer protection, and I think you understand that and you accept that. You would expect and accept for us to be very scrupulous in doing our job. The only way we can do our job is if you do your job. So, you know, we need to work in a cooperative way, obviously; not necessarily adversarial, but, certainly, cooperative. To the extent that we disagree, we have to find ways in which to move forward that will provide maximum consumer protection. You know, that is our job and that is your job, too. You can, I hope, look forward to the kind of an involvement from this Committee that will result in the only thing that we want, which is almost zero mistreatments of people who sign up to do business with your companies. That is your goal. Our job is to oversee you, which, I am sure, you understand and accept. You know, personally, I am looking forward to working with you to be sure that in the months and years ahead, we do not have problems with people who sign up with your companies to do business--you know, the very least that they expect--right?--is that it is honest, straightforward; that there is nothing there that is misrepresented. I mean, that is the very least that people who do businesses with your companies have a right to expect. Isn't that true? I mean, any disagreement with that? Mr. Bailey. Mr. Bailey. No disagreement with that. The Chairman. Mr. Clarkson. Mr. Clarkson. No disagreement, Senator. The Chairman. Ms. Margulis. Ms. Margulis. No, sir--zero tolerance. The Chairman. Ms. Ignagni. Ms. Ignagni. Absolutely no disagreement, sir. I think you are absolutely right. We are going to take the responsibility of addressing these issues affirmatively, very specifically, and in an accountable fashion. The Chairman. That is great. I appreciate that. Ms. Ignagni. Thank you. The Chairman. Senator Wyden. Senator Wyden. Thank you, Mr. Chairman. I just want to comment you, first of all, for all your leadership. This has been an excellent hearing. You have really shone a hot light on this problem, where seniors are getting ripped off. It is clearly not an isolated case. There is a pattern. I am very appreciative that you are going to stay at it and get to the bottom of it. You will have my full support in that effort, Mr. Chairman. I commend you for it. Ms. Margulis, you made a statement in the course of your testimony that disturbs me very much. I want to make sure I understand it and give you a chance to amplify so the record is clear. You said that the Federal law doesn't have to change here. You said that there are already adequate tools to deal with it. Do you continue to assert that position? Ms. Margulis. We believe that the Federal Government, working together with the States, can, indeed, ensure consumer protection. Senator Wyden. Well, that, then--in fact, let's make sure I can get the views of everybody else on the record on that as well. Mr. Clarkson, do you agree with that--that Federal law does not need to change here? Mr. Clarkson. I think we have to look at what is going to be most beneficial to the beneficiary. Senator Wyden. Just a yes or no. Do you think Federal law needs to change? Do you believe, as Ms. Margulis said, that there are already adequate tools in Federal law to deal with it? Just a yes or no. Mr. Clarkson. No, Senator. Senator Wyden. You think Federal law may have to change? Mr. Clarkson. No, I do not think Federal law needs to change. Senator Wyden. Very good. Then, Mr. Bailey, yes or no--do you think Federal law needs to change? Mr. Bailey. I think the tools have been provided to us, but we need much more communication between all of the parties involved. Senator Wyden. OK. What you three have now stated on the record is contrary to what the insurance commissioners have told us earlier. What the insurance commissioners--Mr. Dilweg and Ms. Holland--have said--and it is at page five and six of Mr. Dilweg's testimony--is that under the Medicare Advantage statute, they have got authority as it relates to brokers and as it relates to those individuals, but very limited authority over the actual insurance companies. They would like to have actual authority over insurance companies, actual legal authority. That is why I asked them about the applicability of the Medigap law. So what you have stated here, on the record, is contrary to what the insurance commissioners have stated earlier--they say they need. Now, that is not very different than what happened the 10 years that I was battling to get those Medigap changes. I want to assure you--I want to assure each of your companies--I am not going to wait 10 years to have this corrected. It is not going to happen again. I don't think Chairman Kohl is going to allow it and I don't think Republicans of the U.S. Senate are going to allow it. We are going to drain this swamp because this is not an isolated set of instances. There has been a pattern here. By the way, it is given a bad name to the many good people who are offering private health insurance. I have got many of them in my State. We have the largest incidence in our State in the country--in Portland--of managed care. We have had a long history of private roles. So you are having older people ripped off and also giving a bad name to the many people in private insurance who do a good job. I and others are not going to accept it. Now, what are we going to do to get you on the same wavelength as the insurance commissioners who described a very different position than you all have stated? Let's start with you, Ms. Margulis. Ms. Margulis. Senator, first, with regard to appointment in the States, Humana has a policy to appoint our agencies. So the State, indeed, does know who represents Humana. As I mentioned to you, we take full responsibility for delegated agents or contracted agents, as we do with our employed agents. So my suggestion would be that CMS and the States work together so that appointment is required of companies. That will give the insurance commissioners information to work directly with the insurers. I might add that it is, from where I sit, our responsibility to work with both State and Federal regulators. Senator Wyden. You are still reflecting a position that is contrary to what these insurance commissioners are saying they need in terms of tools. I would urge you--and we will keep the record open, you know, for you on this--read what Commissioner Dilweg says at page five and six. He is talking about how he has the tools for Medicare Advantage as it relates to State regulation of the agents and brokers. He is saying he doesn't have the tools with respect to the companies. He needs those tools. Ms. Holland said that as well. I just think it is unfortunate--we are interested, as the Chairman has said, in working with all of you. I am not one who thinks that private insurance ought to be put out of business. I mean, I have written a universal-coverage health bill--the Healthy Americans Act--that has that role for private health insurance. But this has got to change. So I will hold the record open for you on this. If either of you two other individuals, Mr. Clarkson or Mr. Bailey, would like to add anything--but I don't think this is the right way to end a hearing, when the private companies, after a pattern of abuse--it is revealed that private companies are then taking a position which is contrary to what the insurance commissioners say they need. That is something that we are going to revisit. Ms. Ignagni, do you want to add anything? Ms. Ignagni. Yes, sir. Would you consider a suggestion? Senator Wyden. Sure, of course. Ms. Ignagni. What we have laid out as a community are some very specific, measurable standards that go beyond what we are being required to do today. We are going to be now initiating dialog with CMS, working collaboratively with CMS. We found out about these issues in listening to the insurance commissioners and advocacy groups around the country. We are very comfortable with CMS proceeding to accept these recommendations and being in dialog about continuing to add to the standards we are required to meet. That is point No. 1. Point No. 2, which I think is something that the insurance commissioners talked about and could be done today, is for the NAIC and every insurance commissioner to agree on a single standard that would be established at the State insurance- commissioner level to require us very specifically to set up terms and conditions under which we report bad practices, whether they be agent or broker or our own employees. We think that absolutely needs to be done--not simply dismissals for cause, but at sub-par practice. I think these two issues could be taken together. What you have out there is inconsistent approaches to brokers. Now that we understand that, we have made some specific recommendations. We are fully comfortable with CMS proceeding along these lines. We would like to be in dialog with you and add to those recommendations. We think the State appointment process also, as Ms. Margulis has said, does offer us an opportunity. So, I think, taken together, you are looking at a fabric of accountability mechanisms that don't exist today. So we hope we have started something positive here. We want to be very transparent about it. We are going to be working with all parties, including advocacy organizations, because we think they have a lot of important learnings to add to this important issue. Senator Wyden. I appreciate that. There is no question at all that steps are being taken by your organization, by all of the three companies. What I find troubling, however, is when the insurance commissioners--the lead commissioners like Commissioner Holland, Commissioner Dilweg--come in, state for the record in their testimony that they need additional tools because the Federal Government has limited their authority, and then, we have the companies saying, ``No, we can do all this with the current tools.'' That still leaves me very troubled. We are going to continue to follow this up. We will leave this for the record. There is no doubt that steps can be taken by the agency called CMS, the private companies. Steps ought to be taken immediately. You have made it clear that that is going to be the case. But there still is a significant gap between what the insurance commissioners have told us today they need and what the three companies have said that they are willing to support. So we will continue to revisit this and continue to have a discussion about it. One last question, then, if I might, for the three companies--starting with you, Ms. Margulis. Just go down the row. How did this problem get out of hand? It seems to me you all have described various programs, verification programs. Ms. Margulis talked about the training programs and the like. But it was clear this was going to be a big market. I have got a Wall Street Journal article here, recently, talking about Humana making 66 percent of its net income from Medicare Advantage this year. I mean, it was clear it was going to be a big market. I think it would be valuable to have, on the record, from each of you, your perspective as to how this problem got out of hand. Ms. Margulis. Ms. Margulis. We, as I mentioned, Senator, do have and always have had a zero-tolerance policy. When allegations come to our attention, we seek to investigate and to take corrective action. The allegations that we have, no matter how many they are, are troubling, but in terms of the number of members whom we have, are small. Senator Wyden. But that is---- Ms. Margulis. However---- Senator Wyden. That is not, ma'am, what the Oklahoma Insurance Department said. The Oklahoma Insurance Department said that there were many problems. My question is, given that the regulators are saying that there are many problems, I would like to hear your thoughts about how it got out of hand. Because if a company has a zero-tolerance policy and then an insurance regulator documents that there are many problems, that would suggest to me that the zero-tolerance policy wasn't working particularly well. I am just interested in getting your sense of how things got out of hand. Let me say that, in the past, in terms of our experience, we have had employed sales representatives and a strong program; although, there have been sales complaints in that process, as well, which we have addressed. As one of the witnesses mentioned, there are short enrollment periods during which we marketed throughout the country, which caused us to contract with a number of independent agents. We needed to strengthen the program for the contracted sales force. That is what we put into place going forward. We have, as we have gone forward, worked to reduce the number of contracted agents who sell our products. As I mentioned, last year, for the 2007 season, we had about 82 percent of our sales coming from employed agents. So there was strengthening of the training programs. There were complaints that people were not receiving full and fair disclosure with regard to the kind of products that they were buying, which caused us to re-look at our verification processes that had been in place for years, but, obviously, did not address the new products that were in the market that needed additional clarification. So we made some mistakes, Senator. We put into place mechanisms to address those. We are not perfect today. Let me mention two more mechanisms. We need to be making callbacks to people who have purchased our product to make sure that the sales experience was what it should have been and fully disclose to people what they were buying. Secondarily, we, as I mentioned, are working very hard to see--and we will work with States and CMS to see if we can't have some sort of national registry for reporting infractions; not just those that are caused by people who violate our marketing code of ethics, but where there are demonstrable trends and complaints. Senator Wyden. Mr. Clarkson, how did problems get out of hand? Mr. Clarkson. Thank you, Senator. I, first of all, would say that we understand our accountability to this and accept that responsibility for these issues. During the open-enrollment period, we made changes in terms of the selling cycle and the length of time that is open for enrollment. We introduced a private fee-for-service plan, which was designed to serve traditionally underserved markets, specifically the rural market, where older Americans have not had an opportunity for traditional insurance products to be offered in those areas because of network issues, because of coverage issues and because of staff issues in terms of being able to place people in those remote areas. In addition to that, Senator, we underestimated the popularity of this plan and we had, and experienced, explosive growth without having an infrastructure in place to support that as effectively as what our members and our providers are entitled to. Senator Wyden. What does that mean, that, ``There wasn't an infrastructure in place''? There wasn't training? I mean, you know, are marketing abuses infrastructure? I mean, what does that mean? Mr. Clarkson. I am referring to training mechanisms, broker oversight mechanisms; the ability for the IT infrastructure to handle enrollment, claim processing; our customer service areas; of which we have, over the course of 2006 and into 2007, have made much progress and advances in all of those areas that we would love to be able to share with you. But we have work to do. Senator Wyden. Mr. Bailey, how did problems get out of hand? Mr. Bailey. WellCare`s experience with the new private fee- for-service product, which has proved to be extremely popular with the Medicare beneficiaries is less than 20 weeks old. It is somewhat of a hybrid between fee-for-service and managed care plan. I think the challenges we faced were in educating ourselves, all of our partners, and the beneficiaries--we have developed new compliance initiatives. I think the secret shopper program is going to help us in gauging beneficiary satisfaction with marketing and making sure that they are not given inappropriate information. We are very excited about the inbound enrollment- verification process calls. We are going to be talking to Medicare beneficiaries at the point of enrollment, with another WellCare representative on the phone, other than the broker, to make sure the beneficiary, clearly understands the implications of joining a private fee-for-service plan. Heretofore, we were not doing that. We are going to be doing that now. Coupled with the back-end post-enrollment calls we have been doing, we hope to minimize instances of inappropriate marketing even more. So when we do come here in the future, there will be even less problems to discuss. I do want to say I believe these inappropriate marketing by agents are the exception and not the rule. It doesn't mean they are acceptable. It doesn't mean we don't have a zero-tolerance policy. But we are doing everything we can. We are open to ideas from the Committee. We support the AHIP principles and will work with our colleagues here to make sure that we are doing all that we can do. Senator Wyden. Mr. Chairman, I think your hearing has covered it. I am glad that you are going to keep the hot light of the congressional-hearing process and your gavel on this. I will tell you, based on everything that I have heard, I think there is a lot of heavy lifting left to do because it is clear that the insurance commissioners feel they need additional tools to deal with the problem. We have had three companies go on the record as indicating that the existing tools are sufficient. So I look forward to following this up with you. Given how many complaints there have been from our constituents, I think moving quickly now, while people see that your Committee is going to stay at it, is particularly helpful. I look back at the history of Medigap. Again and again, interest would flag and people would move on to another subject. With you and your capable staff, we are going to stay at this now and get it done and get it done quickly. I look forward to working with you, Senator Smith. Of course, my colleague and friend from Oregon will be working as well on a bipartisan way. I thank you. The Chairman. Thank you very much, Senator Wyden. Your experience with Medigap has really been beneficial here today. I think it points the way in terms of the directions in which we need to travel. We do appreciate your presence here today, folks. I have no doubt you want to be as perfect as human beings can be, understanding that 100 percent is hard to get to. But I believe you want to get as close to 100 percent as we can get. I think that there is a lot of opportunity for us to work together to get there in a way that would cast positive light on all of us and, particularly, you, because these are your companies. We know you want to be regarded as A-plus players in the industry. We have no doubt about that. So we will work together. We will get a lot done. Again, we appreciate you being here today and we are looking forward to working with you. Thank you so much. This hearing is closed. [Whereupon, at 1:58 p.m., the Committee was adjourned.] A P P E N D I X ---------- Prepared Statement of Senator Robert P. Casey, Jr. I want to thank you Chairman Kohl for holding this hearing on such a critical issue to our older citizens. I am grateful to have the opportunity to hear from the impressive panels of witnesses you have brought together on the issue of the marketing and sale of Medicare Advantage Plus. The Medicare Modernization Act of 2003 made some significant changes regarding benefit options available to Medicare beneficiaries. Part D, the Medicare prescription drug benefit, was initiated with the MMA. Another significant change was an increase in payments by the government to private insurance plans, also known as Medicare Advantage (MA) plans, that offer Medicare benefits. The original intent of this provision was to encourage participation, competition and enrollment. Payments to Medicare Advantage plans average anywhere from 12% to 18% higher than payments to traditional Medicare fee-for-service providers. I am deeply concerned about troubling reports I have heard from my state about the marketing tactics of Medicare Advantage Plans. These reports have come from the Department of Aging and concern citizens who are enrolled in the Pennsylvania Pharmaceutical Assistance Contract for the Elderly, also known as the PACE Program. With the advent of Medicare Part D, seniors had the option of enrolling in PACE Plus Medicare, thus supplementing prescription drug coverage under PACE with the federal Medicare Part D program. The PACE program currently serves about 15% of the 65-plus population in Pennsylvania. The PA Department of Aging, which administers the PACE Program, has informed my office that literally hundreds of Medicare beneficiaries have reported being misled and in some cases even deceived into enrolling in Medicare Advantage plans by the independent agents who sell these private plans, a practice known as ``slamming.'' Specifically the beneficiaries have complained of being subjected to high pressure sales pitches about benefits and coverage offered. I understand that seniors who are concerned about the high cost of healthcare and prescription drugs are often told they will pay less on a private plan, only to find out that just the opposite is true. It is particularly troubling because MA plans receive financial incentives from the government for removing beneficiaries from Medicare and enrolling them in a private plan. According to reports and some of the testimony we will hear this morning, this is also happening I states all over the country. Older citizens may end up enrolling in plans that are not appropriate for their needs. They may not find out until they go to a regular doctor's visit that their doctor is no longer covered under the Medicare Advantage program in which they are now enrolled. Another troubling aspect is the question of jurisdiction over these disputes. The Center for Medicare and Medicaid Service (CMS) oversees MA plans and claims sole authority to regulate the corporate providers that sell these plans. Yet states clearly have a compelling interest in protecting their citizens against fraud. This is an egregious situation that must be resolved quickly and comprehensively. I will be working with the Aging Committee and Pennsylvania state officials to get to the bottom of this problem and ensure that our senior citizens are well protected from such deceptive and misleading practices. ------ Responses to Senator Kohl's questions from Abby Block Question. How many complaints has CMS received regarding the marketing and selling of Medicare Advantage plans? How have these complaints been resolved? Answer. Between December 2006 and April 2007, CMS received approximately 2,731 complaints related to Medicare Advantage marketing issues. Most of these complaints are received via 1- 800-MEDICARE, phone, fax, and through CMS Regional Offices. Of the 2,731, 1,925 have been closed and 806 are still open. Question. Do you analyze complaint data to identify trends, poor business practices, and other large thematic concerns in specific geographic areas? Answer. Yes. Complaints received through 1-800-MEDICARE are logged into a Complaint Tracking Module (CTM), which was designed to allow CMS to better identify sponsor-specific, plan type-specific, and area or region-specific trends. The CTM captures and tracks Medicare Part C and D complaints to facilitate immediate and longitudinal oversight for the Medicare Advantage and Medicare Drug Benefit Programs. Question. What is CMS doing proactively to anticipate and prevent problems with sales and marketing of Medicare Advantage plans? Answer. With the significant expansion of MA enrollment we remind organizations that they are responsible for the actions of sales agents/brokers whether they are employed or contracted. Organizations must ensure agents/brokers are properly trained in both Medicare requirements and the details of the products being offered. Employees of an organization or independent agents or brokers acting on behalf of an organization may not solicit Medicare beneficiaries door-to- door for health-related or non-health-related services or benefits. Medicare Advantage organizations must provide strong oversight and training for all marketing activities. This is especially critical for the marketing of private fee-for- service (PFFS) plans, which are unfamiliar to many beneficiaries and providers. CMS has established policies for MA plans to follow in order to protect beneficiaries from inappropriate sales tactics. For example, CMS requires that plans use only State- licensed marketing representatives; monitor marketing representative activities to ensure compliance with applicable laws and policies; ensure that the identity and other information of a marketing representative is reported to a State when required; and ensure that terminations for cause are reported to the appropriate State agency, if a State has such a requirement. Because organizations are required to use only a State- licensed, registered, or certified individual to market a plan, if a State has such a requirement, CMS expects an organization to comply with a reasonable request from a State insurance department, or other State department that licenses individuals for the purpose of marketing insurance plans, which is investigating a person that is marketing on behalf of a organization, if the investigation is based on a complaint filed with the State insurance or other department. CMS also encourages an organization to report a person that markets on the plan's behalf to the appropriate State entity if an organization believes that the person is violating a State's licensing, registration, certification, insurance or other law. ------ Responses to Senator Smith's Questions from Abby Block Question. What are the findings from the Secret Shopper program, and what actions will CMS be making in response to any concerns raised by the secret shoppers? Answer. Because CMS has received an increasing number of complaints from Medicare beneficiaries resulting from PFFS marketing activities, we investigated the practices of sales agents in the field to evaluate which marketing requirements and guidelines may have been violated. These complaints range from minor to egregious. To help CMS assess the proliferation of non-compliant PFFS marketing tactics, auditors from our contractor observed 42 sales events in varying geographic locals nationwide under a ``Secret Shopper'' initiative. The auditors observed many areas of violation and identified specific compliance concerns. Medicare program violations were documented in the following general categories: (i) incentives, (ii) preferential targeting of healthier beneficiaries (``cherry picking''); (iii) misrepresentation of potential charges/fees, and (iv) misrepresentation of plan rules/ services. The top four violations were: 1. Failure to clearly communicate the deeming process. 2. Failure to clearly communicate provider or network restrictions with the PFFS plan. 3. Failure to communicate that if a beneficiary obtains a service not covered under PFFS that the beneficiary is responsible for the cost. 4. Failure to clearly explain the charges for which the prospective member will be liable. CMS takes any violation of our marketing policies very seriously. We will be closely monitoring plan marketing activities, and will take appropriate corrective action where necessary to protect Medicare beneficiaries from being misled or harmed. Question. What recourse does a beneficiary have who has been misled into enrolling in a MA plan, and can you please explain the process for disenrollment? Answer. CMS has the legal authority to establish a Special Election Period (SEP) for exceptional circumstances. In the case where a beneficiary has been misled into enrolling in an MA plan, we believe an SEP is appropriate. This SEP would allow the beneficiary to disenroll from one plan and enroll in another or return to Original Medicare. The beneficiary may request disenrollment from their plan either in writing or electronically (if the plan offers that option), or by calling 1-800-MEDICARE. Follow Up Questions: Question a. How does CMS publicize the disenrollment process to beneficiaries, plans, SHIPS, and advocacy groups? Answer. Retroactive disenrollment actions are performed on a complaint/request basis. The SHIPs, 1-800 Medicare customer service representatives and caseworkers, and beneficiary advocate partners are aware of the availability of such actions when appropriate. Question b. Is there a way for CMS to simplify and better publicize the disenrollment process? Beneficiaries can call 1-800-Medicare to disenroll, which we believe is a very simple and well-understood option. The availability of customer service representatives at 1-800- Medicare to meet a variety of beneficiary needs and handle complaints is well publicized. Question c. For the period January 2005 through May 2007, how many retroactive disenrollments from MA plans have been applied for? Of the foregoing, please specify the type of MA plan (HMO, PFFS, etc.) to which the request relates. Question d. For the period January 2005 through May 2007, how many retroactive Disenrollments from MA have been granted, and on what basis? Of the foregoing, please specify the type of MA plan (HMO, PFFS, etc.) to which the request relates. Answer for c and d. In Calendar Year 2006, there were 303,732 disenrollments from PFFS MA/MA-PD plans and 1,374,212 disenrollments from non-PFFS MA/MA-PD plans. Of the total disenrollments in 2006, 74,922 were retroactive. From January 2007 to April 2007, there were 136,359 disenrollments from PPFS MA/MA-PD plans and 387,953 disenrollments from non-PPFS MA/MA-PD plans. Of the January to April 2007 disenrollments, 8,693 were retroactive. These disenrollment figures include routine enrollment changes made during open enrollment periods. Disenrollments due to death are not included. Some beneficiaries may have had multiple disenrollments during these timeframes. Comparable data on disenrollments between January 2005 and December 2005 is currently unavailable due to the transition in database systems from 2005 to 2006. Question. Many stakeholders have suggested implementing a national registry of agents and brokers as one mechanism to create greater accountability and enhance oversight of sales agents. What is CMS' perspective regarding the utility of this registry? Answer. CMS will be gathering agent/broker information and will make that information available to States. While this is does not constitute a national registry, it would serve the purpose of informing State regulators of which agents and brokers are selling specific Medicare managed care products for specific organizations. CMS also is exploring the feasibility of making this information available to the general public. Question. In light of the state law preemption provisions of the Medicare Modernization Act (MMA), can state laws on appointment of agents be lawfully implemented by states, or instead, would the MMA need to be amended to restore state appointment laws? Answer. Organizations have State appointment of agent laws with which they can voluntarily comply, and often do. At the same time, as noted above, CMS will be gathering agent/broker information and make that information available to States that have signed the MOU with CMS. Follow Up Questions: Question a. Commissioner Delwig has suggested that Congress look to Medigap. As a jurisdictional model for oversight of the MA program. Is that a sound approach, and why or why not? Answer. We question that approach. Medicare Advantage plans differ from Medigap plans in some significant ways. For example, Medigap plans are paid for entirely by the purchaser (i.e., either a beneficiary or an employer/former employer) and they supplement Medicare. Medicare Advantage plans, in contrast, provide all original Medicare benefits and in some cases additional benefits. The Medicare Advantage program is run and heavily subsidized by the Federal government and for that reason we believe that oversight of this program must remain at the Federal level. Question b. It is my understanding that in relation to the Memorandum of Understanding with the states, CMS will be implementing a secure website for states to access regarding complaints received by CMS. Can you provide more information about this website, e.g., what types of information will it contain, what entities will have access, when it will be operational, etc.? Answer. The purpose of the website is to create a place where MOU States can easily access documentation pertaining to compliance and enforcement actions that CMS has undertaken in the Medicare Advantage and prescription drug programs. The types of information that will be available on this website, which is targeted to be operational by the end of the summer, include:Summaries of CMS program audits Civil monetary penalty letters Intermediate sanction letters (e.g., freezing marketing and enrollment activity) Letters announcing the Agency's intent to terminate a Medicare managed care or prescription drug organization contract Letter announcing the Agency's intent to non- renew a Medicare managed care or prescription drug organizations contract Individual complaints received by CMS where individual marketing agents or persons are named. Question. For the period January 2005 to May 2007, how many complaints has CMS received related to sales and marketing of Medicare Advantage (MA) plans? In your response, please indicate: Please see the attached spreadsheets for answers to the following questions. 1. for each month during the period January 2005 to May 2007, a monthly numerical summary of the type of plan to which the complaint relates (HMO, PFFS, etc.); 2. for each month during the period January 2005 to May 2007, a summary of the type of complaint received (e.g., alleged inappropriate enrollments, questions about broker tactics, etc), and the number of each type of complaint; 3. for each month during the period January 2005 to May 2007, of the complaints received each month, how many complaints presently are closed, and how many remain open; 4. a yearly summary indicating the originating source of the complaint, e.g., beneficiary, SHIP, state department of insurance, etc.; 5. a yearly summary of complaints received, complaints closed, and complaints remaining open; 6. a yearly summary setting forth the average resolution time for closing complaints; and, 7. for each month during the period January 2005 to May 2007, the number of complaints received by CMS relating to MA plans offered by each of the following entities--Humana, WellCare, and United Health Care. Question. For the period January 2005 to May 2007, for Humana, WellCare and United Health Care MA plans, how many complaints has CMS received with respect to slow payments to providers? Answer. Between December 2006 and May 2007, CMS has received 24 complaints related to slow payments to providers. Nine concern Humana, one concerns WellCare, and 14 concern United Health Care. Prior to December 2006 and the establishment of the Complaint Tracking Module (CTM), CMS did not have one central method for collecting and classifying complaints and therefore cannot provide data for January 2005 to November 2006. Question. For the period January 2005 to May 2007, how many disciplinary actions has CMS taken against plans in relation to sales and marketing of Medicare Advantage (MA) plans? In your response, please indicate for each month during the period January 2005 to May 2007, the number and type of disciplinary action(s) undertaken (e.g., warning letter, corrective action plan, civil monetary penalties, contract termination, etc.) and the name of the plan against which the action was taken. Answer. This question is answered in combination with the follow-up question, below. Question. For the period November 2005 to May 2007, how many disciplinary actions has CMS taken against plans in relation to sales and marketing of Medicare Part D plans? In your response, please indicate: for each month during the period November 2005 to May 2007, the number and type of disciplinary action(s) undertaken (e.g., warning letter, corrective action plan, civil monetary penalties, contract termination, etc.) and the name of the plan against which the action was taken. [GRAPHIC] [TIFF OMITTED] T8618.176 [GRAPHIC] [TIFF OMITTED] T8618.177 Responses to Senator Blanche L. Lincoln Questions from Abby Block Question 1. My state office in Little Rock has received many calls from constituents who have been the victims of misleading sales and marketing pitches for Medicare Advantage plans. Here are just two examples: In one case, insurance agents went into low-income housing buildings for seniors (housing projects) and set up shop in common rooms. They offered free food or $15 Wal-Mart gift cards to residents, and signed up the seniors for MA plans. The company listed all the doctors who were supposedly on their plan, but many of these doctors were not in the plan, and one of the listed doctors was actually dead. Another example is misleading marketing strategies related to the MA plans logos. One company in Arkansas used a logo that implied that it is selling Medicare with extra perks (MedicareExtra is in big letters and the company name in small letters). Many people switched to this plan because they believed it was a better version of Medicare. Also, the agents call themselves ``Medicare Specialists'' when they are selling their plans. This made the seniors believe that they are just improving their Medicare coverage rather than switching to a new system. Companies and agents like this are clearly misleading seniors. Are there any plans to tighten the marketing guidelines to prevent these types of practices in future? Has CMS heard of other cases like this and what type of action is the agency taking to remedy marketing violations such as this? Answer. The Centers for Medicare & Medicaid Services' (CMS') priority is to ensure that Medicare beneficiaries have accurate and meaningful information necessary to help them make informed decisions about their Medicare health care and prescription drug coverage options. CMS shares your concerns and therefore, has been working diligently to implement stronger oversight requirements to ensure better accountability of marketing activities conducted by MA organizations. In general, CMS is taking actions aimed at strengthening our oversight of the overall Medicare marketplace, and taking specific actions against any organization that we suspect are violating Medicare program requirements. MA organizations that directly employ or contract with a person to market an MA plan must ensure that a plan representative or agent complies with the applicable MA and Medicare Part D laws, Federal health care laws and CMS policies, which include CMS' Marketing Guidelines. In order to ensure that the marketing activities and outreach of these plans is accurate and complies with all program requirements, CMS has taken a proactive approach in developing additional MA oversight features. Question 2. I am concerned that seniors seemed to be getting blamed when they receive misleading information and sign up for the wrong plan. For example, if a person disenrolls before the plan takes effect (in the same month of enrollment), he or she can disenroll and enroll in another plan. If the senior enrolls for the first time in a managed care plan, he or she can disenroll. It appears most of these cases are handled on a case-by-case basis. But the senior has to allege misinformation or fraud and be specific. Some of these people are just stuck until next year. When my staff has contacted the Regional Dallas CMS office about this, they have been told: ``Don't these people check to see if their doctors are on the provider lists?'' I don't think they are taking into account that salespeople are knocking on doors and pressuring the seniors into enrolling in their plans. In Arkansas, there are a high percentage of uneducated seniors, not to mention those with cognitive problems, who may have difficulty understanding the different Medicare plans. Do you think that it is fair that senior who have been misled by sales agents have to prove that they received faulty information? How is this being addressed and do you have any recommendations for how we can better serve seniors when this occurs? Answer. CMS takes these concerns very seriously, and we are taking steps to ensure that beneficiaries are protected, and that there is better understanding of Private Fee-For-Service plans on the part of beneficiaries as well as providers. We are particularly concerned about reports of marketing schemes designed to confuse, mislead or defraud beneficiaries, and are taking vigorous action to address violations. Possible CMS enforcement responses to marketing violations range from issuing a corrective action plan, to suspension of enrollment, civil monetary penalties, or even termination of the plan from the program. CMS has the legal authority to establish a Special Election Period (SEP) for exceptional circumstances. In the case where a beneficiary has been misled into enrolling in an MA plan, we believe an SEP is appropriate. This SEP would allow the beneficiary to disenroll from one plan and enroll in another (or return to Original Medicare). The beneficiary may request disenrollment from their plan either in writing or electronically (if the plan offers that option), or by calling 1-800-MEDICARE. Question 3. I have several questions related to MA disenrollment. When individuals sign up for an MA plan, they may find out only afterward when they have received bills that they have been rejected both by the carrier for Original Medicare and their new Medicare Advantage plan. Individuals in this situation have the right to retroactively disenroll from the MA plan re-enroll in Original Medicare and have their provider resubmit claims to the Medicare carrier for payment. Few individuals are aware that they have these rights, however, and, even with the help of an advocate, it can be a difficult process. How are Medicare beneficiaries made aware that they have this right? Are the customer service operators at 1-800- Medicare aware of the right to a retroactive MA disenrollment? Answer. Retroactive disenrollment actions are performed on a complaint/request basis. The SHIPs, 1-800 Medicare Customer Service Representatives (CSR) and caseworkers, and beneficiary advocate partners are aware of the availability of such actions when appropriate. Question. Are they able to initiate and complete the process for a beneficiary in this situation? Answer. No, 1-800-MEDICARE CSRs are only able to process prospective disenrollments. Retroactive disenrollments are processed and sent to either the plan or a CMS Regional Office. Question. How long does it take to complete a retroactive disenrollment? Answer. A retroactive disenrollment from an MA plan entered into the CMS system online on a Monday, for example, would be processed and completed Monday night. The completed transaction would be available in the system by Tuesday morning. Once the disenrollment is complete, CMS notifies the plan of the change with a once weekly report. Question. Is the MA plan given any discretion on whether it will allow disenrollment in these situations? Answer. No. MA plans do not have discretion over disenrollment in these situations. Question. How many requests for retroactive enrollments has CMS received? Answer. In Calendar Year 2006, there were 303,732 disenrollments from PFFS MA/MA-PD plans and 1,374,212 disenrollments from non-PFFS MA/MA-PD plans. Of the total disenrollments in 2006, 74,922 were retroactive. From January 2007 to April 2007, there were 136,359 disenrollments from PPFS MA/MA-PD plans and 387,953 disenrollments from non-PPFS MA/MA-PD plans. Of the January to April 2007 disenrollments, 8,693 were retroactive. These disenrollment figures include routine enrollment changes made during open enrollment periods and disenrollments due to death. Beneficiaries may have had multiple disenrollments during these timeframes. [GRAPHIC] [TIFF OMITTED] T8618.178 [GRAPHIC] [TIFF OMITTED] T8618.179 [GRAPHIC] [TIFF OMITTED] T8618.180 [GRAPHIC] [TIFF OMITTED] T8618.181 [GRAPHIC] [TIFF OMITTED] T8618.182 [GRAPHIC] [TIFF OMITTED] T8618.183 Responses to Senator Smith's Questions from Commissioner Dilweg Question 1--Preemption of State Laws Question. Why is a Memorandum of Understanding is necessary to facilitate what it seems should be occurring anyway, that is, the sharing of information between states and CMS? Answer. CMS maintains the MOU is necessary for the exchange of confidential agent and company information between CMS and state insurance regulators. Absent an MOU, CMS is unwilling to provide information on agent activity. Follow Up Questions: Question a. Can you tell the Committee what you hope to gain from the agreement, and is more needed? Answer. I am hopeful the MOU will lead to greater communications between states and CMS regarding MA complaints. While increasing shared information is a positive step, I do not believe it is the final answer to ensuring greater consumer protection from agent and company abuses. Question b. Many states would like to see a rollback of federal preemption provisions contained in the MMA, but plans maintain that it would be too onerous to comply with varying laws in 50 different states. Is there a middle ground that can be reached, for example, would it be a useful first step to restore state appointment laws? Answer. A rollback of federal preemption provisions would give me authority over insurance companies selling MA plans. As I mentioned in my testimony, I have all the regulatory tools I need. Federal pre-emption, however, prohibits me from using them to protect consumers purchasing MA plans. Without the ability to regulate the plans themselves, I am not able to provide input as to whether a marketing strategy, plan or advertisement is appropriate. Authority over the insurance companies would increase my ability to prevent abuses. It would allow me to hold companies responsible for inappropriate agent action. I put forth the Medigap regulatory model as a means to restore state commissioners' authority over companies while also addressing industry concerns related to compliance with varying state laws. Under the Medigap model, there would not be 50 different laws regulating Medicare Advantage. Rather, states would enact one set of laws, developed by NAIC and CMS, to regulate MA. States electing not to enact the laws would remain pre-empted as they are now under the current federal regulatory structure for MA. It would be useful to restore state appointment laws given agent appointment by an insurance company creates a trackable link for states in determining which agents write MA coverage for which plans. However, there is some question as to whether CMS has the statutory authority to pre-empt state appointment laws. I would argue CMS does not have that authority. Question c. What is the most critical complication arising from the current bifurcated regulatory system in which states are enforcing licensing laws over agents, and CMS is exercising purview over the plans. Answer. Having regulatory authority over agents allows me to only address half the problem. Agents are not operating in a vacuum. They are responsible to a company that should be held accountable for the action of their agents, especially in those cases where company marketing and sales tactics are driving agent action. In cases where agents are initiating the problems, company accountability allows state regulators to turn to and require the insurers to fix the problems created by their sales force. Reaching the company with these complaints prevents further agent abuses. Under the current regulatory scheme state regulators are limited in what we can do to prevent abuses and are instead acting on a high number of complaints that result from abuses. Most state regulators do not have the resources to track down and respond to every inappropriate agent action. In order for me to do that I would have to increase my enforcement staff. MA complaints would be handled more efficiently and effectively if I could use my toolbox to investigate agents and companies collectively. This would allow for a much more proactive regulatory approach than states currently face. Question d. You advocate that Congress look to Medigap as a jurisdictional model for oversight of the Medicare Advantage program. In response, CMS has indicated that it is critical that the federal government maintain supervision and oversight of Medicare Advantage plans because in contrast to Medigap, which is purchased by beneficiaries with their own money, Medicare Advantage is federal program, MA plans are heavily federally funded, and the plans are CMS contractors. In light of the foregoing, is Medigap really the best jurisdictional model for overseeing the MA program? Can you point to other federal programs in which states are imbued with oversight of federal contractors? Answer. Under the Medigap regulatory model, CMS would retain ultimate regulatory authority over MA plans. CMS would merely be allowing those states that have enacted the federal regulatory program for MA (developed by NAIC and CMS) to enforce the laws. Beneficiaries are paying for MA with their own money. In addition to the part B premium, some pay a premium to the MA plans for additional coverage, including for prescription drugs. It is important to note that companies sponsoring MA plans are insurance companies required by federal law to be licensed in the states in which they provide MA coverage. It does not make sense to bifurcate the regulatory responsibilities for this coverage. As I mentioned earlier, CMS would have a significant role in developing the new regulatory provisions and would assure that the regulations CMS promulgates are properly enforced. Question 2--Complaints referred to CMS Question. For the period January 2006 through May 2007, how many MA marketing/sales complaints has your office referred to CMS, and of these complaints, how many remain unresolved? Answer. To date, we have not referred any formal complaints to CMS regarding marketing/sales issues. We contact the insurers and/or agents and attempt to resolve marketing/sales complaints. As part of the MOU we recently signed, we will share information about enforcement actions. The states and CMS are still finalizing the procedures for sharing this information. We do refer MA beneficiaries who call our office with MA plan problems to CMS for handling. Follow Up Question: Question a. How many agents/brokers have you identified that have been selling MA plans in you state, but have not been licensed in your state? Answer. We informed the insurers marketing MA products that we expected them to use only licensed agents. We have not identified any situations where unlicensed agents sold MA plans in Wisconsin. Question 3--National Registry for Agents/Brokers Question. Please elaborate on the concept of a national registry of agents, and explain your thoughts on what entity is best suited maintain the registry, what types of data the registry would contain, what types of complaints and/or disciplinary actions would result in an agent being placed on the registry, what parties would have access to the registry, and what the cost might be of implementing and maintaining such a measure? Answer. I was a bit surprised to read in the AHIP response that it was looking forward to working with CMS and NAIC on a national producer registry for insurance agents who sell MA. There is already a national registry of insurance agents, the National Insurance Producer Registry. Insurers can access information in the public portion of this database, the Producer Data Base (PDB). The PDB is an electronic database consisting of information relating to insurance agents and brokers (producers). The PDB links participating state regulatory licensing systems into one common repository of producer information. The PDB also includes data from the Regulatory Information Retrieval System (RIRS) to provide a more comprehensive producer profile. Through PDB, industry is able to access all public information related to a producer provided by the participating state insurance departments. The product is designed to assist insurers in exercising due diligence in the monitoring of agents and brokers to reduce the incidence of fraud. Currently, PDB contains information on over 3.8 million producers. Information available includes: Demographics--name, date of birth, addresses License Summary--state of license, license number, issue date, expiration date, license type/class, residency, lines of authority, status, status reason, status/ reason effective date. Company appointment information such as company, effective date, termination date and termination reason. Regulatory Actions--State of action, entity role, origin of action, reasons for action, enter date penalty/ fine/forfeiture, effective date, file reference, time/length of dates. All of the above information is supplied by the states to PDB. The information is updated on a regular basis, usually daily or as submitted by states. Access to the PDB is sold on a subscription basis. There is a $75 annual fee per password and a $1.34 charge per ``look up'' of an entity in PDB. A ``look up'' includes all the available license information being supplied by participating states for an individual producer, business entity, or company. Question 4--CMS' Marketing Guidelines Question. Do CMS' marketing guidelines provide sufficient protections for beneficiaries? In your response, please indicate your opinion regarding whether the marketing guidelines allow any unacceptable practices. Answer. I believe CMS marketing guidelines unintentionally promote possible sales and marketing abuses in some areas. For example, the guidelines promote cross-selling of other products during the sale of Medicare products under the theory of financial planning for the Medicare-eligible. Agents sell seniors unrelated and sometimes unsuitable insurance products-- including Medicare Advantage plans, annuities, life insurance policies, funeral policies, and other types of products. These other products are much more lucrative to the agents than Medicare Part D plans. Medicare Advantage plans are being reimbursed at an amount that is significantly higher than the cost of original Medicare; on average between 111% and 119% higher. As a side note, financial incentives tied to the MA plans are very likely driving the abuses we are seeing today. CMS marketing guidelines allow MA plans to change the cost- share provisions and premiums annually. This is a very significant problem. All stability in coverage for the beneficiary is lost. MA plans do not provide the stability and consistency people are accustomed to having in their health plans from year to year. In contrast, the Medigap model would provide that needed stability. Medigap plans are guaranteed renewable, meaning plans cannot unilaterally change coverage from year-to-year except to adjust to original Medicare's changes of its deductibles and co-payments. The CMS guidelines seem to be written first for promoting the products and second for protecting the beneficiary. I feel that developing marketing and sales guidelines through a collaborative process, using the NAIC Medigap regulatory model, with CMS, state insurance regulators, the insurance industry, and consumer groups that the guidelines will accomplish protecting the consumer and the market place from abusive practices thereby promoting these products as valuable alternatives to the buying public. ------ Responses to Senator Lincoln's Questions from Commissioner Dilweg Question. Commissioner, you mentioned in your testimony the unscrupulous practice of agents signing up people with dementia into an inappropriate plan. How widespread do you think this is? What kind of protective measures are there for these persons? Answer. My agency has received complaints regarding MA policies sold to people who have legal guardians appointed to make decisions on their behalf. The plans were sold without the guardians' consent. I do not have documentation of dementia specific cases but certainly have seen cases where developmentally disabled individuals purchased plans without being fully aware of what they were committing to. While I cannot quantify how widespread this is, the fact that it has happened at all sends a red flag and indicates to me that it is happening in the market place. Individuals who feel an agent selling MA plans has acted inappropriately can file a complaint with my office. As I mentioned in my testimony, I can use my regulatory enforcement tools against bad agents but I can't get at the insurers employing the agents. The ability to do so would hold companies employing agents accountable for their misconduct and would certainly help in preventing agent abuses. Question. You mentioned in your written testimony that Medicare Advantage plans can scale back benefits from year to year and seniors may not understand the changes and expect to get what they signed up for and at particular prices. How frequently are plans changing benefits and prices? Are seniors notified about these changes and how? Answer. Insurers offering MA products are allowed by CMS to change benefits and prices every year. OCI is not notified or involved in the process and therefore I do not have information regarding the number of plans that have made changes. I can tell you that most plans changed either benefits, prices or both in 2007. My point in mentioning these changes in my testimony was to demonstrate the burden these constant changes place on seniors--it means they have to re-evaluate their plan decision every year and try to make comparisons between plans that are all very different. CMS sets the standards for the notification of changes and the format for the notices which have to be filed with CMS. I believe they have to provide notice of plan changes by November 1 for changes effective the following January 1. ------ Response to Senator Kohl's Question from Commissioner Holland Question. Your office took marketing enforcement action against a Medicare Advantage plan sponsor, Humana, despite what we were told is a pre-emption of your authority to do that. In fact, Humana, in its written testimony, cites that pre-emption. Why did you take those actions? Answer. Due to the high volume of consumer complaints Oklahoma received, we initiated a targeted market conduct examination. The examination was targeted at the agents' conduct, over which we retain oversight. Humana's claims practices that would have been violations of Oklahoma law, if not for federal preemption, were uncovered during the examination and was not the basis for the authority to conduct the examination. ------ Responses to Senator Smith's Questions from Commissioner Holland Question 1--Preemption of State Laws Question. Why is a Memorandum of Understanding necessary to facilitate what it seems should be occurring anyway, that is, the sharing of information between states and CMS? Answer. Federal and state privacy laws, in particular, hinder the ability of state Departments of Insurance and CMS to share critical information about consumer complaints regarding carriers or agents and brokers. The MOU establishes that the information shared will remain confidential and not be misused by the regulator. The MOU allows for the free and open sharing of information between the state and CMS. Follow Up Questions: Question a. Can you tell the Committee what you hope to gain from the agreement, and is more needed? Answer. As the insurance commissioner for the State of Oklahoma, I hope to receive complaints involving agents and brokers from CMS and send complaints involving carriers to CMS. More importantly, I hope to receive information from CMS on how and when complaints are resolved and what complaints are being received in other states against companies selling insurance in my state. My understanding is that CMS is currently working on a database that could be accessed by states that have signed the MOU and provide them with this much-needed information. However, we are still awaiting this information. Question b. Many states would like to see a rollback of federal preemption provisions contained in the MMA, but plans maintain that it would be too onerous to comply with varying laws in 50 different states. Is there a middle ground that can be reached, for example, would it be a useful first step to restore state appointment laws? Answer. First, I would like to point out that MA plans operated very successfully before MMA rolled back state regulation of the plans--and without all of the consumer problems that have since arisen. Second, I do think a middle ground exists. As suggested by Commissioner Dilweg of Wisconsin at the hearing, a single set of marketing rules could be developed and adopted by the states, which would then regulate the marketing practices of the plans. This model has worked with Medicare supplemental plans (Medigap) and would work in this instance, as well. Question c. What is the most critical complication arising from the current bifurcated regulatory system in which states are enforcing licensing laws over agents, and CMS is exercising purview over the plans. Answer. The inability of states to establish the marketing guidelines to be used by agents and brokers and hold plans responsible for the appointment, training and oversight of agents and brokers severely limits the ability of state regulators to do their job. Question d. You advocate that Congress look to Medigap as a jurisdictional model for oversight of the Medicare Advantage program. In response, CMS has indicated that it is critical that the federal government maintain supervision and oversight of Medicare Advantage plans because in contrast to Medigap, which is purchased by beneficiaries with their own money, Medicare Advantage is federal program, MA plans are heavily federally funded, and the plans are CMS contractors. In light of the foregoing, is Medigap really the best jurisdictional model for overseeing the MA program? Can you point to other federal programs in which states are imbued with oversight of federal contractors? Answer. While MA plans receive some federal funding, they are far from federal contractors. When a consumer purchases an MA plan, they enter into a contract with that plan to provide payment for certain health services. As with other health insurance carriers, the state's responsibility is to ensure this contract was not entered into fraudulently or via unethical or misleading sales practices. It must also be noted that the consumer does contribute quite a bit to the cost of this coverage. First, the Part A portion of the premium was contributed by the consumer while he or she was employed. Second, the consumer must pay a portion of the Part B premium. Third, the consumer is, in most cases, required to pay an additional premium for the additional coverage provided by the MA plan (similar to Medigap coverage). Question 2--Complaints referred to CMS Question. For the period January 2006 through May 2007, how many MA marketing/sales complaints has your office referred to CMS, and of these complaints, how many remain unresolved? Answer. Due to the system established by CMS for complaints, the complaints are not referred by our office to CMS; rather the beneficiary must call 1-800-MEDICARE to make the complaint. However, in an attempt to serve our consumers, we do call CMS. When we call 1-800-MEDICARE on behalf of a beneficiary, we have trouble getting through, and when we do we speak to someone, it's difficult to get any response. We have referred 138 complaints to CMS. Again, due to the structure established by CMS, they do not report to us if or when the complaints have been resolved. Follow Up Questions: Question a. How many agents/brokers have you identified that have been selling MA plans in you state, but have not been licensed in your state? Answer. The appointment process compels the insurer to verify the licensure of an agent because they cannot appoint an agent without a valid license. The only way to determine to what extent which insurers are utilizing unlicensed agents is to conduct targeted market conduct examination. With that being said, the targeted market conduct exam we conducted on Humana was inclusive of both Medicare Part C and D sales. We found 68 agents to be unlicensed as a result of that examination. Question 3--National Registry for Agents/Brokers Question. Please elaborate on the concept of a national registry of agents, and explain your thoughts on what entity is best suited to maintain the registry, what types of data the registry would contain, what types of complaints and/or disciplinary actions would result in an agent being placed on the registry, what parties would have access to the registry, and what the cost might be of implementing and maintaining such a measure? Answer. Such a national registry of agents and brokers has been in place since 1996. The National Insurance Producer Registry (NIPR) is a non-profit affiliate of the National Association of Insurance Commissioners and provides a national database of producers and allows state regulators to communicate and coordinate oversight. Question 4--CMS' Marketing Guidelines Question. Do CMS' marketing guidelines provide sufficient protections for beneficiaries? In your response, please indicate your opinion regarding whether the marketing guidelines allow any unacceptable practices. Answer. The current marketing guidelines developed by CMS are not adequate to protect consumers. By allowing practices such as cross-selling, the guidelines encourage much of the unethical behaviors we are seeing in the market today. Further, it is obvious by the number of problems that currently exist in the market that CMS has inadequate resources which are necessary for enforcement deployed in the states. Thus, we maintain our assertion that CMS should work with the state regulators who already have the necessary resources and experience to protect their consumers. ------ Responses to Senator Smith's Questions from Sherry Mowell Question 1--National Registry for Agents/Brokers Question. Please elaborate on the concept of a national registry of agents, and explain your thoughts on what entity is best suited maintain the registry, what types of data the registry would contain, what types of complaints and/or disciplinary actions would result in an agent being placed on the registry, what parties would have access to the registry, and what the cost might be of implementing and maintaining such a measure? Answer. In my opinion, a national registry would need to be maintained at the federal level. Each consumer complaint would need to be investigated and, if found legitimate, the federal regulator would take appropriate action to restrict or prohibit an individual from selling any Medicare product. (I would suggest a sliding scale of punishment, with the most severe punishment being to completely and permanently bar an agent from selling any Medicare product.) The registry should be set up so that the public could check to see if an individual is under investigation (without full disclosure to the public of the details of the investigation); states should have full access for state licensing issues. Depending on the severity of the punishment, the states could use that information to take appropriate action against the individual agent license. (Congress should also consider modifying the federal law to enable states to take actions against licensed companies for company wrongdoing.) Any company engaging in Medicare business should have an obligation to notify the registry of suspected agent wrongdoing. Also, I would recommend that, prior to being approved to sell Medicare, an agent be required to acknowledge that the agent is aware of the ramifications of potential wrongful acts. I anticipate that the cost to implement such a registry and to employ adequate staff to conduct investigations would be substantial--you would need investigators in all 50 states to investigate each complaint. Investigators would need to be able to go into the field and meet with the complainant (the Medicare recipient). This would also require administrative attorneys to enforce the regulations and follow through with administrative orders. If Medicare gave the states the jurisdiction that we have suggested during the Senate hearing, this system is already set up on a state-by-state basis. Each state already investigates insurance fraud at different levels. Through the NAIC, the states report actions taken against individuals and companies. Thus, when an agent's license is revoked in one state, it is unlikely that he or she will be given a license in another state. Question 2--CMS' Marketing Guidelines Question. Do CMS' marketing guidelines provide sufficient protections for beneficiaries? In your response, please indicate your opinion regarding whether the marketing guidelines allow any unacceptable practices. Answer. No. The guidelines set out violations but do not provide for punishment. In our experience, if a company dismisses an agent for his or her practice, the agent just moves to the next company. The states do not even know a problem exists unless the consumer contacts us directly. However, in the State of Georgia, if a company dismisses an agent, the company must notify the state of the dismissal and of the reason for the dismissal. If wrongdoing occurs the company is obligated to notify the state. ------ Responses to Senator Smith's Questions from Albert Sochor Question 1--National Registry for Agents/Brokers Question. Please elaborate on the concept of a national registry of agents, and explain your thoughts on what entity is best suited maintain the registry, what types of data the registry would contain, what types of complaints and/or disciplinary actions would result in an agent being placed on the registry, what parties would have access to the registry, and what the cost might be of implementing and maintaining such a measure? Answer: There is already a national registry process in place. It's called National Insurance Producer Registry (NIPR). Insurance companies, insurance agents and state insurance departments all use and have access to this registry. It has the capability of handling all that you have asked. Cost is set up on an as used basis. This would give CMS and the states a gathering sight for complaints, compliance and data. All insurance companies are required by the state insurance departments to use NIPR to appoint agents. (See attachment for more information) Web Site: http://www.licenseregistry.com/ Question 2--CMS' Marketing Guidelines Question. Do CMS' marketing guidelines provide sufficient protections for beneficiaries? In your response, please indicate your opinion regarding whether the marketing guidelines allow any unacceptable practices. Answer: No, if it had been doing so we wouldn't be experiencing the difficulties we have. The marketing guidelines do not allow any unacceptable practices; the problems are enforcement and accountability. You cant dictate compliance. Humana was the only company that had agents actually appoint with them and not contract through a third party, they also had the most comprehensive training (two days in school) and testing. Yet they had the most complaints. I have yet to read where Humana, their agencies or their agents have been fined for their infractions. What would help beneficiaries is when they call 1-800-Medicare they should get help and guidance as to what to do when the beneficiary has made a mistake or has been taken advantage of. As I stated in my testimony, I and many other agents and beneficiaries have spoken with CMS and MA Company's service reps and have been given the wrong information. Beneficiaries and being told they are ``Locked In'' until the end of the year and are not being advised about the ``Trial Period.'' All the CMS reps would have to do is asked the beneficiary a few questions when they call; such as, ``Is this your first time on an MA plan? Did you drop a Medicare Supplement policy to join this MA plan?'' ``Have you called the company? What was their response?'' CMS needs to be the advocate for these beneficiaries. They claim it's their program and the companies are their contractors. CMS needs to be handling the problems and doing it right, not SHICP or other entities. Senator Wyden was right when he said ``We need to drain this swamp.'' As I stated in my testimony, all MA, MAPD and PDP plans need to be standardized to stop the confusion. Commissions need to be lowered and levelized to stop the churning and the incentive to cheat. You must get rid of the ``Lock In'' to give beneficiaries the freedom of choice. This will give them confidence that if they make a mistake or if something in the plan changes and it is not what they want, they can get out. I also believe that you need to have an equitable reimbursement rate to relieve the burden that it puts on the current Medicare system. The Federal and the State systems already had programs in place to protect the poor before MA plans came along; it was called Medicaid and the QMB and SLMB programs. These worked for years to help the poor with their medical costs. ------ Responses to Senator Smith's Questions from Karen Ignagni Question 1--National Registry for Agents/Brokers Question. Please elaborate on the concept of a national registry of agents, and explain your thoughts on what entity is best suited maintain the registry, what types of data the registry would contain, what types of complaints and/or disciplinary actions would result in an agent being placed on the registry, what parties would have access to the registry, and what the cost might be of implementing and maintaining such a measure? Answer. We are calling for strengthening of the processes and criteria for reporting broker and agent misconduct to state agencies, not creating a national registry. Uniform processes and criteria would enhance the ability of states regulators, plan sponsors, and the Centers for Medicare & Medicaid Services (CMS) to strengthen safeguards against broker misconduct. At the same time, we are aware that the National Association of Insurance Commissioners (NAIC) has an existing database, the National Insurance Producer Registry (NIPR). AHIP is committed to working collaboratively on an expedited basis with the NAIC, CMS, and other interested parties to confirm whether NIPR or another mechanism could provide a workable vehicle for timely access to expanded information about misconduct. We believe that NIPR has the potential to serve as a platform that would enable this initiative to move forward more quickly, and we are in discussions with the NAIC about the functionality and data submission processes for this database, as well as NAIC's evaluation of the potential for an expanded role for NIPR. We understand that NIPR already contains information for brokers and agents whose licenses have been terminated, along with termination date and reason. We also are prepared to work with NAIC, CMS and others on such operational issues as reporting criteria, data submission mechanisms, and data use and access. We believe that in these areas, as well, existing processes could provide a sound basis for moving forward. For example, State licensure laws include a variety of categories of broker and agent misconduct, processes for reporting such misconduct, and a range of disciplinary action when misconduct is verified through prescribed processes. We believe that a joint effort to review the critical elements of these laws, establish standard criteria that could be used across the country to enhance the breadth and timeliness of information reported, and make the resulting data available through a centralized database, such as NIPR could improve the ability of States and plans to take more effective preventive and corrective action regarding misconduct. We have not yet developed a cost estimate for this project because it will be the product of the joint effort described above. Question 2--CMS' Marketing Guidelines Question. Do CMS' marketing guidelines provide sufficient protections for beneficiaries? In your response, please indicate your opinion regarding whether the marketing guidelines allow any unacceptable practices. Answer. CMS' marketing guidelines require plan sponsors to follow a wide range of requirements that are designed to protect beneficiaries including requirements for the content and scope of marketing materials, the conduct of marketing activities and the qualifications and role of contracted brokers and agents. We believe these guidelines establish an effective foundation for holding plan sponsors accountable and for achieving CMS and plan oversight of broker/agent conduct but--in light of the concerns about marketing conduct that have been identified--we support efforts to clarify and strengthen this guidance. Specifically, we support the issuance of more detailed guidance, based on the principles outlined in the AHIP Board of Directors statement we submitted with our testimony to address the serious concerns discussed at the May 16 hearing. Question 3--SHIP Hotline Numbers Question. Please provide a list of your members' SHIP hotline numbers. To address privacy concerns, please provide two documents as follows: One document should be labeled ``Document A.'' Document A should list your member plans and corresponding SHIP hotline numbers. Document A will not be published in the hearing transcript. Please mark Document A as ``Not for Publication.'' One document should be labeled ``Document B.'' Document B should provide a list of your member plans, and a yes/no acknowledgment next to each members' name as to whether the phone number has been provided on Document A. Document B will be entered into the hearing transcript. [GRAPHIC] [TIFF OMITTED] T8618.184 [GRAPHIC] [TIFF OMITTED] T8618.185 [GRAPHIC] [TIFF OMITTED] T8618.186 [GRAPHIC] [TIFF OMITTED] T8618.187 [GRAPHIC] [TIFF OMITTED] T8618.188 [GRAPHIC] [TIFF OMITTED] T8618.189 [GRAPHIC] [TIFF OMITTED] T8618.190 [GRAPHIC] [TIFF OMITTED] T8618.191 [GRAPHIC] [TIFF OMITTED] T8618.192 Responses to Senator Lincoln's Questions from Heidi Margulis Question. I have heard from my state office that about 25% of the complaints we receive about Medicare Part D are from people who have signed up for a managed care type plan without understanding that their providers aren't participating. The salespeople are telling the seniors that the plan they represent is as good or is better than the plan the senior is enrolled in. How is Humana handling this situation and how does your company reign in salespeople who are misleading seniors about the plans? Answer. Within Humana's sales agent training program, we train agents to fully and fairly disclose to beneficiaries that Private Fee for Service enrollees may see any provider that is willing to accept Humana's payment terms and conditions. Our CMS-approved sales presentation includes this information and our enrollment verification scripting (please see Attachment #1) addresses this issue as well. During the verification process, we specifically inform the member of this rule and that the member should confirm their provider's willingness to accept the plan. Additionally, agents can forward provider information to our Provider Relations' education staff to request they communicate with providers about the PFFS plan, in the event the provider is unaware of how a PFFS plan works and how they will be paid. We have a team of Provider Relations representatives who conduct educational sessions in communities for providers and who provide ongoing outreach to them. Providers can also directly contact this staff. Humana has a sales investigation unit outside our Medicare Sales department that investigates all allegations that come to our attention. Specific remedial actions are in place, including termination and reporting to state Departments of Insurance for those findings of statutory cause. Further, for many years, we have had a policy in place that incents best practice selling and disincents bad sales practices. Agents do not receive commission for members who disenroll within the first 90 days of enrollment--this is known as our ``chargeback policy.'' Question. What evidence do you have that the corrective action plans have been effective? Answer. Agent complaints are tracked and agent files maintained with investigation reports and findings. Agent personnel files also contain monitoring, corrective actions and other remedies. If repeat allegations on the same topic or related allegations occur, further disciplinary action, up to and including termination may be warranted. Question. I am concerned that some cognitively impaired persons are being taken advantage and signed up for plans that they did not understand. Agent Mowell noted in her testimony that one agent went to a facility and signed up individuals who were mentally disabled for Part D and then switched them to a MA plan without the knowledge of the patient or their guardian. How does Humana ensure that agents are not taking advantage of beneficiaries with mental disabilities? You noted in your written testimony that Humana has a verification system, which is used to ensure that the beneficiary or authorized representative understands the MA plan and the basic rules. Can you please walk me through this system and how it works? Answer. Our sales training program includes a section on senior vulnerabilities. We also monitor sales through our verification process, local management and through sales- related complaints. Our sales program does not target specific groups of vulnerable beneficiaries and cold-calling without an appointment or agreement on the part of relevant parties violates our sales practice policies. HUMANA'S MEDICARE ADVANTAGE ENROLLMENT VERIFICATION PROCESS Since 1991, Humana has used an enrollment verification process to confirm a beneficiary's intent to enroll in a Medicare Advantage (MA) plan and his/her understanding of plan rules. This process has been updated over time to reflect new requirements, new technology and better approaches to beneficiary health literacy needs. Following a beneficiary's completion of an enrollment application, the agent phones a toll-free number that connects with an interactive voice response (IVR) system. The beneficiary has the option of completing the verification through the IVR system or by speaking directly with a customer care representative (verification staff are not in the sales organization). Both the IVR system and the customer care representative (verification staff are not in the sales organization). Both the IVR system and the customer care representative utilize a CMS-approved script that includes questions related to plan rules as well as confirms the beneficiary's understanding that the plan in which they are enrolling is not a Medicare Supplement plan, that the plan is not a stand-alone prescription drug plan and that the beneficiary's providers must accept Humana payment terms and conditions (Humana pays the same as what Medicare pays). Telephonic verifications are recorded. During the verification process, if the IVR detects hesitation or a negative response, the system automatically transfers the beneficiary to a live customer care representative. If the customer care representative detects hesitation or the beneficiary negatively responds or the beneficiary does not understand a provision, the verification system is stopped and the agent is instructed to explain the relevant provisions to the beneficiary. If, at a later time, the beneficiary wants to enroll, the verification process begins anew. Humana tries to verify all sales. If for some reason, the verification is not completed telephonically, or the application is completed online without a sales representative, an outbound call is made to the beneficiary by a customer care representative after the application is processed. If the beneficiary cannot be reached, a letter is mailed to the beneficiary. All telephonic enrollments are recorded and the recording serves as the verification. These enrollees also receive a verification letter. Stand-alone PDB enrollees receive an outbound verification letter. The Verification Unit is staffed Monday-Sunday: 8AM-11PM ET. The IVR line is available 24/7. Beginning within the next months, Humana will be implementing an outboud verification system with a customer service representatives contacting members post-sale in accordance with new CMS guidance. As well, Humana is in the process of designing a secret shopper program to evaluate sales experiences. In addition to our verification process, Humana has had in place for many years a commission chargeback policy. This policy stipulates that agents do not receive commissions on sales that terminate prior to the first 90 days of enrollment. This policy was designed to promote best-practice techniques. 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