Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

 

BENEFICIARIES REMAIN 

VULNERABLE TO SALES AGENTS’ 

MARKETING OF MEDICARE 

ADVANTAGE PLANS 

 

Daniel R. Levinson 

Inspector General 

March 2010 

OEI-05-09-00070 
 

 EXECUTIVE SUMMARY 

OBJECTIVES

(1) To examine selected Medicare Advantage (MA) plan sponsors’ 

compensation of sales agents. 

(2) To determine whether selected MA plan sponsors ensured that their 

sales agents were qualified. 

(3) To compare the number and topics of Medicare beneficiaries’ 

complaints about sales agent marketing before and after 

implementation of sales agent marketing regulations. 

BACKGROUND 

The Centers for Medicare & Medicaid Services (CMS) contracts with 

private companies, known as plan sponsors, to provide health insurance 

plans under MA. Plan sponsors may market their MA plans through 

independent sales agents, who may market on their own or through a 

field marketing organization (FMO), or by employing their own sales 

agents. 

Between June 2007 and June 2008, Congress held three hearings 

examining sales agents’ marketing of MA plans. During these hearings, 

witnesses testified that sales agents had marketed without licenses, 

portrayed themselves as Medicare employees, and misled Medicare 

beneficiaries about plan benefits. These types of aggressive, deceptive, 

and fraudulent marketing practices could result in Medicare 

beneficiaries enrolling in plans that do not meet their health care needs. 

Several members of Congress raised concerns about sales agents’ 

marketing to Medicare beneficiaries to the Office of Inspector General 

(OIG); one specifically requested that OIG examine the marketing 

practices of MA plans. 

In July 2008, Congress enacted the Medicare Improvements for Patients 

and Providers Act of 2008 (MIPPA), which prohibited or limited certain 

marketing activities by sales agents and plan sponsors. In 

September 2008, CMS published regulations implementing the MIPPA’s 

marketing provisions, including limiting sales agent compensation to 

independent sales agents. In addition, CMS regulations required that 

all sales agents be trained and tested annually and be State licensed. 

To examine selected MA plan sponsors’ compensation of sales agents 

and determine whether the selected plan sponsors ensured that their 

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EXECUTIVE SUMMARY 

sales agents were qualified, we reviewed compensation, testing, and 

licensure data for a random sample of sales agents. We purposively 

selected the plan sponsors based on their size and the rate of marketing 

complaints they received. We also compared complaints regarding sales 

agent marketing reported to CMS from 2008 and 2009 to determine 

whether the number and topics of Medicare beneficiaries’ complaints 

changed after implementation of the sales agent marketing regulations. 

FINDINGS 

All five plan sponsors using independent sales agents had 

compensation practices that resulted in inappropriate financial 

incentives. Five selected plan sponsors’ compensation practices may 

have led sales agents to enroll Medicare beneficiaries in MA plans that 

did not best meet Medicare beneficiaries’ health care needs. Three of the 

five selected plan sponsors that used independent sales agents made 

payments to sales agents in excess of their CMS-approved compensation 

schedules. In addition, three of the five selected plan sponsors made 

payments to FMOs that may have created inappropriate financial 

incentives to market their MA plans. One plan sponsor did both. 

Five of the six selected plan sponsors did not ensure that all sales 

agents were qualified under CMS’s regulations. Five of the 

six selected plan sponsors used unqualified sales agents who either had 

not passed the marketing test for 2009 or were not licensed at the time 

they took Medicare beneficiaries’ enrollment applications. In our 

random sample of 30 sales agents per plan sponsor, there were 

12 unqualified sales agents, the majority of whom had not passed the 

marketing test for 2009. Despite a requirement that MA plans have 

systems in place to confirm that enrolled Medicare beneficiaries are 

aware of their enrollment in the plans and that the Medicare 

beneficiaries understand the plans’ rules, no plan sponsor had a policy 

to contact Medicare beneficiaries enrolled by an unqualified sales agent 

to ensure that they knew of their enrollment or understood the plans’ 

rules. 

The number and topics of sales agent marketing complaints 

remained unchanged after implementation of sales agent marketing 

regulations. About 13,000 sales agent marketing complaints were 

reported to CMS during each of the 2008 and 2009 annual enrollment 

periods. For both years’ annual enrollment periods, these complaints 

represented less than 10 percent of all complaints reported to CMS. For 

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EXECUTIVE SUMMARY 

both years, sales agent marketing complaints referenced one or more of 

the same three broad topics: (1) providing misleading information about 

plan benefits, (2) enrolling Medicare beneficiaries without their consent, 

and (3) engaging in aggressive sales tactics. 

RECOMMENDATIONS 

Each of the six selected plan sponsors did not follow at least one of the 

marketing regulations concerning sales agent compensation and 

qualifications. Any such instances represent gaps in plan sponsors’ 

oversight and implementation of the sales agent marketing regulations. 

In addition, results from CMS’s oversight of plan sponsor marketing 

activities after implementation of the sales agent marketing regulations 

indicate that compliance concerns are not limited to the six selected 

plan sponsors. Therefore, we recommend that CMS: 

 take appropriate actions regarding the specific instances of 

noncompliance documented in this report, 

 audit plan sponsors and include an assessment of the 

vulnerabilities identified in this report, 

 issue additional regulations concerning FMO payments, 

 issue regulations requiring plan sponsors to contact all new 

enrollees to ensure that they understand plan rules, and 

 issue guidance clarifying that plan sponsors should terminate 

unlicensed sales agents immediately upon discovery. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with our first recommendation. CMS concurred in part 

with our second recommendation, stating that it would conduct audits 

or other oversight activities of plan sponsors posing the greatest risk to 

Medicare beneficiaries. As such, we have amended the wording of the 

recommendation. CMS did not concur with our final three 

recommendations. We continue to recommend that CMS issue 

additional regulations and guidance to protect Medicare beneficiaries 

from inappropriate sales agent marketing. However, we have modified 

the wording of two of the recommendations to reflect alternative 

approaches that are consistent with CMS’s comments. 
 TABLE OF CONTENTS 

EXECUTIVE SUMMARY .....................................i

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 

All five plan sponsors using independent sales agents had 

compensation practices that resulted in inappropriate financial 

incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 

Five of the six selected plan sponsors did not ensure that all 

sales agents were qualified under CMS’s regulations . . . . . . . . . . 17 

The number and topics of sales agent marketing complaints 

remained unchanged after implementation of sales agent 

marketing regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 

 

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 

Agency Comments and Office of Inspector General Response . . . 24 

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 

A: Medicare Improvements for Patients and Providers Act of 

2008 Provisions Concerning Sales Agents . . . . . . . . . . . . . . . . 27 

 B: Detailed Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 

C: Estimates and Confidence Intervals for Samples From the 

Centers for Medicare & Medicaid Services’ Complaint 

Tracking Module . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 

D: Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 

ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
 

 INTRODUCTION 

OBJECTIVES 

(1) To examine selected Medicare Advantage (MA) plan sponsors’ 

compensation of sales agents. 

(2) To determine whether selected MA plan sponsors ensured that their 

sales agents were qualified. 

(3) To compare the number and topics of Medicare beneficiaries’ 

complaints about sales agent marketing before and after 

implementation of sales agent marketing regulations. 

BACKGROUND 

The Medicare Prescription Drug, Improvement, and Modernization Act 

of 2003 (MMA) replaced the Medicare + Choice program with the MA 

program and made qualified prescription drug coverage available to 

Medicare beneficiaries.1, 2 The Centers for Medicare & Medicaid 

Services (CMS) contracts with private companies, known as plan 

sponsors, to provide health insurance plans under MA. Plan sponsors 

may offer multiple MA plans. 

Between January 2008 and September 2009, enrollment in MA plans 

increased from 9.2 million Medicare beneficiaries to over 11.2 million, or 

nearly a quarter of the more than 45 million Medicare beneficiaries.3 

For each Medicare beneficiary enrolled in MA in 2009, the Medicare 

Payment Advisory Committee (MedPAC) projected that Medicare pays 

1 MMA, P.L. 108-173 § 201, 42 U.S.C. § 1395w-21 note. 

2 MMA, P.L. 108-173 §101, Social Security Act, § 1860D-1 et seq., 42 U.S.C. § 1395w-101 

et seq. 

3 CMS, Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan Contract 

Report - Monthly Summary Report (Data as of January 2008). Available online at 

http://www.cms.hhs.gov/MCRAdvPArtDEnrolData/Downloads/Contract Summary -

January 2008.zip. Accessed on October 16, 2009. CMS, Medicare Advantage, Cost, PACE, 

Demo, and Prescription Drug Plan Contract Report - Monthly Summary Report (Data as of 

September 2009). Available online at 

http://www.cms.hhs.gov/MCRAdvPArtDEnrolData/Downloads/Contract Summary -

September 2009.zip. Accessed on October 16, 2009. CMS, Medicare Enrollment: National 

Trends 1966 – 2008. Available online at 

http://www.cms.hhs.gov/MedicareEnRpts/Downloads/HISMI08.pdf. Accessed on 

September 24, 2009. 

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MA plan sponsors 14 percent more than if a Medicare beneficiary 

remains in fee-for-service Medicare.4

Medicare beneficiary complaints about MA plan marketing raised 

concerns in Congress and with CMS. Between June 2007 and June 

2008, Congress held three hearings examining MA plan marketing in 

response to complaints of aggressive, deceptive, and fraudulent 

marketing practices reported by Medicare beneficiaries and consumer 

advocates. During these hearings, witnesses testified that sales agents 

had marketed without licenses, portrayed themselves as Medicare 

employees, and misled Medicare beneficiaries about plan benefits.5 

After discussions with CMS, in June 2007, seven MA plan sponsors 

agreed to suspend their marketing of specific MA plan types that were 

the subject of many complaints. 

Protecting Medicare beneficiaries from inappropriate sales agent 

marketing practices is critical to ensuring that Medicare beneficiaries 

enroll in plans that meet their health care needs. In 2008, several 

members of Congress raised concerns about sales agents marketing to 

Medicare beneficiaries to the Office of Inspector General (OIG). This 

study is in response to a request from Congressman Fortney “Pete” 

Stark that OIG examine the marketing practices of MA plans. 

Marketing MA Plans To Enroll Medicare Beneficiaries 

Plan sponsors market through advertisements and sales agents to 

attract Medicare beneficiaries to enroll in their plans. CMS allowed 

plan sponsors to begin marketing activities on October 1, 2008, for the 

2009 plan year.6 A plan year begins January 1 and ends December 31. 

Medicare beneficiaries may choose to enroll in MA when they are first 

eligible for Medicare and then annually thereafter between 

November 15 and March 31 (hereinafter referred to as the annual 

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4 MedPAC, A Data Book: Healthcare Spending and the Medicare Program, June 2009, 

p. 155. Available online at http://www.medpac.gov/chapters/Jun09DataBookSec10.pdf. 

Accessed on September 30, 2009. 

5 42 U.S.C. § 1320b-10. 

6 CMS, 2009 Call Letter, March 17, 2008, p. 7. Available online at 

http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/CallLetter.pdf. Accessed 

on April 1, 2009. 

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INTRODUCTION 

enrollment periods).7 Aside from their initial eligibility and the annual 

enrollment periods, most Medicare beneficiaries may not change plans 

and must remain enrolled in their chosen plans throughout the plan 

year.8 

Marketing MA Plans Through Sales Agents 

Plan sponsors may contract with independent sales agents or employ 

sales agents to market their plans to Medicare beneficiaries. 

Independent sales agents may contract with one or more plan sponsors. 

Independent sales agents may market MA plans on their own or as 

employees of field marketing organizations (FMO). When sales agents 

market MA plans as FMO employees, FMOs typically provide sales 

agents with enrollment leads and marketing assistance. Plan sponsors 

pay sales agents directly or through an FMO. 

Laws and Regulations Governing Sales Agent Marketing of MA Plans 

In July 2008, Congress enacted the Medicare Improvements for Patients 

and Providers Act of 2008 (MIPPA).9 In the MIPPA, Congress 

prohibited or limited certain sales and marketing activities by sales 

agents and plan sponsors. For instance, the MIPPA required CMS to 

issue guidance limiting sales agent compensation and requiring sales 

agents to be trained and tested annually and be State licensed.10 

More than half of the limitations on sales agent and plan sponsor 

activities codified in the MIPPA had been previously released as 

guidance in 2006. For example, in previous guidance, CMS directed 

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7 Technically, there are two separate enrollment periods with slightly different rules. 

From November 15 to December 31, Medicare beneficiaries may enroll in, or disenroll from, 

MA plans as often as they like. From January 1 to March 31, Medicare beneficiaries may 

enroll in, or disenroll from, MA plans only once. CMS, Medicare Managed Care Manual

(MMCM), Pub. 100-16, ch. 2, §§ 30.1, 30.3. Available online at 

http://www.cms.hhs.gov/MedicareMangCareEligEnrol/Downloads/2009MAenrollmentguida

nce.pdf. Accessed on February 18, 2009. 

8 MMCM, ch. 2, § 30. CMS allows certain Medicare beneficiaries more flexibility to 

change plans. Medicare beneficiaries eligible for Medicaid may enroll in or switch MA plans 

at any time. In addition, CMS provides special enrollment periods for Medicare 

beneficiaries whose plans terminate, who change residence, or who meet exceptional 

conditions. 

9 MIPPA, P.L. 110-275. 

10 MIPPA, §§ 103(b)(1) and (d)(1), Social Security Act, §§ 1851(j) and (h), 42 U.S.C. 

§§ 1395w-21(j) and 1395w-21(h). 

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INTRODUCTION 

plan sponsors to reasonably compensate sales agents in line with 

industry standards and to use State-licensed sales agents.11 

CMS published regulations implementing the MIPPA’s sales agent 

marketing provisions on September 18, 2008, 2 months before the 

annual enrollment periods for the 2009 plan year began.12 Appendix A 

lists the sales agent marketing provisions in the MIPPA and associated 

CMS guidance for implementing the MIPPA's provisions and indicates 

whether CMS addressed the provisions in its previous 2006 guidance. 

Sales agent compensation. In September and November 2008, CMS 

issued regulations implementing the MIPPA provision concerning sales 

agent compensation.13 These regulations are intended to ensure that 

sales agents enroll Medicare beneficiaries “based on the plan that best 

meets their health care needs.”14 They govern compensation of 

independent sales agents, including those employed by FMOs. These 

regulations do not cover sales agents that are plan sponsor employees.15 

CMS defines compensation as the monetary or nonmonetary payment 

for the sale or renewal of a plan policy (i.e., the initial enrollment of a 

Medicare beneficiary into an MA plan or the renewal of a Medicare 

beneficiary’s enrollment), including but not limited to commissions, 

bonuses, gifts, prizes, awards, and finders’ fees. In its definition of 

compensation, CMS does not include fees for complying with State laws; 

training, certification, and testing costs; or reimbursement for mileage 

and actual costs associated with sales appointments.16 Thus, plan 

sponsors may pay for these items in addition to any compensation for 

the sale or renewal of a plan policy. 

CMS requires a 6-year compensation cycle for sales agents, whether 

paid by a plan sponsor directly or through FMOs, consisting of two types 

of compensation: initial-year compensation and renewal-year 

11 CMS, Medicare Marketing Guidelines for: Medicare Advantage Plans, Medicare 

Advantage Prescription Drug Plans, Prescription Drug Plans, and 1876 Cost Plans, 

pp. 128–138 (2nd revision, July 25, 2006). Available online at 

http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/FinalMarketingGuidelines.

pdf. Accessed on June 26, 2009. 

12 73 Fed. Reg. 54208 and 54226 (Sept. 18, 2008). 

13 73 Fed. Reg. 54226 (Sept. 18, 2008); 73 Fed. Reg. 67406 (Nov. 14, 2008). 

14 73 Fed. Reg. 54226, 54237 (Sept. 18, 2008); 73 Fed. Reg. 67406, 67407 (Nov. 14, 2008). 

15 42 CFR § 422.2274 (as of Nov. 14, 2008). All subsequent citations in this report to 

42 CFR pt. 422 are to the regulation as amended in September and November 2008. 

16 Ibid. 

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INTRODUCTION 

compensation. Plan sponsors must pay sales agents an initial-year 

compensation rate for a Medicare beneficiary’s initial year of enrollment 

into an MA plan. Plan sponsors must pay sales agents a renewal-year 

compensation rate, equal to 50 percent of the initial-year compensation 

rate, each year for 5 years after a Medicare beneficiary’s initial year of 

enrollment so long as the Medicare beneficiary remains enrolled.17 

For 2009, CMS required plan sponsors to submit compensation 

schedules for sales agents and FMOs.18 This submission included plan 

sponsor’s compensation schedules for sales agents and FMOs from the 

past 3 years and their proposed schedule for the 2009 plan year.19 

CMS used the compensation schedules to determine market rate limits 

for sales agents. For 2009, CMS set the market rate limit for 

initial-year compensation at $400, with exceptions for certain States.20 

Accordingly, for 2009 the maximum renewal-year rate for most States is 

$200. CMS required plan sponsors to resubmit their sales agent 

compensation schedules for approval if they were out of compliance with 

the market rate limit. 

CMS stated that administrative difficulties with the enrollment process 

would prevent CMS from distinguishing between initial- and 

renewal-year enrollments at the time of enrollment.21 Thus, for 2009, 

CMS instructed plan sponsors to pay sales agents the renewal-year 

compensation rates until CMS notified them that enrollments were 

eligible for initial-year compensation.22 CMS did permit plan sponsors 

to pay initial-year compensation for individuals newly eligible for 

Medicare.23 

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17 42 CFR § 422.2274(a)(1). 

18 73 Fed. Reg. 67406, 67410 (Nov. 14, 2008). 

19 Ibid.; CMS, Release of Centers for Medicare & Medicaid Services 4138-IFC2 and 

Clarification of guidance on agent/broker compensation, November 10, 2008. 

20 CMS, January 16, 2009 replacement of the December 24, 2008 memo: 2009 Medicare 

Advantage and Prescription Drug Program Agent and Broker Compensation Structures

(January 2009 Replacement Memorandum), January 16, 2009. Available online at 

http://www.cms.hhs.gov/ManagedCareMarketing/Downloads/CompStructureRepMemo_ 

011609.pdf. Accessed on June 30, 2009. For Connecticut, Pennsylvania, and the District of 

Columbia, the initial-year compensation rate could be as high as $450 for MA plans. For 

California and New Jersey, the initial-year compensation rate could be as high as $500. 

21 73 Fed. Reg. 67406, 67408 (Nov. 14, 2008). 

22 Ibid.; 42 CFR § 422.2274(a)(1)(iii). 

23 42 CFR § 422.2274(a)(1)(iii). 

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Beginning in May 2009, CMS identified enrollments for which sales 

agents should have been paid the initial-year compensation rate. CMS 

requires plan sponsors to retroactively adjust sales agent compensation 

to the initial-year compensation rate if CMS identifies the beneficiary as 

new to MA or newly eligible for Medicare in 2009.24

The regulations also address payments to FMOs for ancillary services, 

such as training, material development, customer service, direct mail, 

and agent recruitment. CMS did not establish limits for such payments. 

Rather, the regulations state that plan sponsors must pay FMOs for 

services at fair-market value and each plan sponsor’s payment must not 

exceed an amount commensurate with what that plan sponsor paid 

FMOs in each of the prior 2 years.25 The regulations also do not state 

that plan sponsors must pay FMOs for ancillary services using a 6-year 

compensation cycle. 

Sales agent qualifications. In September 2008, CMS also issued 

regulations implementing the MIPPA provisions requiring plan 

sponsors to ensure that sales agents meet certain qualifications.26 

First, plan sponsors must ensure that all sales agents are trained and

that they pass an annual written or electronic test on Medicare 

(hereinafter referred to as the marketing test) with a score of 85 p

or better.

ercent 

r online. 

27, 28 CMS does not specify the content of the training or the 

test or the number of times a sales agent may attempt the test. 

Training and testing may be provided in person o

Second, plan sponsors must use only State-licensed sales agents to 

market their plans.29, 30 The process for attaining licensure is 

determined by each State. State licenses may be valid for as little as 

1 year or may not expire at all. 

24 42 CFR § 422.2274(a)(1)(iii). 

25 42 CFR § 422.2274(a)(1)(iv). 

26 73 Fed. Reg. 54208 and 54226 (Sept. 18, 2008). 

27 42 CFR §§ 422.2274(b) and (c). 

28 CMS, Guidance for regulations in CMS 4131-F and CMS 4138-IFC, September 15, 

2008, p. 23. Available online at 

http://www.cms.hhs.gov/ManagedCareMarketing/Downloads/MIPPA_Imp_memo091208Fin

al.pdf. Accessed on September 9, 2009. 

29 42 CFR § 422.2272(c). 

30 California does not require sales agents who market Health Maintenance 

Organization (HMO) plans to be licensed. Knox-Keene Health Care Service Plan Act of 

1975, Cal Health & Saf Code § 1359. 

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Plan sponsor reporting of terminated sales agents. CMS regulations also 

require plan sponsors to report the termination of licensed sales agents 

to the applicable State.31 If State laws require, plan sponsors must also 

include the reasons for sales agent terminations. In addition, plan 

sponsors must make their reports of sales agent terminations available 

to CMS upon request.32 However, CMS regulations and guidance do not 

specify circumstances under which plan sponsors should terminate sales 

agents. 

CMS and Plan Sponsor Oversight of Sales Agent Marketing 

In September 2008, CMS announced an oversight strategy to ensure 

that plan sponsors comply with sales agent marketing regulations.33 

CMS staff stated that they visited more than 1,500 marketing events 

unannounced and reviewed 1,300 advertisements during the 

2009 annual enrollment periods. CMS staff noted that they expanded 

oversight activities to include monitoring of sales agents in 

one-on-one settings. In addition, in the summer of 2009, CMS staff 

audited one plan sponsor to ensure compliance with the sales agent 

marketing regulations. CMS staff indicated that they plan to conduct 

more compliance audits in the future. 

As part of CMS’s oversight strategy, CMS staff also assessed complaints 

reported to the 1-800-MEDICARE hotline or Medicare Drug Integrity 

Contractors (MEDIC).34 CMS registers complaints reported to either 

source in its Complaint Tracking Module. CMS assigns each complaint 

to one of several categories. One category, “marketing,” is for 

complaints about plan sponsor marketing. Within the “marketing” 

category, CMS includes a “marketing misrepresentation” subcategory. 

For the 2009 annual enrollment periods, CMS staff stated that hotline 

employees were instructed to place all sales agent marketing complaints 

in the “marketing misrepresentation” subcategory. 

31 42 CFR § 422.2272(d). 

32 CMS, Medicare Marketing Guidelines for: Medicare Advantage Plans, Medicare 

Advantage Prescription Drug Plans, Prescription Drug Plans, and 1876 Cost Plans, p. 141. 

Available online at 

http://www.cms.hhs.gov/ManagedCareMarketing/Downloads/R91MCM.pdf. Accessed on 

January 5, 2010. 

33 CMS, Final Marketing Provisions and CMS Marketing Surveillance, September 26, 

2008. 

34 MEDICs are responsible for managing reports about fraud, waste, and abuse in the 

prescription drug program and working with CMS, plan sponsors, and others to protect 

Medicare beneficiaries. 

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Because of its oversight activities, CMS sent warning letters to 92 plan 

sponsors regarding 1 or more of the following issues: (1) a high number 

of sales agent marketing complaints, (2) noncompliance with a sales 

agent marketing regulation detected at marketing events or through 

advertisement reviews, (3) deficiencies in plan sponsors’ implementation 

of the sales agent marketing regulations, or (4) poor customer service. 

Of the 92 warning letters, 84 referenced 1 or more of the first 3 issues 

related to marketing. 

Plan sponsors must also monitor compliance with sales agent marketing 

regulations. Specifically, CMS requires plan sponsors to monitor sales 

agents to ensure that they comply with all applicable laws, CMS 

policies, and marketing guidelines.35 In addition, CMS requires that 

plan sponsors have a meaningful procedure for receiving and resolving 

complaints reported to plans.36

State Departments of Insurance Oversight of Sales Agents 

State Departments of Insurance oversee and license sales agents 

employed in their States. Like CMS, the Departments of Insurance 

receive complaints from Medicare beneficiaries and use them to oversee 

and discipline sales agents whose actions violate State laws or 

regulations. 

CMS has signed Memorandums of Understanding with all Departments 

of Insurance to allow the exchange of complaint data involving sales 

agents and plan sponsors. In addition, CMS holds quarterly 

teleconferences with all State Departments of Insurance to exchange 

information about sales agent and plan sponsor marketing. 

Related Office of Inspector General Work 

In 2006, OIG published a report assessing CMS oversight of MA 

marketing materials. OIG found that some MA marketing materials 

lacked CMS-required information essential for Medicare beneficiaries to 

make informed choices. For instance, plan sponsors’ advertisements did 

not include operating hours for their customer service numbers, did not 

state that the 1-800-MEDICARE line is available 24 hours a day and 

7 days a week, or did not clearly identify resources for Medicare 

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35 CMS, “Marketing Guidelines,” p. 130. 

36 42 CFR § 422.564. 

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beneficiaries with special needs. Furthermore, some marketing 

materials used unclear and technical language.37 

METHODOLOGY 

To examine selected MA plan sponsors’ compensation of sales agents 

and determine whether the selected plan sponsors ensured that their 

sales agents were qualified, we reviewed compensation, testing, and 

licensure data for a random sample of sales agents. We also compared 

complaints regarding sales agent marketing reported to CMS from 

2008 and 2009 to determine whether the number and topics of Medicare 

beneficiaries’ complaints changed after implementation of the sales 

agent marketing regulations. See Appendix B for a more detailed 

description of our methodology. 

Scope 

We reviewed plan sponsors offering MA plans. We did not review plan 

sponsors that offered only prescription drug plans and no MA plans. 

According to CMS staff, plan sponsors offering only prescription drug 

plans account for a small number of sales agent marketing complaints. 

This study is designed to identify whether selected plan sponsors have 

problems associated with the compensation or qualifications of their 

sales agents. It does not project the extent of any problems for MA plan 

sponsors. Because of the intensity of the review, we focused our 

analysis on a purposive sample of six plan sponsors that used sales 

agents to market to Medicare beneficiaries. 

We limited our analysis of plan sponsors to 3 of the marketing 

provisions in the MIPPA: (1) compensation of sales agents, (2) annual 

training and testing of sales agents, and (3) use of State-licensed sales 

agents. These three marketing provisions are critical to protecting 

Medicare beneficiaries because they address sales agents’ financial 

motivation and their qualifications to market MA plans. See 

Appendix A for a complete list of the marketing provisions in the 

MIPPA. 

In addition, we limited our analysis of plan sponsors’ compliance with 

sales agent marketing regulations to dates between October 1, 2008, 

37 OIG, Medicare Advantage Marketing Materials for Calendar Year 2005, 

OEI-01-05-00130, August 2006. 

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when marketing began for the 2009 annual enrollment periods, and 

March 31, 2009, the end of the 2009 annual enrollment periods. Most 

Medicare beneficiary enrollment occurs during this timeframe.38 

Finally, we did not determine whether plan sponsors' payments 

complied with the Federal antikickback statute.39 A legal analysis of 

whether plan sponsor payments violated the Federal antikickback 

statute was beyond the scope of this study. 

Examining Sales Agents’ Compensation and Qualifications 

To examine sales agents’ compensation and qualifications, we collected 

data from 6 of the 266 plan sponsors offering MA plans in 2009. From 

three strata of plan sponsors, we purposively selected six plan sponsors 

with the highest rate of marketing complaints per enrolled Medicare 

beneficiary. We selected one plan sponsor from a stratum of plan 

sponsors with small enrollment, two from a stratum with medium 

enrollment, and three from a stratum with large enrollment. These six 

plan sponsors represented approximately 7 percent of MA enrollment at 

the time of our review. They are geographically dispersed and three of 

the six plan sponsors offered their plans nationally. 

Within each plan sponsor, we randomly sampled 30 sales agents. We do 

not project our findings to all sales agents from the six plan sponsors or 

to the universe of MA plan sponsors. 

We conducted site visits at each of the selected plan sponsors during 

April 2009. During each site visit, we conducted structured interviews 

of plan sponsor representatives and collected data on the random 

sample of 30 sales agents. For each sampled sales agent, we collected 

all enrollment applications, compensation, and testing data. While 

onsite, we verified the accuracy and completeness of these data. 

We determined whether five of the six selected MA plan sponsors followed 

CMS’s compensation regulations regarding sales agent compensation. We 

dropped one plan sponsor from this analysis because it did not use 

independent sales agents. Only independent sales agents are subject to 

the compensation regulations. For each of the 5 plan sponsors, we 

compared the payments made to each of the 30 sampled sales agents to the 

plan sponsors’ CMS-approved compensation schedules. 

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38 MMCM, ch. 2, § 30. 

39 42 U.S.C § 1320a-7b. 

P LANS
 

INTRODUCTION 

We also compared payments made to FMOs on a per enrollment basis to 

each of the plans sponsor’s CMS-approved compensation schedule. For 

this analysis, we did not determine whether these payments comply with 

CMS regulations. In particular, we did not determine whether FMO 

payments were fair-market value or whether payments exceeded the 

amounts that plan sponsors paid FMOs for similar services in the previous 

2 years. 

We determined whether selected plan sponsors ensured that their sales 

agents were qualified by checking whether sales agents were 

appropriately trained and licensed at the time they enrolled Medicare 

beneficiaries. To determine whether their sales agents for the 

6 selected plan sponsors were trained, we reviewed the date on which 

each of the 30 sampled sales agents passed the marketing test. For 

each sampled sales agent, we compared the date the sales agent passed 

the marketing test to the Medicare beneficiary’s signature date on each 

enrollment application submitted by that sales agent. 

We determined whether 5 the 6 selected plan sponsors used licensed 

sales agents by checking whether each plan sponsor’s 30 sampled sales 

agents had licenses in the States at the time they generated enrollment 

applications. We dropped one plan sponsor from this analysis because it 

operated as an HMO in California and California does not license sales 

agents to market HMOs. For the five selected plan sponsors, we 

compared the Medicare beneficiaries’ signature dates to the licensure 

dates for all sales agents available on State Department of Insurance 

Web sites or through the National Insurance Producer Registry 

database.40 

Medicare Beneficiary Complaints Regarding Sales Agent Marketing 

Number of sales agent marketing complaints. To determine the number of 

sales agent marketing complaints reported to CMS, we selected 

2 stratified random samples of 400 complaint records from the Complaint 

Tracking Module from October 1, 2007, to April 30, 2008, and from 

October 1, 2008, to April 30, 2009. We chose these periods because they 

capture complaints from when plan sponsors may begin marketing for the 

plan year to 1 month after the end of the annual enrollment periods. We 

40 Two States’ licensure information is not available on their Department of Insurance 

Web sites. For these States, we used the National Insurance Producer Registry, a private 

compilation of current licensure information. 

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INTRODUCTION 

stratified the complaint records by those that are categorized as 

“marketing misrepresentation” and those that are not. We selected 

100 complaint records from the “marketing misrepresentation” stratum 

and 300 complaint records from the other stratum for each period in case 

some sales agent marketing complaints were placed under an incorrect 

category. 

We manually reviewed all sampled Complaint Tracking Module 

complaint records. We used each complaint’s categorization and 

description to determine whether the complaint concerned sales agent 

marketing. We projected the number of sales agent marketing 

complaints to the total number of complaints for the 2008 and 

2009 annual enrollment periods. See Appendix C for a list of 95-percent 

confidence intervals for all statistical projections. 

Topics of sales agent marketing complaints. To determine the nature of 

complaints in the Complaint Tracking Module, we analyzed sales agent 

marketing complaints from the “marketing misrepresentation” stratum 

only. The proportion of sales agent marketing complaints we found in 

the “marketing misrepresentation” stratum is large enough to make 

valid projections between periods. We then compared the proportion of 

complaints by type between the 2008 and 2009 annual enrollment 

periods. 

To determine the nature of sales agent marketing complaints reported 

to other sources during the 2009 annual enrollment periods, we 

collected data from the Departments of Insurance, MEDICs, and the 

six selected plan sponsors. From the Departments of Insurance, we 

requested the types of complaints they received. From the MEDICs and 

the six selected plan sponsors, we requested actual complaints. We 

compared the Complaint Tracking Module complaints to those collected 

from other sources. 

Data Limitations 

We were unable to verify the accuracy and completeness of some 

compensation data from one plan sponsor. While we were able to assess 

the accuracy and completeness of payments to the sampled sales agents 

for that plan sponsor, we were not able to verify the completeness and 

accuracy of other payments, such as finders’ fees. Because this plan 

sponsor’s payments to sales agents were accurate and complete and 

because none of the other plan sponsors provided inaccurate 

compensation data, we included these unverified data in our analysis. 

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INTRODUCTION 

The number of sales agents we report as unqualified under CMS 

regulations and the number of enrollment applications they generated 

are conservative. Representatives from some selected plan sponsors 

stated that they were unable to find a small number of enrollment 

applications associated with our sampled sales agents. These 

enrollment applications could have had problems; however, we could not 

determine this because they were missing. 

We use the number of sales agent marketing complaints reported to 

CMS as a way to identify potential concerns with sales agent marketing 

tactics. However, some of these complaints may have been unjustified, 

resulting in a potential overstatement of concerns with sales agent 

marketing tactics. 

Standards 

This study was conducted in accordance with the Quality Standards for 

Inspections approved by the Council of Inspectors General on Integrity 

and Efficiency.

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All five plan sponsors using independent sales 

agents had compensation practices that resulted 

in inappropriate financial incentives 

 FINDINGS 

All five of the plan sponsors using 

independent sales agents had 

compensation practices that 

resulted in inappropriate financial 

incentives for sales agents or may have created inappropriate financial 

incentives for FMOs to market their MA plans. The plan sponsor that 

did not use independent sales agents is not included in this analysis of 

compensation practices because only independent sales agents are 

governed by CMS compensation regulations. 

Three of five selected plan sponsors using independent sales agents 

made payments to sales agents in excess of their CMS-approved 

compensation schedules. In addition, three selected plan sponsors made 

payments to FMOs that may have created inappropriate financial 

incentives to market their MA plans. One plan sponsor did both. 

Inappropriate financial incentives for sales agents and FMOs may affect 

Medicare beneficiary enrollment. Sales agents and FMOs may 

encourage Medicare beneficiaries to enroll in MA plans that pay more 

than other MA plans without regard to whether those MA plans best 

meet Medicare beneficiaries’ health care needs. Once enrolled, 

Medicare beneficiaries have limited opportunities to switch MA plans 

before the next annual enrollment periods begin. 

Three of the selected plan sponsors made payments in excess of their 

CMS-approved compensation schedules, resulting in inappropriate financial 

incentives 

Payment of administrative fees in excess of compensation rate. One 

selected plan sponsor paid in excess of its CMS-approved compensation 

schedule by paying additional flat administrative fees to sales agents in 

our sample. For each enrollment, this plan sponsor paid flat 

administrative fees of $50 to sales agents. These payments were in 

addition to its CMS-approved compensation payments. Including the 

flat administrative fees, a sales agent’s compensation would total 

$250 per enrollee, exceeding the plan sponsor’s renewal year 

compensation rate of $200. 

CMS allows plan sponsors to pay fees, in addition to CMS-approved 

compensation, if these fees are for actual costs related to sales 

appointments. However, the plan sponsors’ flat administrative fees do 

not appear to reflect payments for actual costs because these payments 

never varied; the plan sponsor always paid sales agents $50. In 

addition, the plan sponsor stated that these fees were payments for 

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FINDINGS 

costs related to enrollments rather than costs related to sales 

appointments. 

Since implementing its practice of paying additional flat administrative 

fees, this plan sponsor experienced enrollment growth that exceeded 

overall MA enrollment growth throughout its region. Between 

November 1, 2008, and June 1, 2009, this plan sponsor’s enrollment 

increased nearly 47 percent. During the same period for the same 

region, MA enrollment grew by 8 percent, excluding this plan sponsor’s 

enrollment. 

Payments of excessive compensation rates. One selected plan sponsor 

paid sampled sales agents in excess of its CMS-approved compensation 

schedule by paying the initial-year compensation rate, which is twice 

the renewal-year compensation rate, for enrollees it believed to be new 

to MA. The regulations are clear that for 2009, plan sponsors may pay 

the initial-year compensation rate only for enrollees new to Medicare. 

For all other Medicare beneficiaries, including beneficiaries new to MA, 

plan sponsors must pay sales agents the renewal-year compensation 

rate until CMS notifies them otherwise. 

This plan sponsor may have gained a competitive advantage over plan 

sponsors that followed CMS’s regulations. Even if sales agents would 

have eventually received the full initial-year compensation rate, they 

received payment of the full initial-year compensation rate as much as 

5 months earlier than they otherwise would have. 

Plan sponsor representatives stated that they paid the initial-year 

compensation rate for Medicare beneficiaries new to MA to remain 

competitive with other plan sponsors in their area. According to plan 

sponsor representatives, they hired a contractor to determine whether 

each new enrollee was new to MA after learning that other MA plan 

sponsors in their area were paying the initial-year compensation rate 

for new MA enrollees. Compensation data from two selected plan 

sponsors that marketed in the same area show that these plan sponsors 

paid the renewal-year compensation rate. These data do not support 

the claim that competitors paid the initial-year compensation rate. 

Regardless of its competitors’ compensation practices, this plan sponsor 

should have followed CMS’s compensation regulations for 2009. 

A second selected plan sponsor paid in excess of its CMS-approved 

compensation schedule by paying a sales agent an additional payment, 

on top of his compensation rate, that it would have otherwise paid to the 

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FINDINGS 

FMO. This sales agent’s compensation totaled as much as $375 per 

enrollment, exceeding the plan sponsor’s CMS-approved renewal-year 

compensation rate of $200. A plan sponsor representative stated that in 

2006, the FMO requested that the plan sponsor pay the sales agent the 

additional amount because this sales agent was a top seller. 

Payment of finders’ fees in excess of compensation. One plan sponsor 

exceeded its CMS-approved compensation rate by paying finders’ fees. 

This same plan sponsor also paid sales agents initial-year compensation 

rates as described previously. The plan sponsor paid a $25 finders’ fee 

for referrals in addition to the sales agents’ compensation. CMS 

specifically noted that such fees must be deducted from the sales agents’ 

compensation.41 The total compensation for an enrollment, including 

finders’ fees, may not exceed the plan sponsor’s approved compensation 

rate. Plan sponsor representatives reported that they intend to expand 

this practice. 

Three of the selected plan sponsors’ payments to FMOs may have created 

inappropriate financial incentives to market their MA plans 

Variations among plan sponsors' payment to FMOs raised concerns 

about inappropriate financial incentives.42 Three plan sponsors’ 

payment practices may have created inappropriate financial incentives 

for FMOs to market their MA plans. Three of the five selected plan 

sponsors paid what they deemed to be an “initial-year compensation 

rate” to FMOs for 2009 enrollments, whereas two of the five selected 

plan sponsors paid what they deemed to be a “renewal-year 

compensation rate.” The compensation regulations intend that 

Medicare beneficiaries be enrolled in MA plans that best meet their 

health care needs.43 If some plan sponsors paid an “initial-year 

compensation rate” for 2009 enrollments and others did not, FMOs had 

a financial incentive to encourage their sales agents to enroll Medicare 

beneficiaries in plans that paid more rather than those that met 

Medicare beneficiaries’ health care needs. 

41 CMS, Memorandum: Payment of Referral Fees, February 24, 2009. 

42 As previously stated, we did not determine whether these payments comply with CMS 

regulations about FMO payments or the antikickback statute. Therefore, it is possible for 

there to be additional issues associated with these payments that are not explored in this 

study. 

43 73 Fed. Reg. 54226, 54237 (Sept. 18, 2008). 

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FINDINGS 

The three selected plan sponsors’ compensation practices also may have 

the potential for plan sponsors to gain a competitive advantage through 

FMO compensation after 2009. If the three plan sponsors continue to 

pay FMOs an “initial-year compensation rate” for each year of a 6-year 

compensation cycle while the other two pay a “renewal-year 

compensation rate,” the former will continue to have a competitive 

advantage over the latter. Paying FMOs an “initial year compensation 

rate” for each year of a 6-year compensation cycle would significantly 

increase the total payment an FMO would receive. For example, if one 

of these plan sponsors paid its “initial year compensation rate” during 

the 5 renewal years, the plan sponsor would pay the FMO $1,050 over 

the course of 6 years as compared to a plan sponsor that paid its 

“renewal-year compensation rate” during the 5 renewal years for a total 

of $615 over the 6 years. 

Five of the six selected plan 

sponsors used sales agents who 

were unqualified under CMS 

regulations because they either 

had not passed the marketing test 

for 2009 or were not licensed at the time they took Medicare 

beneficiaries’ enrollment applications. Two of the five selected plan 

sponsors used sales agents who had not passed the marketing test and 

who were unlicensed. In our random sample of 30 sales agents per plan 

sponsor, there were 12 unqualified sales agents. While unqualified, 

these 12 sales agents took 44 enrollment applications from Medicare 

beneficiaries. Because we assessed only the qualifications of a sample of 

sales agents, the 12 sales agents represent the minimum number of 

unqualified sales agents from the 6 selected plan sponsors. 

Five of the six selected plan sponsors did not 

ensure that all sales agents were qualified 

under CMS’s regulations 

Four selected plan sponsors used sales agents who took enrollment 

applications from Medicare beneficiaries before passing the marketing 

test for 2009. These 4 plan sponsors had 10 sales agents submit 

38 enrollment applications for Medicare beneficiaries before passing the 

marketing test for 2009. On average, the 10 sales agents took 

enrollment applications 17 days before passing the marketing test for 

2009. These sales agents took enrollment applications as little as 1 day, 

and as many as 63 days, before passing the marketing test for 2009. 

In addition, three selected plan sponsors used unlicensed sales agents. 

These plans sponsors used at least three sampled sales agents who 

generated enrollments while unlicensed. One unlicensed sales agent 

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FINDINGS 

also took enrollment applications before passing the marketing test for 

2009. These unlicensed sales agents took six enrollment applications 

from Medicare beneficiaries. One of the sales agents took an enrollment 

application 1 year and 8 months after his license had expired. Another 

sales agent took four enrollment applications, on average, 25 days after 

his license had expired. The other sales agent took one enrollment 

application in a State for which we found no evidence that he had ever 

been licensed. 

In spite of their application review processes, four selected plan sponsors 

did not identify enrollment applications taken by unqualified sales agents 

Our selected plan sponsors all used an application review process to 

ensure that only qualified sales agents submitted enrollment 

applications. Under the application review process, plan sponsors 

review each enrollment application to determine that a sales agent has 

passed the annual marketing test and is licensed, among other things. 

In spite of their application review processes, four plan sponsors did not 

detect enrollment applications taken by unqualified sales agents. 

Four selected plan sponsors did not detect 37 out of 43 enrollment 

applications taken by unqualified sales agents in our sample. In these 

cases, plan sponsors paid the sales agents for the enrollments. The 

fifth plan sponsor detected the only enrollment application submitted by 

an unqualified sales agent to the plan. 

Two selected plan sponsors could not always identify the sales agent 

responsible for enrollment applications 

A plan sponsor’s application review processes cannot determine whether 

sales agents are unqualified under CMS regulations if the plan sponsor 

cannot identify the responsible sales agent. Two selected plan sponsors 

could not identify the sales agents responsible for more than 

6,000 enrollment applications out of approximately 112,000 enrollment 

applications submitted for the 2009 annual enrollment periods. 

One of these plan sponsors kept a record only of the responsible FMO 

when they could not identify the responsible sales agent. Thus, when 

we sampled sales agents, 6 of the 30 sales agents we selected were 

actually FMOs. Because the plan sponsor could not identify the sales 

agents for these enrollment applications, the plan sponsor could not 

verify during its application review process that the sales agent was 

tested or licensed. 

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FINDINGS 

None of the selected plan sponsors contacted Medicare beneficiaries 

enrolled by unqualified sales agents 

Plan sponsors detected at least seven enrollment applications taken by 

sales agents who either had not passed the marketing test for 2009 or 

were not State licensed. In these cases, plan sponsors reported that 

they did not pay the sales agents their compensation, but still processed 

the Medicare beneficiaries’ enrollments. 

Plan sponsors are required to have processes to confirm that Medicare 

beneficiaries are aware of their enrollment in MA plans and that they 

understand the MA plans’ rules.44 Plan sponsors have discretion as to 

the process or mechanism they put into place. For example, plan 

sponsors may call new members or conduct marketing audits to ensure 

that Medicare beneficiaries’ enrollments were based on complete and 

accurate information and that MA plan rules were completely 

explained. By calling to confirm whether Medicare beneficiaries’ 

enrollments were based on complete and accurate information, plan 

sponsors could correct any incorrect or misleading information given to 

Medicare beneficiaries by unqualified sales agents. 

No plan sponsor that we reviewed had a policy to contact Medicare 

beneficiaries enrolled by an unqualified sales agent to ensure that those 

Medicare beneficiaries were aware of their enrollment or that they 

understood the MA plan’s rules. During interviews, representatives 

from several selected plan sponsors stated that they must enroll an 

applicant unless the Medicare beneficiary is not eligible or the 

enrollment application is incomplete. They stated that they do not have 

enough time to follow up with Medicare beneficiaries whose enrollment 

applications had been taken by unqualified sales agents because they 

must submit the enrollment applications to CMS within 7 days of 

receipt.45

During the 2009 annual 

enrollment periods, which began 

after CMS implemented the sales 

agent marketing regulations, 

approximately 13,000 sales agent 

marketing complaints were reported to CMS. Similarly, approximately 

The number and topics of sales agent marketing 

complaints remained unchanged after 

implementation of sales agent marketing 

regulations 

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19

44 42 CFR § 422.2272(b). 

45 MMCM, ch. 2, § 40.3. 

P LANS
 

FINDINGS 

13,000 sales agent marketing complaints were reported to CMS during 

the 2008 annual enrollment periods, before implementation of the sales 

agent marketing regulations. For both years’ annual enrollment 

periods, sales agent marketing complaints represented less than 

10 percent of all complaints reported to CMS. 

For both 2008 and 2009, sales agent marketing complaints referenced the 

same three broad topics 

Sales agent marketing complaints from the Complaint Tracking 

Module’s “marketing misrepresentation” subcategory for both 2008 and 

2009 referenced one or more of the same three broad topics: 

(1) providing misleading information about plan benefits, (2) enrolling 

Medicare beneficiaries without their consent, and (3) engaging in 

aggressive sales tactics. Complaints reported to the Departments of 

Insurance, MEDICs, and the six selected plan sponsors for the 

2009 annual enrollment period also referenced these same three broad 

topics. 

Misleading information about plan benefits. For both the 2008 and 

2009 annual enrollment periods, the majority of sales agent marketing 

complaints reported to CMS referenced sales agents providing 

misleading information. A typical complaint regarding a sales agent 

providing misleading information alleged that the sales agent told the 

Medicare beneficiary that an MA plan supplemented traditional 

Medicare or otherwise misled the Medicare beneficiary about an MA 

plan’s benefits. For example, one complaint in the Complaint Tracking 

Module alleged that a sales agent was to enroll a Medicare beneficiary 

in a plan that would supplement her health care coverage. The sales 

agent stated that the new plan would not include prescription drug 

coverage because the Medicare beneficiary already had prescription 

drug coverage. After enrolling, the Medicare beneficiary learned that 

the MA plan supplanted rather than supplemented her previous health 

care and prescription drug coverage and did not cover the prescription 

drugs she was taking. 

Although the three broad topics did not change between 2008 and 2009, 

the proportion of complaints to CMS alleging sales agents provided 

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FINDINGS 

misleading information decreased from 85 percent to 64 percent. This 

difference is statistically significant at the 95-percent confidence level.46 

Enrolled without consent. Typically, complaints alleging that Medicare 

beneficiaries were enrolled without their consent stated that the 

Medicare beneficiaries were unaware of how they had been enrolled. 

For example, one complaint in the Complaint Tracking Module stated 

that a Medicare beneficiary asked the sales agent to return with more 

information on the MA plan before submitting his enrollment 

application. The sales agent did not return but the Medicare 

beneficiary was enrolled in the MA plan. 

Aggressive sales tactics. Generally, complaints of sales agents using 

aggressive sales tactics alleged that sales agents inappropriately and 

inaccurately discussed the Medicare beneficiaries’ current plans or 

contacted Medicare beneficiaries at their residences. For example, one 

complaint in the Complaint Tracking Module alleged that a sales agent 

called the Medicare beneficiary claiming to be from Medicare. The sales 

agent stated that the Medicare beneficiary’s current plan would no 

longer provide Medicare coverage and that he would need to enroll in a 

new plan. The Medicare beneficiary enrolled but called the 

1-800-MEDICARE hotline to disenroll upon learning that this 

information was false. 

46 There was no statistically significant change between the 2008 and 2009 annual 

enrollment periods for complaints of sales agents enrolling Medicare beneficiaries without 

their consent and using aggressive sales tactics. Because Medicare beneficiaries could 

reference one or more of the three broad topics in each complaint, a decrease in the 

proportion of complaints referencing misleading information is independent of any change 

in the proportion of complaints referencing the other two topics. 

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 RECOMMENDATIONS 

We reviewed six plan sponsors to determine whether MA plan sponsors 

complied with regulations concerning the compensation and 

qualifications of sales agents during the first plan year after these 

regulations were implemented. Each of the six selected plan sponsors 

did not follow at least one of the marketing regulations concerning sales 

agent compensation and qualifications. Five selected plan sponsors’ 

compensation practices resulted in inappropriate financial incentives for 

sales agents or may have created inappropriate financial incentives for 

FMOs to market their MA plans. In addition, five of the six selected 

plan sponsors did not ensure that all sales agents were qualified. 

Finally, the number and topics of complaints regarding sales agents 

reported to CMS did not change after CMS implemented the sales agent 

marketing regulations. 

Although, in some cases, the instances of plan sponsors’ noncompliance 

may not have involved large numbers of sales agents or Medicare 

beneficiaries, in other cases the vulnerabilities were systemic. In 

particular, some of the compensation practices were standard operating 

procedures for plan sponsors, although they did not follow CMS’s 

compensation regulations. Any instances of noncompliance with sales 

agent marketing regulations represent gaps in plan sponsor’s oversight 

and a failure to fully implement the sales agent regulations. 

While this study was limited to six plan sponsors, compliance with sales 

agent marketing regulations is a larger concern. During the course of 

CMS’s oversight activities, it identified 84 plan sponsors, including 5 of 

the 6 plan sponsors in this review, as either having deficiencies in their 

implementation of sales agent marketing regulations or noncompliance 

with a sales agent marketing regulation. 

In light of these concerns, we recommend that CMS: 

Take appropriate actions regarding the specific instances of noncompliance 

documented in this report 

Each of the six selected plan sponsors made payments in excess of their 

CMS-approved compensation schedules or enrolled beneficiaries 

through unqualified sales agents. We have forwarded the specific 

instances of noncompliance documented in this report to CMS for 

followup. 

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RECOMMENDATIONS 

Audit plan sponsors and include an assessment of the vulnerabilities 

identified in this report 

In addition to following up on specific instances of noncompliance 

identified in this report, CMS should oversee plan sponsors’ compliance 

with sales agent marketing regulations through onsite compliance 

audits. CMS staff conducted a compliance audit of one plan sponsor 

during the summer of 2009 and indicated that they plan to conduct 

more audits to ensure compliance with sales agent marketing 

regulations. We encourage CMS to expand its oversight efforts through 

compliance audits. We suggest that CMS incorporate an assessment of 

the specific vulnerabilities identified in this report into its audit 

protocol, such as the inappropriate payment of administrative fees and 

finders’ fees. In addition, we encourage CMS to consider using 

complaint rates from the Complaint Tracking Module to focus audits or 

select plan sponsors for audits in future years. 

CMS staff also indicated that as part of these audits, CMS will assess 

plan sponsors’ oversight of sales agents. Our review indicates that plan 

sponsors are not always able to identify enrollment applications from 

unqualified sales agents. For this reason, we encourage CMS to review 

the systems plan sponsors have in place to review enrollment 

applications from sales agents. 

Issue additional regulations concerning FMO payments 

CMS regulations lack specificity concerning payments to FMOs. As a 

result, plan sponsors may have created financial incentives that could 

lead FMOs to encourage sales agents to enroll Medicare beneficiaries in 

plans that do not meet their health care needs. Because FMOs, like 

sales agents, may influence Medicare beneficiaries’ enrollment in MA 

plans, CMS should issue additional regulations more clearly defining 

how and how much FMOs should be paid for their services. In the 

meantime, CMS should issue guidance to plan sponsors clarifying 

appropriate payments to FMOs. 

Issue regulations requiring plan sponsors to contact all new enrollees to 

ensure that they understand plan rules 

CMS regulations require sales agents to pass a marketing test on 

Medicare regulations annually and be State licensed. Requiring sales 

agents to pass the annual marketing test and to be State licensed 

supports an environment where sales agents have the knowledge 

necessary to help Medicare beneficiaries enroll in MA plans that meet 

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RECOMMENDATIONS 

their health care needs. Yet, no plan sponsor had a policy to contact 

Medicare beneficiaries enrolled through unqualified sales agents. 

In August 2009, CMS issued revised marketing guidance instructing 

plan sponsors to contact all new enrollees to ensure that Medicare 

beneficiaries understand plan rules. To protect Medicare beneficiaries 

and ensure that they understand their new plans’ rules, we recommend 

that CMS codify this guidance in regulations. 

In addition, if a Medicare beneficiary’s enrollment is discovered to have 

been inappropriate, the plan sponsor should also be required to alert 

CMS. If necessary, CMS should grant a special enrollment period to 

Medicare beneficiaries enrolled in plans that do not best meet their 

health care needs. 

Issue guidance clarifying that plan sponsors should terminate unlicensed 

sales agents immediately upon discovery 

Sales agent marketing regulations stipulate that plan sponsors must 

employ licensed sales agents. Yet, we found instances in which 

unlicensed sales agents enrolled Medicare beneficiaries in plans offered 

by three of the six plan sponsors. CMS should issue guidance clarifying 

that plan sponsors should immediately terminate any sales agent found 

to be unlicensed while conducting marketing activities. In addition, 

CMS should collect reports of terminated sales agents during its audits 

of plan sponsors. Pursuant to its Memorandums of Understanding with 

State Departments of Insurance, CMS should then notify the applicable 

States of instances in which plan sponsors terminated unlicensed sales 

agents. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with our first recommendation. CMS concurred in part 

with the second recommendation, stating that it would conduct audits 

or our oversight activities of plan sponsors posing the greatest risk to 

Medicare beneficiaries. We agree with this approach and we have 

amended the wording of the recommendation in the report. CMS did 

not concur with our final three recommendations. 

Specifically, CMS did not concur with our recommendation for more 

specific regulations concerning FMO compensation payments. CMS 

stated that regulations at 42 CFR § 422.2274(a)(1)(iv) apply to FMO 

payments and therefore it is unnecessary to issue regulations 

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RECOMMENDATIONS 

concerning FMO payments. However, we found that the lack of 

specificity in the compensation regulations allowed plan sponsors to 

create financial incentives that may lead FMOs to encourage sales 

agents to enroll Medicare beneficiaries in plans that pay more. We 

continue to think that CMS should clearly define how and how much 

FMOs should be paid for their services. However, we have broadened 

our original recommendation to allow CMS latitude in designing the 

best approach in regulating FMO payments. 

CMS also did not concur with our recommendation to issue regulations 

requiring plan sponsors to contact all new enrollees to ensure that they 

understand plan rules. CMS responded that new regulations are 

unnecessary because CMS has already used existing regulations as the 

basis for new guidance which requires outbound enrollment verification 

calls to make sure that newly enrolled Medicare beneficiaries 

understand plan rules. If CMS guidance is sufficient to ensure that 

plan sponsors conduct outbound enrollment verification calls, we agree 

that it has met the intent of our recommendation. 

However, we are concerned that guidance may not be sufficient to hold 

plan sponsors accountable. CMS should reconsider formalizing the 

guidance as regulations after monitoring plan sponsors’ implementation 

of outbound enrollment verification calls. If CMS determines that 

stronger oversight authority is necessary to ensure that outbound 

enrollment verification calls are occurring, it should formalize the 

guidance in regulations. 

Finally, CMS did not concur with our recommendation to issue 

regulations requiring plan sponsors to report unlicensed sales agents to 

State Departments of Insurance. CMS responded that it does not have 

the authority to require that plan sponsors report unlicensed sales 

agents to State Departments of Insurance. CMS stated that the statute 

gives CMS the authority to require plan sponsors to report only 

terminations of licensed sales agents to States. We agree that the 

statute mentions plan sponsors only reporting terminated sales agents. 

However, we do not think that the statute limits CMS’s authority to 

require the reporting of all terminated sales agents, both licensed and 

unlicensed. 

In light of CMS’s comments, we have modified our original 

recommendation to reflect an alternative approach for ensuring that 

plan sponsors report unlicensed sales agents to State Departments of 

Insurance. We now recommend that CMS issue guidance requiring 

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RECOMMENDATIONS 

plan sponsors to terminate all unlicensed sales agents immediately 

upon discovery. During its audits of plan sponsors, CMS should collect 

reports of terminated sales agents and then make the names of 

terminated unlicensed sales agents available to the appropriate States 

pursuant to its Memorandums of Understanding with State 

Departments of Insurance. 

For the full text of CMS’s comments, see Appendix D. 

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 APPENDIX ~ A

Medicare Improvements for Patients and Providers Act of 2008 

Provisions Concerning Sales Agents 

Table A-1: MIPPA* Provisions Concerning Sales Agent Marketing 

MIPPA Provisions Associated Centers for Medicare & Medicaid Services** Guidance for Implementing the MIPPA 

Provisions 

Addressed in 

2006 CMS 

Guidance 

Compensation of sales 

agents 

Plan sponsors should pay sales agents an initial-year compensation rate for a sale and a 

renewal-year compensation rate for 5 subsequent years of enrollment. Compensation includes 

payments such as commissions, bonuses, gifts, prizes, awards, and finders’ fees. 

x 

Annual training and testing of 

sales agents 

Plan sponsors must ensure that sales agents are trained and tested annually on Medicare rules 

and on plan details. Sales agents must receive a score of at least 85 percent after 

September 18, 2008. 

Use of State-licensed sales 

agents 

Plan sponsors must use State-licensed sales agents. Plan sponsors also must comply with 

State laws requiring plans to give States information about sales agents marketing their 

Medicare Advantage (MA) plans. 

x 

Reporting terminated sales 

agents to States 

Effective January 1, 2009, plan sponsors must report terminated sales agents, and the reasons 

for termination, to the States in which the sales agents were contracted to sell insurance. x 

Unsolicited direct contacts 

with Medicare beneficiaries 

Sales agents may not conduct certain types of solicitation, such as initiating marketing activities 

with potential plan enrollees; calls to former enrollees; and approaching Medicare beneficiaries 

in common areas, unless requested. 

x 

Scope of appointment 

agreements with Medicare 

beneficiaries 

Sales agents must document, either in writing or recorded by phone, the scope of their 

appointments with Medicare beneficiaries prior to the appointments. 

Cross-selling 

non-health-care-related 

products 

Sales agents may not market any non-health-care-related products during an MA sales activity. 

Sales and marketing in health 

care settings and educational 

events 

Sales agents may not conduct sales activities in health care settings except in common areas. 

Sales agents may not conduct sales activities, such as the distribution of marketing materials or 

plan enrollment applications, at educational events. 

x 

Nominal value of gifts to 

Medicare beneficiaries 

The nominal value of gifts is defined as an item worth $15 or less, based on the retail purchase 

price of the item. x 

Providing meals to Medicare 

beneficiaries 

Sales agents may not provide or subsidize meals. Sales agents are allowed to provide light 

snacks and refreshments. 

Sources: Office of Inspector General analysis of: (1) MIPPA; (2) CMS marketing guidance issued on September 15, 2008; and (3) Medicare Marketing Guidelines for 

MA Plans, Medicare Advantage Prescription Drug Plans, Prescription Drug Plans, and 1876 Cost Plans revised on July 25, 2006. 

 *Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). 

 **Centers for Medicare & Medicaid Services (CMS). 

 

 

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 APPENDIX ~ B

DETAILED METHODOLOGY 

Examining Sales Agents’ Compensation and Qualifications 

To select a purposive sample of plan sponsors, we first created a 

sampling frame targeting Medicare Advantage (MA) plan sponsors that 

used sales agents to market to Medicare beneficiaries. First, we 

identified all plan sponsors offering plans for 2009 using 2009 plan-level 

enrollment data from the Centers for Medicare & Medicaid Services 

(CMS). Next, we identified those plan sponsors that offered MA plans. 

From these plan sponsors, we selected those that CMS identified as 

using sales agents. We then selected only plan sponsors with more than 

100 enrollees. 

Finally, we selected plan sponsors that received at least one complaint 

in the Complaint Tracking Module “marketing” category between 

October 1, 2008, and February 28, 2009. We selected plan sponsors 

with high rates of marketing complaints to test whether they may have 

also had underlying marketing issues. We identified 73 plan sponsors 

for our sampling frame. Table B-1 provides the number of plan 

sponsors that met each step of our sampling frame criteria. 

Table B-1: Sampling Frame of MA Plan Sponsors for 

2009 

Sampling Criteria for Plan Sponsors Number of Plan 

Sponsors 

Plan sponsor for Medicare 281 

Offered MA plans 266 

Marketed through sales agents 109 

Had more than 100 enrollees 106 

Had at least one complaint in Complaint Tracking 

Module 73

Source: Office of Inspector General (OIG) analysis of CMS plan-level enrollment data 

and Complaint Tracking Module data, 2009. 

Purposive sample of plan sponsors. For each of the 73 plan sponsors, we 

calculated the complaint rate using complaints in the Complaint 

Tracking Module’s “marketing” category between October 1, 2008, and 

February 28, 2009. We used the broader “marketing” category because 

we found sales agent marketing complaints in the “marketing” category 

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A PPENDIX ~ B 

and not only in the “marketing misrepresentation” subcategory. We 

found 6,498 marketing complaints in the “marketing” category during 

this period, only some of which identified plans or plan sponsors. Of 

these complaints, 2,781 were associated with the 73 plan sponsors from 

our sampling frame. Using the 2,781 complaints, we then calculated 

the complaint rates per 1,000 Medicare enrollees for the 73 plan 

sponsors within our sampling frame. 

To ensure the representation of different-sized plan sponsors in our 

selection, we stratified the 73 plan sponsors by small, medium, and 

large enrollment. We determined the total enrollment for each plan 

sponsor using 2009 CMS plan-level enrollment data available on CMS’s 

Web site. From each of the three strata, we selected the plan sponsors 

with the highest complaint rates. We selected one plan sponsor from a 

stratum of plan sponsors with small enrollment, two from a stratum 

with medium enrollment, and three from a stratum with large 

enrollment.47 Table B-2 provides the number of plan sponsors selected 

for each of the three strata as well as enrollment ranges. 

Table B-2: Strata of Plan Sponsors 

Plan Sponsor Size 

Number of 

Selected Plan 

Sponsors per 

Stratum 

Overall 

Number of Plan 

Sponsors per 

Stratum 

Range of 

Enrollment per 

Stratum 

Small enrollment 1 24 1,500–15,999 

Medium enrollment 2 25 16,000–63,999 

Large enrollment 3 24 64,000–6,000,000 

Source: OIG analysis of CMS plan-level enrollment data and Complaint Tracking Module data, 2009. 

Random sample of sales agents. For each selected plan sponsor, we 

requested a list of sales agents who enrolled at least one Medicare 

47 We excluded the two plan sponsors with the highest complaint rates in the stratum of 

small plan sponsors. The plan sponsor with the highest complaint rate in this stratum did 

not receive applications for enrollment from any of its sales agents for the 2009 plan year 

enrollment period. The second plan sponsor was owned by another plan sponsor in our 

sample. In addition, we excluded one plan sponsor with the second highest complaint rate 

from the large enrollment strata because it was under Federal investigation at the time of 

our data collection. 

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APPENDIX ~ B 

beneficiary in an MA plan for 2009. From this list, we selected a 

random sample of 30 sales agents for that plan sponsor. 

Two of the selected plan sponsors could identify only the field marketing 

organization (FMO), rather than the sales agent, in some instances. 

When we requested a list of sales agents who enrolled at least one 

Medicare beneficiary, the lists included FMOs as well as individual 

sales agents. As a result, for 1 selected plan sponsor, our random 

sample resulted in a selection of 6 FMOs and 24 sales agents. We 

identified 14 sales agents for the 6 FMOs from enrollment applications 

and obtained compensation, testing, and licensure data for the 14 sales 

agents. This resulted in a sample of 38 sales agents for this plan 

sponsor. 

Data collection. To gather data, we conducted site visits to each selected 

plan sponsor. From each selected plan sponsor, we requested the 

following information 48 or 72 hours before the site visit: (1) copies of 

all 2009 MA enrollment applications generated by the sampled sales 

agents; (2) documentation of payments made to the sampled sales 

agents and to other individuals or entities associated with enrollments 

generated by the sampled sales agents (i.e., commissions, bonuses, gifts, 

prizes, awards, and finders’ fees) from January 1, 2009, through our site 

visits in April 2009; and (3) testing dates and test scores for the sampled 

sales agents for 2009. 

Data verification. During the site visits, we verified the accuracy and 

completeness of all requested data. To validate the data for each of the 

sampled sales agents, we compared the data the plan sponsors provided 

us to those data in their data systems. 

We were able to validate the compensation data we collected for five of 

the six selected plan sponsors. For one plan sponsor, compensation data 

were unverifiable because its systems for collecting compensation data 

had no search function across the various systems that could link all 

payments for a particular enrollment application. Our analysis for this 

plan sponsor is based on the unverified data provided by the plan 

sponsor. 

Structured interviews. In addition to collecting and verifying data, we 

conducted structured interviews with each of the six selected plan 

sponsors. We asked plan sponsor representatives about their oversight 

activities concerning sales agent marketing. We also asked how they 

had implemented the sales agent marketing provisions detailed in the 

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APPENDIX ~ B 

Medicare Improvements for Patients and Providers Act of 2008. We 

collected documentation, such as policies, procedures, and 

communications with sales agents, to verify their statements. 

Medicare Beneficiary Complaints Regarding Sales Agent Marketing 

The Complaint Tracking Module is a central repository of complaints 

related to MA and prescription drug coverage received in the CMS 

regional office or central office or through 1-800-MEDICARE. For the 

2008 and 2009 annual enrollment periods, we analyzed complaints 

concerning MA plan sponsors that CMS received from October through 

April of the next year. We chose these periods because they capture 

complaints when marketing for the annual enrollment periods begins in 

October through 1 month after the marketing period ends in March. 

Our collection period extends 1 month beyond the end of the annual 

enrollment periods because Medicare beneficiaries may not realize that 

they are enrolled in inappropriate plans until after they have attempted 

to access benefits. According to our analysis of Complaint Tracking 

Module data since 2005, the majority of marketing complaints were 

reported to CMS between October and April of the next year. 

Number of sales agent marketing complaints. To identify the number of 

sales agents marketing complaints to CMS for the 2008 and 2009 annual 

enrollment periods, we selected 2 stratified random samples of 

400 complaint records from the Complaint Tracking Module. We stratified 

the complaint records by those that are categorized as “marketing 

misrepresentation” and those that are not. We selected 100 complaint 

records from the “marketing misrepresentation” stratum and 

300 complaints from the other stratum for each period. We sampled 

complaints from two strata because CMS staff expressed concerns that not 

all sales agent complaints were correctly categorized. Our sampling 

strategy enabled us to estimate the percentage of sales agent complaints 

for each time period with expected absolute precision of +/- 6 percent at the 

95-percent confidence level. 

To verify whether a complaint in the Complaint Tracking Module was a 

sales agent marketing complaint, we reviewed all sampled complaints. 

If a complaint was placed in the “marketing misrepresentation” 

subcategory, we considered it a sales agent marketing complaint as long 

as there was not information to the contrary. If the complaint was not 

categorized as “marketing misrepresentation” by CMS, we considered it 

a sales agent marketing complaint if the complaint summary included a 

direct or indirect reference to certain keywords and there was no 

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APPENDIX B 

contradictory evidence. The keywords we used included "agent", 

"broker", "mislead", or "misrepresent". We had three separate reviewers 

confirm and agree that a complaint should be categorized as sales agent 

marketing. Some complaints lacked enough detail to understand the 

situation being reported. When this was the case, we relied on CMS's 

classification of each complaint. Table B-3 provides for each stratum 

the overall number of complaints in the Complaint Tracking Module, 

the number of complaints sampled, and the number of verified sales 

agent complaints. 

Table B-3: Strata of Complaints 

Year Complaint Tracking Module 

Subcategory 

Overall 

Number of 

Complaints 

Number of 

Sampled 

Complaints 

Number of 

Verified 

Complaints 

2008 Marketing misrepresentation 7,219 100 85 

Other 183,226 300 11 

2009 Marketing misrepresentation 11,146 100 89 

Other 152,193 300 6 

Source: OIG analysis of CMS plan-level enrollment data and Complaint Tracking Module data, 2009. 

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Nature of sales agent marketing complaints. To determine the nature of 

complaints, we read each verified complaint in the "marketing 

misrepresentation" category for common topics. We then organized the 

common topics into broader themes that were apparent in their 

complaint descriptions. We also read complaints related to each 

broader theme to determine what these complaints typically alleged. 

Finally, we selected examples of complaints to provide insight into the 

details of sales agent marketing. We compared the proportion of 

complaints for each theme between the 2008 and 2009 annual 

enrollment periods. We were able to produce yearly estimates of 

proportions of complaints for the different complaint types with absolute 

precisions of +/- 6 percent at the 95-percent confidence level. 

We also collected complaint data from Medicare Drug Integrity 

Contractors (MEDIC), the Departments ofInsurance, and the 

six selected plan sponsors to understand how the nature of complaints 

they received compared to those CMS received. From the two MEDICs, 

we requested complaints related to sales agents received between 
 

APPENDIX ~ B 

October 1, 2008, and March 31, 2009. We chose these periods to match 

the periods from our analysis of Complaint Tracking Module complaints 

as closely as possible while remaining timely with our analysis. To 

avoid duplication of complaints that MEDICs entered in the Complaint 

Tracking Module, we requested only complaints that were not entered 

in the Complaint Tracking Module. 

In addition to collecting data from MEDICs, we surveyed the 

Departments of Insurance for each State and U.S. territory to determine 

the types of sales agents marketing complaints they received. 

Fifty-one of the fifty-six Departments of Insurance surveyed responded. 

We had identified complaint themes from our Complaint Tracking 

Module analysis and asked whether the Departments of Insurance had 

received these types of complaints. We also gave the Departments of 

Insurance the opportunity to comment on other types of complaints they 

had received. 

Finally, we requested a record of all complaints received by the selected 

plan sponsors. We requested complaints related to sales agents 

received between October 1, 2008, and February 28, 2009, shortly before 

we contacted the plan sponsors. We read each complaint to determine 

whether it concerned sales agent marketing and common topics. We 

then organized the common topics into broader themes. 

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 APPENDIX~C 

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Estimates and Confidence Intervals for Samples From the Centers 

for Medicare & Medicaid Services’ Complaint Tracking Module 

Table C-1: Estimates of the Number of Sales Agent Marketing Complaints Reported 

in the Complaint Tracking Module for the 2008 and 2009 Annual Enrollment Periods 

Enrollment Period Sample Size 

Number of Projected Sales 

Agent Marketing 

Complaints 

95-Percent 

Confidence Interval 

2008 400 12,854 8,910–16,799 

2009 400 12,964 10,448–15,479 

Source: Office of Inspector General (OIG) analysis of Complaint Tracking Module, 2009. 

Table C-2: Types of Sales Agent Marketing Complaints Categorized as “Marketing Misrepresentation” for 

the 2008 and 2009 Annual Enrollment Periods 

Types of Sales Agent 

Marketing Complaints 

Sample Size 

for 2008 

Enrollment 

Periods* 

Sample Size 

for 2009 

Enrollment 

Periods* 

Point 

Estimate for 

2008 

Enrollment 

Periods 

 95-Percent 

Confidence 

Interval for 2008 

Enrollment 

Periods 

Point 

Estimate for 

2009 

Enrollment 

Periods 

 95-Percent 

Confidence 

Interval for 

2009 

Enrollment 

Periods 

Providing misleading information 85 89 84.7% 75.4%–90.9% 64.0% 53.5%–73.4% 

Enrolling without consent 85 89 14.1% 8.2%–23.3% 24.7% 16.8%–34.8% 

Engaging in aggressive tactics 85 89 14.1% 8.2%–23.3% 21.3% 14.0%–31.1% 

Source: OIG analysis of Complaint Tracking Module, 2009. 

*Sample sizes are based on the number of verified sales agent marketing complaints within the “marketing misrepresentation” strata only. 

Table C-3: Estimates for Comparisons of Types of Sales Agent Marketing Complaints 

Categorized as “Marketing Misrepresentation” for the 2008 and 2009 Annual 

Enrollment Periods 

Types of Sales Agent 

Marketing Complaints 

Sample Size 

for 2008 and 

2009 

Enrollment 

Periods 

Point Estimate For 

Difference Between 

2008 and 2009 

Enrollment Periods 

 95-Percent 

Confidence 

Interval 

P-Value 

Providing misleading 

information 174 20.7% 8.0%–33.3% .0015* 

Enrolling without consent 174 10.6% -1.1%–22.3% .0752 

Engaging in aggressive tactics 174 7.2% -4.1%–18.6% .2103 

Source: OIG analysis of Complaint Tracking Module, 2009. 

*Statistically significant at the 95-percent confidence level. 
A P PEN D x D 

Agency Comments 

DEPARTMENT OF HEALTH & HUMAN SERVICES Canters lor Medicare & Medicaid Services 

RECf.\\1 F.8 Administrator 

20090EC '8 PM 3: 18 Washington. DC 20201 

OI'l'iCi;G~~t\~ :~)~C T C 

DATE: DEC 1 7 2009

TO: 	 Daniel R. Levinson 

Inspector General 

.FROM: 	 Charlene Frizzera 

Acting Administrator 

SUBJECT: 	 Office ofInspector General (OIG) Draft Report: "Beneficiaries Remain 

Vulnerable to Sales Agents' Marketing of Medicare Advantage Plans," (OEI-05­

09-00070) 

Thank you for the opportunity to comment on the OIG Report: "Beneficiaries Remain 

Vulnerable to Sales Agents' Marketing of Medicare Advantage Plans." The Centers for 

Medicare & Medicaid Services (CMS) recognizes the importance of taking the appropriate 

compliance and enforcement actions against Medicare Advantage (MA) sales agents who 

inappropriately market to Medicare beneficiaries. 

The CMS has continued to take steps to ensure that beneficiaries are protected from deceptive 

and inappropriate actions taken by sales agents and brokers who sell MA plans. CMS takes 

immediate action when complaints of inappropriate marketing are reported. We have effectuated 

a comprehensive marketing surveillance initiative designed to detect and respond to incidents of 

inappropriate marketing. This includes secret shopping ofpublic sales events and individual 

sales appointments conducted by MA organizations, review of marketing advertisements for 

inappropriate content and other surveillance activities. CMS takes immediate action when 

marketing violations are uncovered, including issuance of compliance letters requiring MA 

organizations and Prescription Drug Plan spOLL~ors to implement corrective measures, which has 

the direct impact of protecting Medicare beneficiaries. 

In llddition, eMS issued regulations in l&te 2008 to establish limits on commission rates paid to 

agents seIling both MA and Prescription Drug plans in order to prevent beneficiaries moving 

inappropriately between plans. Earlier this year, we issued additional guidance to strengthen 

those rules that established fair market value limits for initial and renewal compensation and 

provided further guidance on payment ofreferral fees to ensure that compensation amounts paid 

to agents do not exceed the fair market value limits identifiep by CMS. Given the new MIPP A 

marketing requirements were released late in the contract year CMS expeets to see 

improvements as organizations implement additional internal controls and improve oversight to 

ensure compliance with these requirements. 

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APPENDIX ~ D 

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APPENDIX ~ D 

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 ACKNOWLEDGMENTS 

This report was prepared under the direction of Ann Maxwell, Regional 

Inspector General for Evaluation and Inspections in the Chicago 

regional office, and Thomas Komaniecki, Deputy Regional Inspector 

General. 

Mark Stiglitz served as the team leader for this study. Other principal 

Office of Evaluation and Inspections staff from the Chicago regional 

office who contributed include Mara Werner, Margarita Rodriguez, 

Erica Fleischer, Brooke Isham, Melissa Baker, Laura Kordish, and Beth 

McDowell; central office staff who contributed include Rita Wurm and 

Kevin Farber. 

 
Office of Inspector General 

http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452,

as amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides all auditing services for HHS, either by

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors 

in carrying out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations. These assessments help reduce waste, 

abuse, and mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on 

significant issues. Specifically, these evaluations focus on preventing fraud, waste, or 

abuse and promoting economy, efficiency, and effectiveness in departmental programs. 

To promote impact, the reports also present practical recommendations for improving 

program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 

and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 

convictions, administrative sanctions, or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support in OIG's internal operations. OCIG imposes program exclusions and civil 

monetary penalties on health care providers and litigates those actions within HHS. 

OCIG also represents OIG in the global settlement of cases arising under the Civil False 

Claims Act, develops and monitors corporate integrity agreements, develops compliance 

program guidances, renders advisory opinions on OIG sanctions to the health care 

community, and issues fraud alerts and other industry guidance.