U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

38–618 PDF 2007

S. HRG. 110–207

MEDICARE ADVANTAGE MARKETING AND SALES:

WHO HAS THE ADVANTAGE?

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

WASHINGTON, DC

MAY 16, 2007

Serial No. 110–8

Printed for the use of the Special Committee on Aging

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 

SPECIAL COMMITTEE ON AGING 

HERB KOHL, Wisconsin, Chairman 

RON WYDEN, Oregon 

BLANCHE L. LINCOLN, Arkansas 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

BILL NELSON, Florida 

HILLARY RODHAM CLINTON, New York 

KEN SALAZAR, Colorado 

ROBERT P. CASEY, Jr., Pennsylvania 

CLAIRE McCASKILL, Missouri 

SHELDON WHITEHOUSE, Rhode Island 

GORDON H. SMITH, Oregon 

RICHARD SHELBY, Alabama 

SUSAN COLLINS, Maine 

MEL MARTINEZ, Florida 

LARRY E. CRAIG, Idaho 

ELIZABETH DOLE, North Carolina 

NORM COLEMAN, Minnesota 

DAVID VITTER, Louisiana 

BOB CORKER, Tennessee 

ARLEN SPECTER, Pennsylvania 

DEB WHITMAN, Staff Director 

CATHERINE FINLEY, Ranking Member Staff Director 

(II) 

C O N T E N T S 

Page 

Opening Statement of Senator Herb Kohl ............................................................. 1

PANEL I 

Abby L. Block, director, Center for Beneficiary Choices, Centers for Medicare 

and Medicaid Services (CMS), Baltimore, MD .................................................. 3

PANEL II 

Sean Dilweg, Wisconsin Office of the Commissioner of Insurance, Madison, 

WI .......................................................................................................................... 14

Kim Holland, Oklahoma Insurance Department, Oklahoma City, OK ............... 43

Sherry Mowell, Georgia Office of the Commissioner of Insurance, Atlanta, 

GA .......................................................................................................................... 55

Albert Sochor, vice president and director of Marketing, Old Surety Life 

Insurance, Oklahoma City, OK ........................................................................... 60

PANEL III 

Karen Ignagni, president and CEO, America’s Health Insurance Plans, Washington, DC ............................................................................................................. 70

Heidi Margulis, senior vice president, Humana Inc., Louisville, KY .................. 86

Peter J. Clarkson, senior vice president, Distributions Operations, 

UnitedHealth Group, Minnetonka, MN ............................................................. 108

Gary Bailey, vice president, Medicare Operational Performance, WellCare, 

Tampa, FL ............................................................................................................ 116

APPENDIX 

Prepared Statement of Senator Robert P. Casey .................................................. 143

Responses to Senator Kohl’s Questions from Abby Block .................................... 143

Responses to Senator Smith’s Questions from Abby Block .................................. 144

Responses to Senator Lincoln’s Questions from Abby Block ................................ 149

Responses to Senator Smith’s Questions from Commissioner Dilweg ................ 157

Responses to Senator Lincoln’s Questions from Commissioner Dilweg .............. 159

Response to Senator Kohl’s Question from Commissioner Holland .................... 160

Responses to Senator Smith’s Questions from Commissioner Holland ............... 160

Responses to Senator Smith’s Questions from Sherry Mowell ............................ 161

Responses to Senator Smith’s Questions from Albert Sochor .............................. 162

Responses to Senator Smith’s Questions from Karen Ignagni ............................ 163

Responses to Senator Smith’s Questions from Heidi Margulis ........................... 167

Responses to Senator Lincoln’s Questions from Heidi Margulis ......................... 174

Responses to Senator Smith’s Questions from Peter Clarkson ............................ 176

Responses to Senator Smith’s Questions from Gary Bailey ................................. 188

Additional information submitted by the Oklahoma Insurance Department ..... 206

Statement submitted by Janet Stokes Trautwein, executive vice president 

and CEO, National Association of Health Underwriters .................................. 260

National Insurance Producer Registry User’s Guide ............................................ 263

(III) 

(1)

MEDICARE ADVANTAGE MARKETING AND 

SALES: WHO HAS THE ADVANTAGE? 

WEDNESDAY, MAY 16, 2007 

U.S. SENATE, 

SPECIAL COMMITTEE ON AGING, 

Washington, DC. 

The Committee met, pursuant to notice, at 11:49 a.m., in room 

SD–106, Dirksen Senate Office Building, Hon. Herb Kohl (chairman of the committee) presiding. 

Present: Senators Kohl, Wyden, Whitehouse, and Smith. 

OPENING STATEMENT OF SENATOR HERB KOHL, CHAIRMAN 

The CHAIRMAN. I thank you all for being here today, and I apologize for having kept you waiting an hour. As you know, there were 

a series of votes on the floor of the Senate, which delayed the beginning of this hearing. 

Nevertheless, we would like to welcome you all here today. We 

particularly want to thank our witnesses for taking time out of 

their busy schedules in order to be with us. 

Today, we will examine the sales and marketing practices involving Medicare Advantage plans. I want to make it clear at the outset that we are not taking any position on the benefit or relative 

cost of Medicare Advantage. These plans may be appropriate and 

beneficial for many individuals under the right conditions. 

Rather, this focus and our concern today is with the numerous 

and widespread complaints involving the sale and marketing of 

Medicare Advantage plans, which are being aggressively promoted 

all around our country. 

For those of you not familiar with Medicare Advantage plans, 

they are private-plan options ranging from managed care to private 

fee-for-service plans, which are offered to Medicare beneficiaries as 

an alternative to traditional Medicare. 

While they have been in existence for some time, Medicare Advantage plans are now the fastest growing segment of the Medicare 

world and are an increasingly profitable enterprise for many plan 

sponsors. Unfortunately, widespread confusion and, in some cases, 

outright misrepresentation and even fraud, have been associated 

with the sale of these plans. Complaints appear to be nationwide 

and a troubling pattern has emerged. 

So today we will hear from two distinguished State insurance 

commissioners, Sean Dilweg of Wisconsin and Kim Holland of 

Oklahoma. They will outline the problems associated with Medicare Advantage plans and tell us what some States, as well as the 

2

National Association of Insurance Commissioners, are doing to address them. 

Our investigation has revealed a disturbingly consistent picture, 

one which only seems to be growing. Countless seniors purchasing 

Medicare Advantage plans have been preyed upon and unwittingly 

taken advantage of by insurance agents. 

Seniors have been removed from traditional Medicare without 

their knowledge, signed onto plans that they cannot afford, mislead 

regarding coverage and told that their doctors accept these plans 

when, in reality, they do not. This, of course, is not acceptable. 

One of the most troubling problems that we have seen involves 

insurance agents misrepresenting and marketing Medicare Advantage plans in inappropriate manners in place such as within nursing homes. We will hear more about that from Sherry Mowell, an 

investigator from Georgia. 

Just as seriously, many insurance-sales agents simply do not understand the important differences between traditional Medicare 

and the multitude of other plans available to seniors, including the 

Medicare Advantage plans that they are peddling. Too many of our 

seniors are paying a terrible price for those frauds, misunderstandings and outright ignorance. 

We will also be learning about the sales training received by the 

insurance agents selling Medicare Advantage plans. At our request, 

plan sponsors have provided the Committee with an array of welldeveloped and impressively written training manuals and programs required for those who sell Medicare Advantage. Sadly, what 

is on paper does not always translate into the real world. In this 

case, not by a long shot. 

Last, we will examine the details of the Federal-State oversight 

partnership, as it concerns Medicare Advantage sales and marketing. Based on current law, CMS has exclusive authority to investigate and discipline plans marketing and selling Medicare Advantage products. 

The States have been permitted to investigate and enforce violations against insurance agents only. This unusual arrangement, 

which some might call a ‘‘preemption of authority,’’ seems to have 

left a sizable enforcement gap that has exacerbated the problems 

found by the Committee. 

To address this, I have begun working with the National Association of Insurance Commissioners and other stakeholders to develop 

legislation that would give States expanded authority to oversee 

plans and agents. 

We are not suggesting today that CMS has done nothing to address these problems or that CMS officials are unconcerned about 

them. According to some State officials, CMS regional offices have 

made legitimate efforts to lend a hand, as they should, particularly 

when fraud and confusion have left our seniors with health-insurance gaps and unnecessary additional costs. Nevertheless, it is 

clear that a major disconnect in oversight exists; one that needs to 

be addressed immediately. 

I am pleased that today’s hearing is already having a positive effect. In the last weeks, Medicare Advantage plans announced initiatives to reform their marketing-and-sales practice guidelines. 

3

The Americas Health Insurance Plans, AHIP, is here today to 

discuss its new initiative to strengthen training for its member 

agents and brokers. This is a good start, but it is only a start. 

As we know, the number of Medicare Advantage plans being offered to beneficiaries is growing rapidly. So we must remain vigilant in our oversight of these plans, and I intend to do so. 

If more hearings are necessary to hold feet to the fire, then we 

will do that. Cleaning up these marketing-and-sales practices is a 

high priority of mine. So let me be clear: This issue will not go 

away after this hearing; and, of course, neither will I. 

We look forward to hearing from our witnesses today, with whom 

we will work to identify and address and shortcomings in the marketing and selling of Medicare Advantage plans. 

At this time, we would like to call our first panel witness, who 

is Abby Block. She is from the Centers for Medicare and Medicaid 

Services, CMS. Ms. Block is the director of the Center for Beneficiary Choices at CMS. Prior to assuming her current responsibilities, she was a senior advisor to the CMS administrator. 

She has worked extensively with the States’ health plans and 

beneficiary advocacy groups on Medicare Advantage plans and the 

issues we are discussing today. She is a very well-versed, very 

knowledge expert. 

We are very pleased to have you with us today, Ms. Block, and 

we would be pleased to receive your testimony. 

STATEMENT OF ABBY L. BLOCK, DIRECTOR, CENTER FOR 

BENEFICIARY CHOICES, CENTERS FOR MEDICARE AND 

MEDICAID SERVICES (CMS), BALTIMORE, MD 

Ms. BLOCK. Thank you for inviting me to discuss Medicare Advantage and, in particular, marketing compliance. 

Medicare Advantage is a valued, important option for millions of 

people with Medicare. Working closely with Congress, we have refined Medicare Advantage over the years to promote strong plan 

participation across the country. 

With a vibrant marketplace of plans for 2007, beneficiary enrollment is now at an all-time high. I am proud of these successes and 

stand committed to work with you in the days ahead to preserve 

choice for people with Medicare. 

I am pleased to report that this year, beneficiaries selecting a 

Medicare Advantage plan are receiving, on average, an estimated 

$86 per month in benefits over and above what original Medicare 

provides. Such additional benefits vary by plan, but can include: 

lower cost-sharing, enhanced Part D prescription drug coverage, 

Part B and D premium reductions; and, access to items and services like hearing aids, routine physicals or vision exams that original Medicare does not cover. 

Regardless of the programs’ successes, CMS takes recent reports 

of aggressive marketing of some products very seriously. We have 

stepped up supervision. I want to talk today about some of the 

ways that CMS is building upon lessons learned and information 

gathered during 2006. 

CMS enforcement for marketing violations ranges from issuing a 

warning letter or corrective action plan to suspending enrollment 

and even, ultimately, terminating a plan from the program. This 

4

year alone, we have fined plans more than $400,000 in civil monetary penalties for failing to provide information to beneficiaries in 

a timely manner. Also, at present, 98 Medicare plans are on a corrective action plan to fix identified problems and allow CMS to 

monitor their progress. 

Our experience shows that, on occasion, private fee-for-service 

plans have not been clear about what they offer our beneficiaries 

and what they don’t provide. Therefore, for 2008, we will require 

plans to include specific, unambiguous language in all marketing 

materials, enrollment materials and sales presentations laying out 

what a beneficiary can expect if he or she signs up for a plan, and 

call all new applicants to confirm that they do, in fact, understand 

the features of the plan and wish to enroll. In fact, in some of our 

corrective actions underway now, we already have those requirements in place. 

Our utmost concern is to aid and protect the beneficiary. Therefore, beneficiaries and enrollees mislead by a plan are given an opportunity to switch to another plan. In addition, during the first 

quarter of every year, all enrollees already have the opportunity to 

switch out of private fee-for-service plans or any other MA plan for 

any reason and select another option. 

Marketing complaints are handled differently, depending on the 

nature of the issue. For example, CMS handles violations of our 

marketing guidelines. Issues involving fraud and abuse go to the 

medics, our program integrity contractors. Allegations of fraudulent 

marketing and enrollment go to the OIG. Finally, States handle 

complaints about licensed agents and brokers. 

CMS is taking many steps to identify organizations in need of 

compliance intervention, including monitoring complaints by conducting secret shoppings of sales events across the country. In addition, stressing relationships with State regulators are key to ensuring that marketing is conducted appropriately. 

Specifically, CMS works cooperatively with the National Association of Insurance Commissioners and State departments of insurance to develop a model compliance and enforcement Memorandum 

of Understanding. So far, 20 States and Puerto Rico have signed 

the MOU that will enable us to share information about non-compliant marketing activities. 

CMS plans to issue soon a proposed rule that will facilitate oversight for Medicare Advantage plans and Part D prescription drug 

plans. The rule proposes new provisions to strengthen and reinforce Medicare’s compliance provisions for detecting, preventing 

and correcting fraud, waste, and abuse. 

These are only the initial steps we are taking to ensure that 

Medicare beneficiaries are not being misinformed, misled or defrauded. We are holding plans responsible for the actions of both 

employed and independent agents selling their products. This includes requiring documented training of marketing agents and brokers. 

Finally, I want to assure you that the vast majority of seniors 

who bought Medicare Advantage products are satisfied with their 

plans and the services they are receiving. I am confident we will 

see continued high levels of plan compliance with marketing reVerDate 0ct 09 2002 12:20 Dec 11, 2007 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 H:\DOCS\38618.TXT SAGING1 PsN: JOYCE
5

quirements, along with significant improvements where necessary 

on this critical front. 

Thank you again for the opportunity to speak with you today. I 

look forward to answering your questions. 

The CHAIRMAN. Thank you, Ms. Block. 

Before we get to questions for you, we would like to hear from 

our Ranking Member, Senator Smith, as well as Senator 

Whitehouse. 

Senator SMITH. Thank you, Senator Kohl, for calling this important hearing on a very vital issue. 

I want to apologize to our witness. You have heard me complain 

in the past that the leadership of the Senate should check with the 

Aging Committee before they schedule votes. We apologize to the 

witnesses. We thank you for your indulgence and your time. We respect it deeply, especially this particular issue. 

I want to make a distinction, which I hope folks who are interested will understand. I find abhorrent the stories which I have recently read, particularly, in the New York Times, that talk about 

marketing and abuse. These things must be routed out. All stakeholders who would like to see this program continue need to understand that, if left unchecked, this will undermine confidence in the 

program. 

Having said that, I want to make clear my belief that Medicare 

Advantage and Medicare Part D are not bad simply because they 

are private delivery systems. These programs are working. They 

can work better. But to all who have an interest in the continued 

success of these programs, it comes to each of us individually to do 

all that we can to fix the problems and to fix them fast. 

What I did when I was Chairman and now, as Ranking Member—and I share the Chairman’s concern—what I began to do in 

the 109th Congress is to provide oversight. Some of what I am 

learning, I don’t like. It needs to change. So we will continue that 

oversight with the view, at least, from my view, to preserving and 

strengthening these programs that do so much good, help so many 

people, particularly, in rural places. 

So any company with an interest in either prescription drugs or 

Medicare Advantage: Get on top of this and get on top of it fast. 

The CHAIRMAN. Thank you very much, Senator Smith. 

Senator Whitehouse. 

Senator WHITEHOUSE. Mr. Chairman, I just want to say thank 

you for holding this hearing. I think it is very important. I am glad 

that you and the Ranking Member are leading on this issue. 

As an attorney general in Rhode Island, I saw over and over 

again how seniors were targeted for all sorts of scams and fraud 

and abuse; how lists of seniors were traded among people who 

played in this arena. I saw firsthand how easy it is to target the 

senior population. 

The other thing that I have seen is a senior population that depends on the provision of healthcare services—any risk to that is 

extraordinarily frightening for them. When you combine those two 

together—the fear that so many seniors have related to their continued provision of healthcare coverage, and their vulnerability as 

well, this kind of marketing hits in a particularly dangerous area. 

6

So I think it is really important that we are doing this, and I appreciate the testimony of all the witnesses. 

The CHAIRMAN. Thank you very much, Senator Whitehouse. 

Ms. Block, in a front-page article in the May 7th New York 

Times, you were quoted as saying, concerning Medicare Advantage 

sales and marketing, that, quote, ‘‘Providers and people with Medicare clearly do not understand this product,’’ unquote. 

I would like to ask you what you meant by that comment and 

what is CMS doing to ensure that beneficiaries and insurance-sales 

agents do understand the Medicare Advantage product before they 

purchase it. 

Ms. BLOCK. Well, the comment was addressed specifically to the 

private fee-for-service product and not the Medicare Advantage 

product, in general. I truly believe that many people, including providers, as well as beneficiaries, have found the private fee-for-service product confusing. Some of that confusion, unfortunately, has 

been perpetuated in the way that product has been marketed. 

So we are taking a number of very meaningful steps, including 

and in addition to the specific things that we have specific plans 

doing, under Corrective Action Plans (CAPS) that are already in 

place because of marketing violations that have occurred in 2006 

and 2007. 

But we have added some very specific requirements, including 

documentation of training programs by the plans and disclaimer 

statements. I even have some examples with me of drafts of what 

those statements will look like. These statements, which are for 

both beneficiaries and providers, explain very clearly what a private fee-for-service plan is and, more importantly, what it is not, 

which is what I think is what confuses beneficiaries. 

We are going to require all of the plans in every presentation in 

all of their materials to include these statements—these very clear 

statements—for both beneficiaries and providers so that there will 

be true transparency, true accuracy of information. 

We are also requiring all of the plans to do callbacks to people 

who enroll in one of the private fee-for-service plans to make sure 

that, in fact, they, first of all, actually chose that plan—that they 

actually signed the application—and then, second, that they truly 

understand the provisions of the product they have purchased and 

that they truly intend to be in that plan because they believe it 

meets their needs. 

The CHAIRMAN. Thank you. 

Senator SMITH.

Senator SMITH. Thank you, Mr. Chairman. 

Ms. Block, thank you again for being here. I believe we will hear 

from members of the second panel that States are frustrated by the 

preemption provision in the Medicare Modernization Act. This prohibits them from taking action against Medicare plans in their 

States that may be engaged in inappropriate and often-illegal marketing and enrollment actions. 

I believe we will also hear from the second panel that CMS is 

not living up to its responsibilities to police these plans. So with 

this in mind, is there value in considering rolling back the preemption policies, creating a better partnership between the States and 

7

CMS; or, at a minimum, reestablishing the State appointment 

laws? 

Ms. BLOCK. Well, I can’t tell you how critical I believe it is that 

CMS and the States work closely together. We are strong advocates 

of a partnership between CMS and the States on this issue. We understand that we share the concern for the well-being of Medicare 

beneficiaries. 

For that reason, we worked with the National Association of Insurance Commissioners to develop the Memorandum of Understanding, which, now, will help us to communicate better, to share 

information, to make sure that each of us is holding up our end in 

terms of what needs to be done to make 100 percent sure—and you 

will hear again and again today—and I said it at the last hearing 

that I was at—there is zero tolerance for Medicare beneficiaries 

being deceived in any way about the products that they are being 

sold. 

We are in total agreement on that. 

Senator SMITH. But does the Medicare Memorandum of Understanding—is that sufficient, or do we need to roll back this preemption provision? 

Ms. BLOCK. I think that the Memorandum of Understanding 

needs to be given a chance to work. We have 20 States that have 

signed the memorandum so far, and Puerto Rico. I would like to 

see the rest of the States do that as well. 

We have a group working closely with the NAIC to work through 

how this is going to work in terms of processes, procedures and so 

on. I think that, clearly—and I know the comparison has been 

made to Medigap and the State supervision of Medigap. However, 

Medigap is something that beneficiaries purchased with their own 

money. 

The Medicare Advantage plans are heavily federally funded. So 

I believe it is critical that the Federal Government maintain supervision and oversight of those plans. They are our contractors. There 

are huge amounts of Federal funds going into that program. It is 

a Federal program. I think we need to work as closely as possible 

with the States, and I can’t emphasize that enough. But I think the 

Federal Government, rightfully, has the supervisory authority. 

Senator SMITH. Would there be value, then, in reestablishing the 

State appointment laws in the interim? 

Ms. BLOCK. Well, I think that is something that we could go back 

and think about. I understand that there has been some confusion 

about the appointment laws and, also, I understand that some of 

the plans actually do appointments voluntarily. So that is something that we could, certainly, go back and look at and talk with 

NAIC and the States and the Committee about. 

But the critical point, I think, is that this is a Federal program 

and we want to work as closely as possible through the mechanisms that we have developed to do this jointly with the States in 

a way that, basically, achieves our common goal, which is to protect 

the beneficiaries. 

Senator SMITH. Well, one plan that I believe is testifying today 

has an excerpt from a document that reads, ‘‘Now is the time to 

sell aggressively. Use the urgency of the impeding deadline to drive 

decisions with a ’Buy now or miss out’ sales proposition.’’ I am wonVerDate 0ct 09 2002 12:20 Dec 11, 2007 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 H:\DOCS\38618.TXT SAGING1 PsN: JOYCE
8

dering if, in your view, Ms. Block, this is standard-operating sales 

pitch. Is this common: ‘‘Buy now or miss out’’? Are their agents unable to answer beneficiaries’ questions? Does any of this violate 

CMS guidelines? 

Ms. BLOCK. Well, certainly, agents are required to be able to answer beneficiaries’ questions, and that is the point of the documented training. 

It is absolutely critical that everybody who is out there selling 

this product—whether the agent is actually employed by the plan 

or whether it is a contract broker or agent—first of all, understands the Medicare rules clearly and, second, fully understands 

the product that they are marketing. So that is something we are 

monitoring very, very carefully. 

Again, we stepped up our supervision of the training programs 

for the coming year to make sure that the people who are out there 

selling know the product that they are selling. 

Senator SMITH. Does CMS have a sense of urgency that some of 

the unscrupulous things that may be going on may be undermining 

the whole effort? 

Ms. BLOCK. Absolutely. We share the sense of urgency. We believe very strongly that we need to get this under control, that we 

need to make sure—and I do want to say I think we are talking 

about some bad apples. Bad apples cannot be tolerated. I don’t 

want to see the whole program disparaged as a result of the really 

unacceptable behavior of——

Senator SMITH. Well, I don’t either. I don’t want to see that happen either. 

Ms. BLOCK [continuing]. Some actors. 

Senator SMITH. I think we we will see it succeed. 

Many of the beneficiaries who were enrolled in policies that don’t 

meet their needs, they are going to end up returning to traditional 

Medicare. Doing so, I am wondering what the unanticipated impact 

might be on the Medicare program; that is, if beneficiaries, who 

have been stuck in an unsuitable MA plan for an entire year due 

to lock-in provisions, go without needed medical care due to lack 

of provider access and/or cost and then return the Medicare during 

the next enrollment cycle, are we going to be dealing with a sicker 

and more costly patient—a patient population that is just cycling 

back in? 

I mean, this is the danger. We are not making it better. We are 

making it worse if the bad apples aren’t harvested real quick and 

thrown out. 

Ms. BLOCK. Senator, just let me say about that if any beneficiary 

has enrolled in a Medicare Advantage plan because they have, in 

any way, been misled or deceived, they can immediately request 

that they be returned either to original Medicare or have the option 

of electing a different Medicare Advantage plan. That is in place. 

We give a special enrollment period to any beneficiary in that situation. 

Senator SMITH. Great. Thank you. 

The CHAIRMAN. Just one additional question, following up on one 

of Senator Smith’s points—later on this morning, one of our State 

insurance commissioners will testify that a letter on the Medicare 

Advantage sales and marketing practices, representing the views of 

9

the National State Commissioners Association, took 10 months to 

be answered by CMS. This was during a period when the sales 

problems were growing rapidly in the States. 

How do you account for that fact that it took almost a year to 

respond to a complaint regarding sales practices, when, at the 

same time, you are saying that you attach a great sense of urgency 

to prevent these kinds of practices? 

Ms. BLOCK. Well, Senator, let me say that you all are aware—

and we have stated repeatedly that we had some startup issues at 

the beginning of the program, mostly systems issues, that needed 

to be addressed. 

So during the initial period, probably the time that you are talking about, we were very much focused on those issues and those 

issues that involved enrollment and making sure that we got the 

enrollments right and that people ended up in the plan that they 

had selected and so on. 

Much of that, of course, was connected with the new prescription 

drug program and the fact that we were moving about 6 million 

from Medicaid coverage to Medicare coverage, so my apologies for 

any delay in responding to correspondence. Believe me. I hope we 

are doing better now. I think we are. 

But if there was an inordinate delay at one point in time, I am 

sure it was because we were caught up in trying to solve a lot of 

problems that, fortunately, in 2007, have diminished dramatically 

so that we are not in that situation now. 

That is one of the reasons that we can now turn our attention 

to these marketing issues and focus on them with the same attention that we gave to the systems issues that we had at the beginning of last year. 

The CHAIRMAN. Well, we thank you very much, Ms. Block. You 

have been a very good witness. Obviously, you are more than willing and eager to cooperate in improving the program. We look forward to working with you. 

Ms. BLOCK. Thank you, sir. 

The CHAIRMAN. Thank you. 

[The prepared statement of Ms. Block follows:]

10


38618.001
11


38618.002
12


38618.003
13


38618.004
14

The CHAIRMAN. We would like to call the second panel at this 

time. 

Our first witness on the second panel will be Commissioner Sean 

Dilweg, who is from my homestate of Wisconsin. Commissioner 

Dilweg heads up the Wisconsin Office of the Commissioner of Insurance. 

Following Mr. Dilweg, our second witness will be Commissioner 

Kim Holland of the Oklahoma Insurance Department. 

Following Commissioner Holland, we will hear from Special 

Agent Sherry Mowell, of the Georgia Office of the Commissioner of 

Insurance. 

Finally, we will hear from Mr. Albert Sochor, who is the vice 

president and director of marketing for Old Surety Life Insurance. 

We welcome you all here this morning. 

We will commence with your testimony, Mr. Dilweg. 

STATEMENT OF SEAN DILWEG, WISCONSIN OFFICE OF THE 

COMMISSIONER OF INSURANCE, MADISON, WI 

Mr. DILWEG. Senator, thank you for the opportunity to appear 

before you today. I am happy to see you in the Chairmanship and 

look forward to working with you and your Committee on this very 

important issue. 

My name is Sean Dilweg, and I am commissioner of the Wisconsin Office of the Commissioner of Insurance. I also currently 

serve as the Chairman of the Senior Issues Task Force of the National Association of Insurance Commissioners, which represents 

chief insurance regulators from 50 States, the District of Columbia 

and five U.S. territories. 

Although I am not testifying in my NAIC capacity today, I will 

be supplementing some of my views with the collective views of the 

Nation’s insurance commissioners on today’s topic. We are still 

working this issue through our organization, but we have been surveying our States on the number of complaints that we have seen 

over the last year. 

Today, I will touch upon those marketing complaints. We have 

surveyed all of our members and have responses from 43 States 

and find a pervasive similarity in what we are seeing throughout 

the Nation. 

In addition, I would like to focus on one potential solution, which 

was mentioned earlier, in order to solve the problems that seniors 

are facing today with the program. That is the Medigap solution. 

As I turn and look as to what model might be on the shelf to take 

off and look at, I turn the Medigap. 

This is a program where the States work very well with CMS 

and the plans and the consumers. We worked well with CMS to develop minimum standards for Medigap. That was delegated to the 

States to meet those minimum standards. It allowed seniors stability—something that they seek. 

Right now, under the Medicare Advantage plans, we have 

changes that occur from year to year. You have the potential for 

almost product-dumping in one year, where a plan has zero cost 

and gets ramped up in the next year. That is not the type of continuity that we like to see in our world of insurance. 

15

To start out, the primary objective of State insurance regulation 

is to protect the consumers. My office was vested in our State constitution because consumers throughout our State were facing very 

complicated products. Let me say that the Medicare Advantage is 

one of the most complicated products we have seen to date. All 

health-insurance products are very complicated. These are not, 

simply, term-life policies that we wrestle with. 

Annually, in Wisconsin, we receive over 8,000 complaints. We 

take all of those seriously. Senator, I have a family with two young 

children. If I were to sit down and fill out a three-page complaint, 

I would hope that that would be taken seriously by the agency that 

handles it. 

In our complaint process in our State, the company is required 

to respond in 10 business days to the consumer. An average case 

in Wisconsin lasts 40 days before it is resolved. I would say that 

about 50 percent of those—this is across the board—this is not only 

in health plans—but I would say that, on average, 50 percent of 

those go in favor of the consumer and 50 percent in favor of industry. 

In this role across the Nation, insurance departments receive the 

whole spectrum of consumer complaints about the Medicare program. As I stated before, the NAIC has surveyed the experience of 

all department across the country and we have found a common 

theme as it relates to high-pressure sale tactics and tactics that, 

under our State laws, are considered unethical at best, and fraud 

at worst. 

We have seen sales by unlicensed agents and brokers; agents improperly portraying that they were from Medicare or from Social 

Security to gain people’s trust, seniors who were merely asked for 

information about a plan or filled out a sign-in sheet at a health 

fair and later discovered they were dis-enrolled from their old plan 

and enrolled in a new plan without consent, mass enrollments and 

door-to-door sales at senior centers, nursing homes or assisted-living facilities. 

Under other circumstances, these types of marketing practices I 

have described are either prohibited by State laws or unfair or deceptive practices in the business of insurance or would be questioned by watchful State regulators and controlled by the State regulatory structure. However, since these cases involve Medicare Advantage and Medicare Part D, our hands are tied as it relates to 

the companies. We obviously have oversight of the agents. 

But when my Governor turns to me and says, ‘‘What do we need 

in our regulatory toolbox to handle these issues?’’ I say that, as a 

State regulator, we have all the tools that we need. We are simply 

preempted. We do not have the authority over the companies. 

You and the Federal Government need to decide if the Medicare 

Advantage plans are either insurance products or, simply Federal 

contracts with a number of vendors. I would argue that these 

should be treated as insurance products. As I stated before, when 

I look at a potential solution, I turn simply to the Medigap solution 

as a model. 

You have a number of seniors in our State—over 800,000 seniors—who are wrestling with very complicated products. As I go 

through my complaints, I see sons and daughters of these seniors 

16

who have PhDs and legal degrees who are having trouble navigating these products. 

In conclusion, in order for these programs to be successful and 

valuable to the marketplace, this issue needs to be resolved as soon 

as possible. The baby boomers will hit the market in full force by 

2010, and the fastest growing segment of our senior population is 

over 85. 

I look to you for action and I hope that we can all work together—Congress, State regulators, CMS, the insurance industry, 

agent groups and consumer advocates—to provide products that 

our seniors can utilize. 

Chairman Kohl, thank you again for this opportunity to testify 

today. 

[The prepared statement of Mr. Dilweg follows:]

17


38618.005
18


38618.006
19


38618.007
20


38618.008
21


38618.009
22


38618.010
23


38618.011
24


38618.012
25


38618.013
26


38618.014
27


38618.015
28


38618.016
29


38618.017
30


38618.018
31


38618.019
32


38618.020
33


38618.021
34


38618.022
35


38618.023
36


38618.024
37


38618.025
38


38618.026
39


38618.027
40


38618.028
41


38618.029
42


38618.030
43

The CHAIRMAN. Thank you very much, Mr. Dilweg. 

Ms. Holland. 

STATEMENT OF KIM HOLLAND, OKLAHOMA INSURANCE 

DEPARTMENT, OKLAHOMA CITY, OK 

Ms. HOLLAND. Mr. Chairman, thank you for allowing me to be 

here today, Senator. 

My name is Kim Holland, and I am the Oklahoma State insurance commissioner, an elected office I have held since January of 

2005. The primary obligation of my agency is to protect the consuming public. I and my staff of over 150 dedicated individuals 

take this obligation very seriously, and this is the main reason I 

am here today. 

The Oklahoma Insurance Department is responding to an unacceptable number of complaints caused by the inappropriate and 

sometimes fraudulent marketing of Medicare Part C and Part D 

products by certain insurance companies and their sales producers. 

Over the past year, we have received hundreds of complaints 

from our citizens, who have been misled or deceived during a sale. 

The Medicare Modernization Act of 2003’s preemption of States’ 

authority to oversee the licensure, market conduct and financial 

solvency of Medicare Part D agents and carriers and the marketing 

practices of Medicare Advantage carriers has led to virtual lawlessness in Oklahoma. 

Unlicensed agents are setting up shop in pharmacies and WalMarts and nursing home lobbies to prey upon seniors’ confusion 

and concern over their medical-care coverage. Certain insurers are 

exploiting their exemption from regulatory oversight with aggressive and frequently misleading advertising, agent financial incentives that encourage high-pressure sales tactics, lack of responsiveness, if not outright neglect, of a vulnerable population caught in 

the middle of an unbridled free market. 

As insurance commissioner, I currently have greater authority to 

address a consumer’s problem with pet insurance than I do ensuring the protection of the 500,000 Oklahoma senior citizens covered 

under a PDP or Medicare Advantage plan. 

Since the rollout of Medicare Part D in November 2005, we have 

communicated with CMS on numerous occasions, attempting to 

forge a partnership in educating and protecting our senior citizens. 

Yet, at the earliest stages of the program rollout, we found ourselves challenged by the inadequacy of CMS’s resources in providing the necessary support to our seniors and by further attempts to preempt our authority over agent licensure. 

Senators, I am grateful to Congress for the passage of the MMA, 

as it has made access to affordable medications possible for 20 percent of my population, a large measure of whom depend solely on 

Social Security for their livelihood. 

The creation of new and affordable programs under Medicare 

Part C and D means that many of our seniors no longer have to 

choose between a meal or their medication. But it is this reality—

a pressing demand for coverage and a growing supply of available 

plans—that necessitates adequate regulatory oversight to ensure 

what insurance commissioners across the Nation strive for: a 

44

healthy marketplace, wherein robust competition and vigorous consumer protections are balanced to create choice and value. 

While I can offer you many examples of how our seniors are now 

dangling on the short end of this teeter-totter, I would like to use 

my remaining few moments to focus on a recent targeted examination we conducted on one of America’s largest providers of Medicare 

Advantage plans, which will illustrate clearly the inadequacy of 

Federal oversight. 

In June 2006, we initiated a targeted examination of Humana, 

due to the escalation in number and nature of unresolved complaints involving the sales tactics of agents selling their product. 

The examination report, submitted with our written testimony, 

provides numerous examples that illustrate the scope and gravity 

of the types of complaints made against this company. 

When finally completed, the examination exposed chronic and 

blatant disregard for State regulation and for senior policyholders. 

Advantage plan products were sold throughout our State by untrained, unlicensed individuals, in violation of Oklahoma law and 

similar laws enforced in every State in the U.S. 

Our appointment process, which creates a critical accountability 

link between insurer and agent was consistently circumvented by 

guidelines promulgated by CMS prohibiting States from enforcing 

this important consumer protection. The examination illustrated 

the company’s indifference to complaints and concerns registered 

by senior consumers, leaving some Medicare beneficiaries waiting 

months for any kind of response. 

It is important to note that throughout the past year and a half, 

we—Oklahoma, individually and collaboratively, through the 

NAIC—have made numerous requests of CMS to act to address 

company sales-and-marketing issues. 

We have made beneficiary-complaint referrals, as required, provided information, negotiated and entered into a Memorandum of 

Understanding for information sharing—whatever we could do to 

encourage a swift and appropriate response to these unnecessary 

and unlawful activities. The senior citizens of my State are still 

waiting for that response from CMS. 

In August of last year, we made a Freedom of Information request to CMS regarding a company selling Part D products under 

a CMS waiver, without having been licensed in their homestate or 

any State, as required by Federal law. We are still waiting for that 

information from CMS. 

Due to the gravity of the findings from the Humana exam, I traveled to DC to meet with CMS officials in March of this year. I provided a copy of the examiner’s draft report and voiced my concerns 

and frustration over our ongoing and unresolved issues. I left CMS 

with no assurances and with the impression that they are more 

concerned with protecting the program than the people. I am still 

waiting for a response from CMS. 

So now I appeal to you, sir. Allow me to do the job I do every 

day to ensure the financial solvency of companies selling health 

plans in my State. Allow me to fully deploy the substantial and immediate resources of my office to protect the interests of all policyholders, regardless of their age and regardless of the private health 

plan that they have purchased. 

45

For the safety and security of all Oklahomans, I have not failed 

to act. I have not failed to respond. Yet, I am encumbered by unproductive, unnecessary and dangerous preemptions that expose 

my citizens to the neglect and abuse I have described. 

Please allow me to do my job. Thank you. 

[The prepared statement of Ms. Holland follows:]

46


38618.031
47


38618.032
48


38618.033
49


38618.034
50


38618.035
51


38618.036
52


38618.037
53


38618.038
54


38618.039
55

The CHAIRMAN. Very good statement. Thank you very much, Ms. 

Holland. 

Ms. Mowell. 

STATEMENT OF SHERRY MOWELL, GEORGIA OFFICE OF THE 

COMMISSIONER OF INSURANCE, ATLANTA, GA 

Ms. MOWELL. First of all, thank you, Senator, and the Committee 

for inviting me here. 

My name is Sherry Mowell. I have been employed with the Georgia Insurance and Safety Fire Commissioner, John Oxendine, since 

1994. During the last year—I am just going to give you some examples of the types of fraud and abuse that we have found in the 

State of Georgia. 

Agents are allowing untrained sub-agents to sell the Medicare 

Advantage product. This is very problematic because the subagents have not been through the required training of CMS. By 

using the untrained sub-agents, the agents can later disclaim 

knowledge of any wrongdoing. 

Agents have obtained personal, identifying information from the 

agencies that they are affiliated with, which have the information 

on record from previous Medicare Part D sales. This personal information is being transferred to a Medicare Advantage plan application, with clients unwittingly signing. 

This is how it works: Agents ask potential clients to sign a form 

to prove to their boss that they have been to visit the client. When 

the client signs the form, they are unaware that they are signing 

the back page of a contract to purchase a Medicare Advantage 

product. 

Agents without prior appointments solicit individuals that have 

not requested any information on a Medicare Advantage program. 

Agents are soliciting door-to-door in areas of high elderly population. 

Agents have told potential clients that Medicare is closing down 

or running out of money, and if the customers do not sign up for 

the Medicare Advantage plan, they will lose all healthcare benefits. 

Some agents are even telling the potential customers that the 

Medicare Advantage product will not go into effect until Medicare 

actually closes down. 

Agents are not clearly and concisely explaining the benefits of 

the Medicare Advantage program. Agents have misled prospective 

enrollees by telling them that they are going to receive free eye 

care and free dental care for signing up, and that enrolling in a 

Medicare Advantage plan will not change their benefits. 

Individuals misrepresent that they are insurance agents. They 

have told prospective enrollees that they are from Medicare or that 

they are sent by the Georgia Department of Family and Children’s 

Services. Agents in our State have signed up deceased individuals 

prior to the enrollment period using the deceased individuals’ personal identifiers. 

Agents call on patients in personal-care homes without prior approval of the patients or their guardians. Agents misrepresented 

their identity and affiliation to the staff in the personal-care 

homes. They have told staff members that they are from Medicare. 

On one occasion, two agents called on a personal-care facility outVerDate 0ct 09 2002 12:20 Dec 11, 2007 Jkt 000000 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 H:\DOCS\38618.TXT SAGING1 PsN: JOYCE
56

side the normal operating hours. Agents have asked staff of 

healthcare facilities to visit patients in their room and not in the 

common areas. They have also asked the staff members not to accompany them to the rooms. 

Consumers have been signed up for Medicare Advantage Programs even though they have never met with an agent or they 

have never discussed signing up for the program. We showed a 

group of elderly victims’ applications with their purported signatures and none of the victims had signed the application, nor had 

they met with an agent. 

One agent who previously signed up individuals under Medicare 

Part D went to a mentally challenged facility and switched these 

patients, without their knowledge or their guardians’ knowledge, 

onto a Medicare Advantage product. These individuals were also 

dual-eligible. 

Agents signing up Medicare Advantage to the dual-eligible: They 

are already eligible for both Medicaid and Medicare. Under the 

Medicare Advantage, they are charged co-pays up to $30 and $40 

per doctor visit. We are talking about individuals who make less 

than $300, $400, $500 a month. 

Agents, on numerous occasions, have claimed that they were 

trained by the company to solicit customers in the manner in which 

they are operating or they were approved to conduct business in 

this manner by their field management office. 

Since January 2006, our office has received over 300 written 

complaints from the public concerning the Medicare Advantage. 

This does not include the hundreds of telephone calls our office has 

received. Also, this office has received numerous complaints on the 

companies that offer the products, which allege the companies are 

not paying the claims, nor are they processing the cancellations 

that have been requested. 

Our office is trying to work hand-in-hand with the Centers for 

Medicare and Medicaid Services, trying to get these individuals the 

help they need. 

Our office has found, in some instances, the companies that have 

been contracted by Medicare to provide the coverage are not adequately prepared to handle the flow of business that has been written by the company. The State regulators do not have the authority 

to regulate the company or the product. The result is consumer 

frustration and dissatisfaction. 

Commissioner Oxendine’s staff has arrested three agents on 

these fraudulent acts within the past 6 weeks and we have more 

investigations that we are working on at the present. 

[The prepared statement of Ms. Mowell follows:]

57


38618.040
58


38618.041
59


38618.042
60

The CHAIRMAN. Thank you very much, Ms. Mowell. 

Mr. Sochor. 

STATEMENT OF ALBERT SOCHOR, VICE PRESIDENT AND DIRECTOR OF MARKETING, OLD SURETY LIFE INSURANCE, 

OKLAHOMA CITY, OK 

Mr. SOCHOR. Thank you, Senator Kohl, for having this meeting. 

I feel honored to be here. 

I am vice president of Old Surety Life Insurance Company. Old 

Surety is an Oklahoma-based insurance company. It has been in 

business since 1932. We have been operating for 20 years in the 

Medicare arena—helping seniors make choices and helping to train 

agents about Medicare. 

I have been invited to speak here because of my personal involvement with some of these problems and on behalf of companies and 

other agents out there that are running into problems with these 

Medicare Advantage plans and the marketing tactics that they are 

using to promote these plans. 

I want to make it clear: I am not against the Medicare Advantage plans. But, I am against how they are marketing the plans 

and the tactics that they are using. 

What I am going to share with you today is what is happening 

in the field and what beneficiaries and agents are dealing with on 

a day-to-day basis. 

It has already been mentioned that seniors go to enroll in a prescription-drug plan; yet, they come to find out that they really 

didn’t enroll in a prescription-drug plan only. They were actually 

enrolled in a Medicare Advantage plan. But frequently they find 

out too late. They don’t find out what they have done until they 

go to a provider and then the beneficiary receives a claim several 

months later. That’s when beneficiaries discover they were actually 

disenrolled from Medicare. That is when they find out. Sometimes, 

it is too late. 

The senior, or the enrollee, will then contact CMS or the Medicare Advantage company and ask for help or assistance. CMS and 

the Medicare Advantage companies tell these seniors that they 

can’t do anything and the are locked in until the next enrollment 

period. 

I have helped many seniors resolve this problem by referring to 

page 60 of the ‘‘Guide to Medicare’’ supplement that CMS distributes. I tell CMS and these MA companies to ‘‘Look at page 60.’’ 

These beneficiaries, in their trial period, have the right to try these 

plans and get out; but it is taking my intervention to get that done. 

Some Medicare beneficiaries have been told by agents that with 

Medicare Advantage plans—’’You can go to any physician,’’ ‘‘It 

works the same as Medicare,’’ ‘‘It works the same as a Medicare 

supplement,’’ ‘‘You can use it and you won’t notice any difference 

with your plan,’’ but the beneficiaries can lose benefits. 

Consequently, many Medicare recipients join the plans only to 

find out that their doctors don’t accept the plan. Even if a doctor 

does accept the plan, he can opt out. 

What happens, is that it leaves some people without coverage unless they want to travel a long distance, to where a provider is loVerDate 0ct 09 2002 12:20 Dec 11, 2007 Jkt 000000 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 H:\DOCS\38618.TXT SAGING1 PsN: JOYCE
61

cated. Many doctors and facilities choose not to accept these Medicare Advantage plans. In rural areas, provider access is limited. 

I am aware that CMS and the MA companies know that these 

beneficiaries can get out of the lock-in period but they aren’t informing consumers. At no time in the history of Medicare have recipients been locked in any plan where they couldn’t make a choice. 

I have actually called CMS and MA companies and spoken to 

their customer service and have been told that the beneficiaries 

were locked in. It has taken me an hour, in some cases, to get to 

the right person to be able to ask them to—’’Look at page 60 of the 

Medicare guide.’’ 

I have talked with CMS customer service, which is actually 

outsourced. They are outsourced! They are not really employees of 

CMS. These service reps have a list of SEPs that CMS tells them 

they can use and I have argued with them about the Medicare 

guide. They do not even have the ‘‘Guide to Medicare’’ booklet 

available to them to look at. 

Now, a 70-year-old senior is not going to be able to push the buttons that I can; to get to the right person; to find out that they 

need to submit a letter to the regional office to do a retroactive disenrollment or get dis-enrolled because of their trial period. Most 

seniors are afraid to push the buttons. If they are told, ‘‘No,’’ they 

stop. 

Many agents and companies are negligent they don’t always take 

into consideration what is best for the beneficiaries, I feel. Agents 

do not fully disclose how the plans work. They fail to tell the beneficiaries about the downfalls of the plan and all the co-pays and coinsurance the beneficiaries will be required to pay. They fail to explain the potential out-of-pocket costs for many of the plans benefits and how much they could be at risk for, if the plan has no outof-pocket max. They leave out the part that plans can, and probably will, change benefits, co-pays and premiums each year. 

I have found that if agents give full disclosure to those who are 

interested in the plans, that many individuals choose not to enroll. 

Once they are told everything about the plan, they usually stay 

with original Medicare; not because the plans are bad, but because 

the plans do not fit their needs. 

Medicare Advantage companies have training—a certification 

process—that agents have to go through to sell the plans. This 

meets the CMS requirements. The certification process covers laws, 

marketing practices and product knowledge. However, they tend to 

leave out a lot about ethics, about consumer interests and how to 

handle the problems that I have discussed. 

I have been to these certification meetings. I am a licensed agent. 

I have sat there and been told that if I don’t get onboard, that I 

will lose my Medicare-supplement business that we have with clients. It is more motivated by commissions than it is by compliance. 

The driving force behind this confusion, I feel, is money; not the 

cost of the product, but what companies and agents can make selling the product. Almost every day, I receive solicitations to appoint 

with agencies to sell Medicare Advantage plans, telling me how 

much money I can make. 

First-year commissions run as high as $700 per enrollee—and 

these agents are advanced these commissions every time they enVerDate 0ct 09 2002 12:20 Dec 11, 2007 Jkt 000000 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 H:\DOCS\38618.TXT SAGING1 PsN: JOYCE
62

roll someone in a Medicare Advantage plan. Agents have made 

hundreds of thousands of dollars in a very short time. Each year, 

these agents can enroll the beneficiaries in new plan to again gain 

access to that first year’s commissions. 

I never understood how much money could be made until we, as 

a company, started being solicited to sell our company at morethan-market value. There is a lot of money to be made by both the 

companies and the agents in this plan. We at Old Surety Life have 

not accepted any offers. 

It brings back memories of why Congress established OBRA 

1990. Companies would bring out new Medicare supplement products every year to try to ‘‘wine and dine’’ and have people to enroll 

in their plans. There wasn’t any way to compare apples to apples 

it was very confusing for beneficiaries. 

Agents would go out and move beneficiaries every year just to 

get those high first-year commissions. So Congress standardized 

Medicare-supplement plans. This stopped the confusion. They 

levelized commissions. Agents lost their motive to churn the business. The market became stable and complaints dropped considerably. 

In conclusion, we all know—we looked in the newspaper this 

morning—in the Washington Post—there are problems going on 

with the Marketing of Medicare Advantage plans. The marketing 

concepts have seniors ending up in situations they weren’t aware 

of. We can’t keep saying things are going well when it seems like 

it is getting worse. 

CMS, the industry and the industry sales force need to understand that they are dealing with one of the most vulnerable segments of our population—our seniors, our poor and our disabled. If 

we, as an industry, do not do our jobs in a professional and ethical 

manner, we are doomed. If CMS doesn’t respond quickly to help 

Medicare beneficiaries, trust will diminish. 

CMS should stand up and be an advocate for Medicare beneficiaries against these plans when they don’t fit the client’s needs 

or they didn’t understand what they were getting into—not tell 

them they are locked in! Have 1–800–Medicare service reps ask 

questions to determine if this beneficiary is eligible for any of these 

enrollment options. 

Get rid of the lock-in. Give beneficiaries freedom to choose. Make 

CMS be an advocate and help Medicare recipients who have made 

a mistake and need to change coverage do so!. Have them become 

more like counselors than they are, not just robots. 

Hold companies and agents accountable for unlawful or deceptive 

sales practices. Standardize the Medicarae Advantage plans, the 

Medicare Advantage Prescription Drug plans and the Prescription 

Drug plans to help stop the confusion. Levelize commissions to stop 

the unnecessary churning of business. 

These are our parents—our moms, our dads, our friends—is this 

how we want to treat them? 

I thank you for your time. I appreciate it. Have a great day. 

[The prepared statement of Mr. Sochor follows:]

63


38618.043
64


38618.044
65

The CHAIRMAN. It is pretty hard to do that after your testimony. 

Very good. 

Before we call on Senator Wyden, I will ask just a couple questions. 

Mr. Dilweg, CMS has informed the Committee that they consider 

the Memorandum of Understanding a working document; that the 

agency has already begun to supply additional information to 

States. As a result, is that your view of the status of this document? In fact, why haven’t 30 States signed on as yet? 

Mr. DILWEG. I think, Senator, when we look at it—obviously, this 

has arisen out of how we handle confidential information between 

CMS and the insurance commissioners as well. 

But as we looked at it and surveyed our States, some simply 

don’t have all the problems that Wisconsin may have seen or Oklahoma may have seen. They don’t have the driving force to get involved or they are simply taking their time in getting around to it. 

Part of the problem is we have been told that we would have a 

secure Web site that we could deal with and have not seen that 

Web site. So before you get involved in exchanging confidential information between State agencies and Federal agencies, you want 

to kind of see the environment you are going to be operating in. 

So it is a work-in-progress. 

The CHAIRMAN. Many of the agents who are operating in the 

State of Wisconsin are operating in a manner which you would describe as scandalous, fraudulent? Is that true? 

Mr. DILWEG. We have surrounding Medicare Part D and Medicare Advantage—we have about 400 complaints over the last year. 

To put that in perspective, when something like credit scoring 

came out for automobile or home insurance, we had 42 complaints. 

So this is quite high——

The CHAIRMAN. But you have the right to crack down on every 

one of them, right? 

Mr. DILWEG. On every one of the agents. 

The CHAIRMAN. You do? 

Mr. DILWEG. Yes. 

The CHAIRMAN. All right. I just want to make that—you know, 

understand so that we don’t only look at the company or CMS. We 

all are involved in this together, including this Committee. 

Mr. DILWEG. Right. 

The CHAIRMAN. But in terms of the responsibility—clear responsibility—to deal directly with agents who are acting in ways which 

are fraudulent, misrepresentative or crooked, you have the opportunity, the right, if you had enough personnel. But the right to 

crack down on them is centered in your office? 

Mr. DILWEG. Correct. 

The CHAIRMAN. Ms. Holland, how would you respond? You have 

the right——

Ms. HOLLAND. We certainly have that right. As you can tell from 

my testimony, we have exercised that right immediately and deliberatively. 

One of the challenges, however, Senator—first of all, in my State, 

what we identified from our examination is we had unlicensed 

agents—numerous unlicensed agents—selling product. I have no 

66

way to track—unless I go to the company and demand that information, I don’t know that there is an unlicensed person there. 

As we discussed in testimony, we are dealing with folks, oftentimes, that are fragile and may not get all the information they 

need, may have gotten a business card that has misleading information or inadequate information. So it is very difficult for my office to track down someone who is an unlicensed agent. 

Additionally, with the absence of an appointment, again, that 

creates that critical link where the agent is actually an agent for 

the company—he is not a freewheeling person out here. He may act 

like one, but he is an agent for the company. 

That creates that tie that allows me to go back to the company 

and hold them responsible as well and help me to crack down on 

an agent that is not performing the way we would have them do 

so in our communities. 

The CHAIRMAN. So you have the right to do that? 

Ms. HOLLAND. I have the right to address an agent that is misbehaving. 

Under the current circumstances, I am somewhat challenged in 

going back to the company and holding them accountable because 

the absence of appointment doesn’t create that direct link. Hopefully, I am going to compel the insurer to step up anyway. But it 

creates a difficulty in us creating that contractual link between the 

agent and the company to hold the company responsible for the 

performance of their agents in the field. 

The CHAIRMAN. OK. 

Ms. Mowell, you talked movingly and very well about the misrepresentations and fraud that are going on in your State. Again, 

you do have the opportunity and the responsibility and the opportunity, again, to deal with them—each and every one of these individual misrepresentations—don’t you? 

Ms. MOWELL. We have the authority over the agents, yes, sir. 

But, there, again——

The CHAIRMAN. That is a considerable authority, isn’t it? 

Ms. MOWELL. It is a considerable authority. However, there are 

only six investigators for the entire State of Georgia for all types 

of insurance fraud. Right now, we cannot keep up with all the 

problems on this and our other duties. 

The CHAIRMAN. That is fair enough. 

It would also be very helpful, wouldn’t it, if the companies themselves could be held severely accountable for their representatives 

out there, selling fraudulent packages? 

Ms. MOWELL. Yes, it would make it much nicer for us to be able 

to go to the companies and say, ‘‘What are you doing about it?’’ because at this point in time, we do not have that authority to go to 

them and make them speak for their agents and bring their agents 

in, or to even look at the allegations. 

The CHAIRMAN. Very good. 

Mr. Sochor, what do we need to do to eliminate this problem? 

Mr. SOCHOR. The problem is when agents never really appoint 

with many of these Medicare Advantage companies. These companies set up independent-marketing organizations that contracts the 

agent. The contract is between the agent and that marketing organization. That is why the States have no way of knowing who is 

67

appointed with whom and have not been able to try to track down 

agent records. 

These companies advance commissions to the agents. The marketing organizations are actually responsible for the payment. 

Then, later, the marketing organization get—reimbursed—by the 

Medicare Advantage companies. This is how the payment system 

works. I think allowing the agents to appoint with the MA companies and licensing the agents with the State insurance departments, has to be done. Then there is some kind of record where you 

can track of the agents and develop a database, because without 

that, there is no way to know what is going on. 

The CHAIRMAN. Very good. 

Senator Wyden. 

Senator WYDEN. Thank you very much, Mr. Chairman. It has 

been an excellent panel. I commend all of you for it. 

I am going to spend most of my time with you, Commissioner 

Dilweg and you, Commissioner Holland. 

I was the principal author of the Medigap law in the early 1990’s 

and, essentially, came to it after, really a 15-year history. I have 

been the director of the Oregon Gray Panthers for about 7 years. 

I ran a legal aid office for the elderly, and then I was on the Aging 

Committee in the House and spent a lot of time on it. 

I have been struck by the number of parallels between the climate before Medigap was enacted and which you all are describing 

today. In fact, what is so helpful about the wonderful service you 

are performing, Ms. Holland and you, Mr. Dilweg, is we really got 

it going in the late 1980’s because a handful of insurance commissioners like yourselves really spoke out and blew the whistle. 

In fact, the language you are using today—the language of lawlessness—is exactly what a handful of insurance commissioners 

said back then. We talked about how the Medigap market was 

pretty much like Dodge City before the marshals showed up. 

In fact, when you think about it, the situation between the Medicare Advantage abuses you are describing today and Medigap back 

then—other than the fact that in the Medigap market, you could 

sell these multiple policies and it was common for a senior back 

then to have a shoebox full of policies—you know, 15, 20 policies—

and they would have these subrogation clauses, and, eventually, 

they wouldn’t be worth the paper they were written on—there is 

pretty much a parallel here between the Medicare Advantage 

abuses and what went on in Medigap. 

Now, my question to you—my first one—is back then, what we 

essentially did was bring in the National Association of Insurance, 

you know, Commissioners, led by a handful of commissioners like 

yourselves, and we used the National Association of Insurance 

Commissioners to develop a model so that the States would have 

aggressive tools to deal with the abuses and we would have these 

uniform, standardized kind of policies. Then, it would be backed up 

by Federal authority. In other words, if a State didn’t go forward 

and there was a specific, you know, timeline, then the Federal Government could step in. 

It strikes me that most of that model makes sense today. They 

are different products, obviously. Medicare Advantage is a different 

product than Medicare supplement. But most of what made sense 

68

back then for Medigap looks like a pretty good model today for us 

under Chairman Kohl’s leadership to proceed with. I would like to 

get your views on the record on that. Then I want to ask some 

other questions with respect to how it would go forward. 

Commissioner Dilweg and then Commissioner Holland. 

Mr. DILWEG. Thank you, Senator. Your reputation is quite wellknown as it relates to Medigap. I appreciate that. 

When I turned to my staff and said, ‘‘What could work here?’’ it 

was, really, that model. It is really—you know, with other Federal 

agencies in the State of Wisconsin—we have the EPA—delegates 

their authority to our natural resources department over the environment. This is really a very similar situation. How does CMS 

delegate their authority to the insurance commissioner’s office, 

which is on the front lines of complaints? 

It was that regulators—where NAIC worked with CMS and built 

those minimum standards. Then States were given, I believe, 12 

months or 18 months to adopt the standards. Now, some States, 

they don’t want to, and so the power remained with CMS. But I 

think it is a good model to look at. It may have to be tweaked. 

Senator WYDEN. Eventually every State came around, I think. 

Mr. DILWEG. Yes, I believe so. 

Senator WYDEN. So you feel it is a pretty good model. 

Commissioner Holland. 

Ms. HOLLAND. I would concur, Senator Wyden. 

I think that it demonstrates the kind of partnership that we are 

looking for between the States and the Federal Government. It creates a framework that gives the States the opportunity and authority to respond quickly to the needs of our consumers in our State 

and to hold the insurers accountable for the products and the activities that are being rendered. 

I am the Vice Chair of the Healthcare and Managed Care Committee, of which your commissioner, Joel Ario, serves as Chair. We 

work very closely. I can tell you that the Healthcare Committee, 

which also supports the Seniors’ Issues Task Force, of which Commissioner Dilweg is a Chair, would welcome the opportunity to 

work with you and to work with CMS is revising and re-looking at 

guidelines and regulations to more model Medigap. 

Senator WYDEN. My understanding—and you correct me otherwise—is that Chairman Kohl, to his credit, has already begun some 

of these efforts with NAIC. I am going to support him in this because I don’t think we have to reinvent the wheel. 

I think the idea is to get with NAIC, give the States the opportunity to indicate what tools, specifically, they need, as it relates 

to this market. You have given us valuable information about the 

advertising abuses. I am going to ask about the companies in a second—and try to turn this around quickly. 

I mean, it took us, literally, 12 years—I mean, in terms of actively working for the Medigap, you know, law—to get it done. I 

don’t think seniors and their families can afford to wait for another 

decade in order to get the tools in your hands to protect them and 

their well-being. 

Now, on this question of the companies and the sort of line of demarcation about how you all don’t have the authority with respect 

to companies themselves, let me make sure that I understand this. 

69

You can go after brokers and agents even under the limited authority that came out of the Medicare Advantage program. Is that correct? 

Mr. DILWEG. Yes. They are licensed in our States. 

Senator WYDEN. Are there any limits at all with respect to your 

ability to go after the agents and brokers? 

Mr. DILWEG. No, I deal with enforcement action every day on 

agents and brokers, and——

Senator WYDEN. Yes, please. 

Ms. HOLLAND. The only thing I would add to that is the issue 

with the appointment, Senator. That does create a limitation for 

us. 

Senator WYDEN. So what you all would like, essentially, as it relates to the companies, is some ability along the lines of what was 

done with Medigap to make sure that the companies would have 

to come in advance and, essentially, show you their materials, show 

you their marketing kind of practices. From that point on, you 

would have authority—oversight authority and regulatory authority—over the companies. Is that essentially what you want? 

You seemed to touch on that Commissioner Dilweg, on page five. 

You have got a variety or points with respect to tools that come out 

of the Medigap law that you would like to have in Medicare Advantage. But aren’t those the key points? 

Mr. DILWEG. Yes, page six of my written testimony shows a 

crosswalk——

Senator WYDEN. Oh, yes. 

Mr. DILWEG [continuing]. Of what authority we have under 

Medigap. 

This is not—you know, with private health insurers, we look at 

their marketing aspects, we look at their representations. We are 

then able, as complaints come in, to really perform market-conduct 

studies and look at—you know, if we see an outlier of 30 complaints coming in on an issue, we can then get in there with the 

companies and, ‘‘How are they treating their agents?’’ We audit 

that relationship with their agents and have full access to that. 

So these types of tools are—like I said, we don’t need to reinvent 

the tools that the States currently have. I believe we have them. 

Senator WYDEN. OK. 

Well, you all have been very helpful. Bouquets to you, Special 

Agent Mowell and Mr. Sochor, for you all speaking out as well. 

This is exactly the kind of thing that has to be done so we don’t 

have to wait another decade to make sure that the government and 

regulators are on the side of seniors. 

I really thank our two commissioners, because this doesn’t happen unless people like yourselves who, under McCarran-Ferguson, 

essentially have the primary responsibility to kind of step in and 

advocate for people. We wouldn’t even know about this for the most 

part, other than angry folks—you know, going to senior centers—

unless you all had those toll-free lines and the capacity, at least, 

to find out about brokers. 

So I am very much committed. I hadn’t even seen page six. It has 

been a crazy day, here, Commissioner Dilweg. But I am especially 

committed to taking the Medigap model, which we know has 

70

worked—it worked better than I could have dreamed of. I mean, 

it really drained the swamp. 

It is very rare today that you get a complaint about a Medigap 

practice. I would be curious if your offices are picking up something 

else. But it happened almost overnight, because the fact that there 

was uniformity, the fact that there was standardization, the fact 

that you had authority over a company—essentially what we saw 

is the sleazy operators, essentially, couldn’t go in that kind of environment; and people who could make a marketplace work, sell a 

private policy that was responsible and of good quality, did just 

fine under it. 

So it worked for seniors. It worked for responsible people in the 

industry. I am glad Chairman Kohl is taking the lead with the National Association of Insurance Commissioners and the States, because we don’t have to wait forever to get this done again. 

Thank you, Mr. Chairman. 

The CHAIRMAN. That was very good, Senator Wyden. I think you 

succinctly and clearly highlighted the problems as well as pointing 

out the things we can do to not only rectify, but, maybe, to eliminate most of these problems. 

We thank you all for being here. Your testimony and your ability 

and willingness to respond to our questions have been very helpful 

and we will continue to be in touch with you. 

Our first witness on the third panel will be Karen Ignagni of the 

American Health Insurance Plans. She serves as AHIP’s president 

and CEO. 

Second witness on this panel will be Heidi Margulis of Humana. 

Ms. Margulis is a senior vice president for that company. 

Third, we will hear from Peter Clarkson, Senior Vice President 

of distribution operations for United Health Group. 

Finally, we will hear from Gary Bailey of WellCare. Mr. Bailey 

is vice president for Medicare operational performance at WellCare. 

Ms. Ignagni. 

STATEMENT OF KAREN IGNAGNI, PRESIDENT AND CEO, 

AMERICA’S HEALTH INSURANCE PLANS, WASHINGTON, DC 

Ms. IGNAGNI. Thank you, Mr. Chairman. Good morning. Good 

morning, Senator Wyden. It is a pleasure to be here. We thank you 

for the opportunity to testify. 

You will hear shortly that our members are strongly committed 

to the long-term success of the Medicare Advantage and Part D 

programs. Today at AHIP—and we represent all of the companies 

at the table and, virtually, all of the members who are participating in both programs—we are announcing a new initiative that 

will be giving beneficiaries additional peace of mind by strengthening protections against improper conduct in marketing Medicare 

plans to beneficiaries. 

I would like to tell you, Mr. Chairman, what we did and what 

we didn’t do. First, we did not try to size the problem and get a 

sense of, ‘‘If this was a small problem, we would act in such a way; 

if it is a larger problem, we would act in such a way.’’ In our view, 

this issue that is now occurring, that you have been talking about 

for the last several hours—any abuse is one too many. So we approached it through that prism. What I am going to tell you about 

71

is what our members have committed to do. In this endeavor, we 

are going to be partnering not only with CMS, but with the State 

insurance commissioners. I will outline specifically where. 

First, we are going to be requiring core competency training that 

meets standards that we are going to be urging CMS to establish. 

We think it is very important, as the insurance commissioners stated, that we have core standardized requirements for specific training. We are going to be requiring that threshold scores be achieved 

so that training not only is adequate, but the performance and efficiency and proficiency are there. 

Second, we are going to be ensuring that continuing-education 

credits are available for the core competency training. We are going 

to be partnering with the broker organizations and with beneficiary 

groups to make sure that those objectives are achieved. 

Fourth, we are going to be requiring achievement of threshold 

scores on specific plan training; not only on the program itself, but 

specific plan training. 

Fifth, we are going to be requiring annual recertification through 

achievement of threshold scores. 

Sixth, targeted re-training throughout the year on specific topics 

required by CMS for special attention. 

Seventh, we are going to be requiring a new beneficiary attestation on enrollment applications to confirm that individuals understand the program that has been chosen. 

Eighth, we are going to be conducting oversight to verify the 

beneficiary’s intent to enroll. We are not going to stop with an attestation. We are committing, for all products, to do post-enrollment outbound calls to confirm the intent and to make sure that 

we are doing systematic monitoring of intent-to-enroll. 

Next, we are going to be requiring that plans proactively track 

and analyze the performance of brokers, agents and plan-marketing staff in such areas as beneficiary satisfaction, rapid dis-enrollment and complaints. 

We are going to be requiring that individual plans address 

verified complaints through an inbound call system to make sure 

that if there is any kind of a pattern that is being observed, that 

that is taken care of. 

Finally, we are going to be working with CMS and the NAIC to 

urge the establishment of a uniform process and criteria for broker, 

agent and staff misconduct—reporting of that misconduct to State 

agencies. Right now, we have a very uneven system. It is not clear. 

It is not the same in every State. We have been working very closely with the insurance commissioners. We think they can play an 

important leadership role here. 

We want to partner with them, partner with beneficiary groups 

and partner with CMS to make sure that the fabric of rules and 

oversight is there and it is consistent. We, then, will know what 

the rules are, how to report bad practice, practice that is sub-par, 

and we commit to doing that. 

Mr. Chairman, you also heard today considerable discussion 

about the issue of lock-in. I would like to make a comment about 

this. This is a new program, but we have a number of plans at the 

table who have been in this program, serving seniors for a number 

of years. 

72

In the old days, it was called the Medicare Plus Choice program. 

Now it is the Medicare Advantage program. At that time, the rules 

of the road were as follows: If an individual joined a plan and realized and found out that he or she was not happy in that plan, they 

were allowed to dis-enroll. We did not support the movement toward lock-in. 

We would be very comfortable and would endorse and support 

the idea of taking a look at that to go back to the way it used to 

be. We had very low dis-enrollment. But it did provide a safety net 

for beneficiaries and for advocacy organizations, knowing that, 

sometimes, people make the wrong choices. 

We are very comfortable with that. We are comfortable with 

what we put on the table. We intend to stand by it. We spent a 

great deal of time in 2006 working on a range of operational initiatives responding to pharmacy issues, physician issues. 

I just want you to know our personal assurance—my personal assurance—that we are going to make this a major priority so that 

when you have your next hearing, as you indicated earlier that you 

intend to do, we can give you a very positive report about specifically what actions have been taken. 

Thank you, Mr. Chairman. 

[The prepared statement of Ms. Ignagni follows:]

73


38618.045
74


38618.046
75


38618.047
76


38618.048
77


38618.049
78


38618.050
79


38618.051
80


38618.052
81


38618.053
82


38618.054
83


38618.055
84


38618.056
85


38618.057
86

The CHAIRMAN. Thank you, Ms. Ignagni. 

Ms. Margulis. 

STATEMENT OF HEIDI MARGULIS, SENIOR VICE PRESIDENT, 

HUMANA INC., LOUISVILLE, KY 

Ms. MARGULIS. Thank you, Mr. Chairman, Senator Wyden. 

Thank you for the opportunity to testify. 

I am Heidi Margulis, senior vice president, Government Relations for Humana. Humana has contracted, for over 20 years, with 

CMS to offer Medicare beneficiaries affordable, comprehensive 

health-plan coverage. We offer MA products in all 50 States and 

Puerto Rico. 

We know you have valid consumer-protection concerns about the 

marketing of plans to Medicare beneficiaries. We share those concerns. 

Humana knows that CMS placed trust in us to provide healthplan options for beneficiaries, many who are vulnerable with special needs. Our long-term success comes directly from satisfied 

beneficiaries who remain with us and trust us. Over 8 out of 10 renewed with us this past year. 

We have zero tolerance for misconduct in sales practices. Last 

year, we terminated 78 agents. We are serious about wrongdoing 

and take action when found. We understand our responsibility to 

meet Federal and State requirements. 

Today, I will describe our marketing, training and oversight program, what has worked, how we can improve, suggest ways in 

which CMS States and plans can strengthen the program. 

All of our employed and contracted agents must comply with our 

marketing code of ethics. For years, we have had a verification 

process so beneficiaries understand the plan that they are enrolling 

in, that their plan is not a Medicare supplement plan, and that 

their providers accept Humana. 

Humana employs 2,000 sales reps who are licensed, appointed 

and certified to sell our MA product, and about 600 tele-sales 

agents. These Humana employees accounted for about 82 percent 

of agent-assisted MA sales in 2007. 

For these agents, we have a formalized process that includes extensive background checks, 12-part classroom and field training on 

everything from Medicare and ethics to plan suitability and communicating with seniors. We test, coach and recertify. 

We field-monitor and investigate all specific complaints, taking 

appropriate corrective action ranging from coaching to termination 

and regulatory reporting. We now track dis-enrollment rates. Commissions are not paid to agents if a member dis-enrolls in 90 days. 

Humana contracts with about 14,800 independent agents 

through agencies. These agents were responsible for about 18 percent of our MA sales last year. These agents are licensed, appointed and certified to sell our products. These agents are also 

trained, monitored and overseen. 

As mentioned, we investigate every specific allegation we get, regardless of source. During 2006, we investigated about 1,612 allegations, considerably less than one percent of sales. Of those, 304 

were founded and corrective action was taken, with 78 agents terminated. 

87

In terms of oversight, in 2005, CMS identified an unapproved 

marketing piece and identified changes needed in our verification 

script and expressed concerns about sales complaints and marketing practices. Humana implemented and CMS accepted several 

corrective actions, including enhanced verification scripts, revised 

training, increased oversight and complaint-resolution staffing. 

Since 2006, Humana has reported findings from sales investigations on a bi-weekly basis to CMS. Last year, the Oklahoma Department of Insurance conducted a modified market-conduct examination. They identified issues relating to licensure and appointment of agents. 

Even though CMS authority preempts State laws on appointments, we maintain that all but six of our agents were appointed 

consistent with Humana policy. Sixty-eight of 950 agents failed to 

have non-resident licenses. Specific action was taken with these 

agents. 

Also, the department has been concerned about sales practices in 

the use of delegated agents. We share this concern, have made 

changes and decreased the use of delegated agents. In addition, we 

had 30 specific beneficiary sales complaints in Oklahoma investigated and took action on each. Nonetheless, we can all improve 

the system. 

Aside from more rigorous training and oversight efforts, some additional actions should be considered. First, there is Federal legal 

authority to implement changes. Federal laws do not need to 

change for all parties to improve efforts to eliminate sales-and-marketing violations. 

Second, we strongly support AHIP’s principles to protect beneficiaries. In part, they call for CMS and the States to work together 

for uniform consumer protections. We believe a watch list, early detection registry, should be established similar to that in the area 

of information sharing for healthcare fraud, containing information 

on both agents terminated for cause and those who demonstrable 

trend in complaints. Humana does not want to contract with an 

agent who has been terminated by another plan or vice-versa. 

Humana continues to implement improvements. Plans for secretshopper efforts and callbacks to new members to solicit their feedback on sales visits are in progress. 

Violations have occurred. While Humana’s founded allegations 

are small in comparison to the number of sales, there is clearly 

room for improvement. You have our unqualified commitment to 

that objective. Humana strives daily to earn the trust that consumers place in us when they select our health-plan coverage. 

I thank you and look forward to your questions. 

[The prepared statement of Ms. Margulis follows:]

88


38618.058
89


38618.059
90


38618.060
91


38618.061
92


38618.062
93


38618.063
94


38618.064
95


38618.065
96


38618.066
97


38618.067
98


38618.068
99


38618.069
100


38618.070
101


38618.071
102


38618.072
103


38618.073
104


38618.074
105


38618.075
106


38618.076
107


38618.077
108

The CHAIRMAN. Thank you, Ms. Margulis. 

Mr. Clarkson. 

STATEMENT OF PETER J. CLARKSON, SENIOR VICE PRESIDENT, DISTRIBUTIONS OPERATIONS, UNITEDHEALTH 

GROUP, MINNETONKA, MN 

Mr. CLARKSON. Thank you, Mr. Chairman. Thank you, Mr. 

Chairman, for the opportunity to testify today. 

I am Pete Clarkson. I am the senior vice president of distribution 

operations for Secure Horizons, which is part of UnitedHealth 

Group. 

I was raised in rural America, and I have spent the past 20 years 

working in healthcare. I am personally committed and 

UnitedHealth Group is personally committed to making sure seniors have access to quality coverage and that they have the information they need to make informed decisions. 

Today’s hearing focuses on concerns about the sale and marketing of healthcare plans to people with Medicare. For 

UnitedHealth Group, the overwhelming majority of the issues that 

arose last year involved private fee-for-service plans, and these 

plans account for less than one percent of our overall Medicare 

business. 

In late 2005, UnitedHealth Group acquired PacifiCare Health 

Systems, which was ramping up its private fee-for-service business. 

At the time, no one could have predicted how fast this market was 

about to grow. The entire industry had about 200,000 private feefor-service beneficiaries then, but PacifiCare alone enrolled 178,000 

new members for 2006, nearly as many as the entire industry had 

before. 

In early 2006, it became apparent that the systems and procedures that were put in place by PacifiCare were not keeping pace 

with the rapid growth. We added staff to our customer service and 

other support operations and we moved the administrative support 

for the plan in-house, to our shared-services group. 

PacifiCare relied heavily on external brokers to sell private feefor-service plans. There were reports of misconduct in 2006 and we 

took aggressive action. Between January and July of 2006, we terminated more than 80 individual brokers, including two entire 

agencies. 

After these events, the Centers for Medicare and Medicaid Services sent PacifiCare a letter on August 16th describing shortcomings in the sales and operation of private fee-for-service plans. 

The letter directed PacifiCare to address each area of weakness 

and to demonstrate rapid improvement. 

We inherited these issues and we accept full responsibility for 

them. We have been working closely with CMS to address them. 

Among other things, we created a post-sale verification process in 

which we call new members to make sure they understand private 

fee-for-service and agree to be enrolled in the plan. Now, CMS 

plans to require all plans to make similar calls in the next annual 

enrollment period. 

In February, CMS provisionally accepted our corrective-action 

plan and they continue to closely monitor our performance. Meanwhile, we continue to make improvements. 

109

Early this year, we launched a national quality-assurance team, 

which works full-time with brokers and sales agents to make sure 

members get the information that they need. If we find that a 

broker may not be explaining the plan well enough, depending on 

the situation, the quality team can do everything from providing 

additional training to making site visits and going out with the 

broker on sales calls. If the broker’s performance doesn’t improve, 

we impose sanctions up to and including termination. 

UnitedHealth Group is working with AHIP and others in the industry to develop best practices, but Congress and CMS could do 

two things to improve the overall structure of the private fee-forservice marketplace. The first involves the process known as deeming, which means accepting the terms and conditions of the plan. 

Unlike an HMO, private fee-for-service generally has no network. 

A member is free to seek treatment from any Medicare-eligible provider, but the physician has to agree to the terms of the plan. A 

physician can decide not to provide services on any given office 

visit, even if the physician previously agreed to treat that same patient. 

We need a deeming structure that is good for both physicians 

and members to increase satisfaction and improve continuity of 

care. 

For our part, we will work with physicians and CMS to address 

the physicians concerns and help them become more willing to accept private fee-for-service plans. 

The second suggestion relates to the fact that whenever one company terminates a broker, that same person often starts selling for 

another competitor. The Federal Government could help by creating a national registry of sanctioned brokers, along with an appeal process to protect honest brokers. 

At UnitedHealth Group, we want only well-trained and highly 

ethical brokers selling our plans. We are committed to working 

with Congress, State and Federal regulators, health advocates in 

the industry, to enforce that standard. 

Thank you. 

[The prepared statement of Mr. Clarkson follows:]

110


38618.078
111


38618.079
112


38618.080
113


38618.081
114


38618.082
115


38618.083
116

The CHAIRMAN. Thank you, Mr. Clarkson. 

Mr. Bailey. 

STATEMENT OF GARY BAILEY, VICE PRESIDENT, MEDICARE 

OPERATIONAL PERFORMANCE, WELLCARE, TAMPA, FL 

Mr. BAILEY. Mr. Chairman, Senator Smith and other members of 

the Committee, I appreciate the opportunity to testify about the 

marketing of Medicare Advantage programs. 

I am Gary Bailey, vice president, Medicare Operational Performance for WellCare Health Plans. At WellCare, I am responsible for 

monitoring and improving our Medicare Advantage and prescription-drug plans. Previously, I spent over 30 years at CMS, working 

to improve the operations of the Medicare program and the services 

delivered to Medicare beneficiaries. 

Today, I am proud to be working at WellCare, a company committed to providing top-notch services to Medicare beneficiaries. 

WellCare has a strong corporate compliance program and prides 

itself on continuous improvement, and I have seen this firsthand 

in our approach the Medicare Advantage sales and oversight. 

Today, I will speak about WellCare’s efforts to go above and beyond the law to protect Medicare beneficiaries in the marketing of 

Medicare Advantage plans. WellCare has developed a corporatewide compliance program known as the Trust Program. This has 

a zero-tolerance policy for the unethical marketing of our products, 

including Medicare Advantage. 

But first, let me tell you about WellCare. WellCare is a leading 

provider of managed-care services, with a longstanding commitment to Medicare and Medicaid. Founded in 1985, our team of over 

3,000 associates currently serves more than 2.2 million Medicare 

and Medicaid members nationwide. 

We offer Medicare Advantage plans in 39 States and DC Because 

of this national scope, WellCare contracts with over 8,000 State-licensed agents. These sales agents are carefully screened by 

WellCare before they interact with beneficiaries. 

Prior to contracting, agent must prove they are State-licensed. 

Agents must pass a criminal-background check. Agents must be 

trained on product benefits, marketing guidelines and other important issues. Agents must pass a test with a 100 percent score. 

Agents are monitored in the field. Agents are retrained and retested on plan terms and marketing guidelines. Agents must follow 

all Federal and State laws and must follow our own code of conduct. Agents are immediately investigated and subject to rapid resolution of any identified compliance issues. 

Also, in today’s Washington Post: A situation involving unethical 

behavior of an agent was raised in the State of North Carolina. The 

Department of Insurance notified us on March 20, 2007, that an 

agent was conducting inappropriate marketing in a low-income 

senior-housing complex. We terminated that agent the next day. 

We worked with the State to eliminate the bad apple. We paid no 

commissions to that agent that was terminated. Our new inbound 

real-time enrollment-verification process will prevent these situations. 

Finally, creation of a national database will assure us and others 

that agents like this will not work with other health plans. This 

117

is but one of several instances where our communication between 

State insurance officials and the plan worked. 

The Trust Program’s compliance process works. Over the past 6 

months, WellCare has terminated 16 sales agents for marketingconduct violations. Our program exposes and punishes unethical 

behavior. For example, in monitoring Medicare Advantage enrollment applications, we discovered an agent in Georgia submitted 

applications for deceased individuals. Working with the Georgia 

Department of Insurance and others, aggressive action was taken 

against the agent. This agent and his accomplice have been arrested. 

WellCare is continuing to improve and strengthen its compliance 

program. First, WellCare is developing an inbound real-time enrollment and verification process. This will allow prospective enrollees 

an opportunity to verify their understanding of plan benefits. It 

will also allow Medicare beneficiaries to tell us what information 

they received—that they needed to make an informed health care 

decision. This new and improved enrollment and verification process will confirm that the sales agent treated the beneficiary appropriately. 

The next improvement is a secret-shopper program. WellCare 

will use an independent organization to monitor the compliance of 

Medicare Advantage sales agents. This program is being launched 

in five States and will be rolled out nationwide. All results of 

WellCare’s secret-shopper program will be reported directly by this 

independent organization to WellCare’s corporate compliance department. 

We support even more improvements. We strongly support our 

trade association’s draft principles to enhance oversight of salesand-marketing efforts. We believe all private Medicare Advantage 

plans should adhere to these issues. We believe there should be a 

national training program for agents who sell Medicare Advantage 

products. 

We also support greater coordination and communication between the Centers for Medicare and Medicaid Services, the State 

departments of insurance, private Medicare Advantage plans and 

licensed agents. There should be no barrier to communication. 

We support the creation of a national database to share information about those agents and brokers who have been sanctioned by 

a State or terminated by a health plan. We do not want to be associated with an agent or broker who has been terminated by another 

plan because of their noncompliance with State or Federal rules. 

This should be done immediately. It will help our current efforts. 

So thank you again for this opportunity to testify. WellCare is 

committed to the long-term success of the Medicare Advantage program. No one should accept behavior that results in a Medicare 

beneficiary being inappropriately treated or enrolled in a product 

that is not suitable to their needs. 

We appreciate the support the Committee has demonstrated for 

Medicare Advantage, and I look forward to answering your questions. 

[The prepared statement of Mr. Bailey follows:]

118


38618.084
119


38618.085
120


38618.086
121


38618.087
122


38618.088
123


38618.089
124


38618.090
125


38618.091
126


38618.092
127


38618.093
128


38618.094
129


38618.095
130


38618.096
131


38618.097
132


38618.098
133

The CHAIRMAN. Mr. Bailey, as recently as April 19, CMS cited 

your company in a corrective-action plan for inadequate oversight 

of your Medicare Advantage sales-and-marketing operations—your 

company’s response and your public rebuke from CMS Acting Administrator, Leslie Norwalk, on the front page of the New York 

Times, May 7, as you know. 

She indicated that your response to CMS’s review was inadequate; caused concern. Does Ms. Norwalk know what she is talking about? 

Mr. BAILEY. Well, actually, we were pleased to have CMS visit 

our corporate operations. On March 12, they spent almost a week 

with us—the CMS staff from the Atlanta regional office and from 

the central office staff. They conducted an extensive documentation 

review. They talked to the WellCare staff. They talked to WellCare 

senior officials. They pulled a number of multiple—and varied samples. 

As a result of their work, they gave us preliminary findings in 

areas relating to marketing, in terms of managing our brokers and 

making sure that our beneficiaries totally understand the product 

for which we are responsible for selling. 

The formal report did come to us on April 19. Those particular 

findings relating to marketing were in the report we received later. 

We are now in the process of developing a corrective-action plan 

that is due to CMS by June 3. I am confident that they will accept 

the recommendations that we have in there. 

Much of the work we had already done in implementing our 

proactive compliance program, our zero-tolerance program, was already underway before this CMS review. 

The CHAIRMAN. Well, when you say the report covered the areas 

of proper training of the people who represent you out there and 

it also covered the need to be sure that people who enroll in your 

program know what they are enrolling in, I mean, isn’t that the 

ABCs of your business? 

Mr. BAILEY. It is. 

The CHAIRMAN. Well, wait, wait, wait. If those are the ABCs of 

your business, aren’t you responsible to be sure and scrupulous—

totally scrupulous—to be sure that these things are not happening? 

Isn’t that your job? 

Mr. BAILEY. That is our responsibility. 

The CHAIRMAN. Well, then——

Mr. BAILEY [continuing]. Quite seriously. 

The CHAIRMAN [continuing]. Why do you—I mean, how is it you 

come here today and talk about, ‘‘Well, we are doing this, we are 

doing that,’’ and, ‘‘Absolutely, we would like to have a national registry,’’ when, in fact—yes, it would be helpful and I think it is a 

good idea and I think we are going to see if we can’t do that—but 

it is your job to be sure that the people you are hiring have been 

background-checked——

Mr. BAILEY. That is right. 

The CHAIRMAN [continuing]. In a complete manner so that if they 

do have things in their past that should deny them employment in 

your company, it is your job to do that. Isn’t it? 

Mr. BAILEY. Yes. There are a number of action we take. In fact, 

we do a very extensive screening process before we contract with 

134

a broker. We check the excluded lists of the OIG and the GSA. We 

do a rigorous examination for appropriate State licensure. We have 

to make sure they are licensed by a State. We do Federal criminal 

background checks, as well as in the county of residence. 

We also train, train and retrain our agents. We also do field 

management. There has been——

The CHAIRMAN. But if you do all of these things and do them 

carefully, properly and well, then infractions would be very, very 

rare. Wouldn’t they be? 

Mr. BAILEY. Yes, they would. I think the infractions are very 

rare. There are a few infractions. There are some bad apples that 

we have been dealing with. 

We have established systems along the lines of what I was describing, as well as new ones, in my oral testimony that will provide for a very strong compliance program. We are proud of this 

compliance program. 

But in those instances where something happens and someone 

becomes a ‘‘bad apple’’, we also have processes in place to immediately identify that agent and terminate that agent, such as the 

one I had mentioned in the North Carolina case, and in the Georgia case. Both of those situations had been brought to our attention 

by the DOIs and we acted swiftly to terminate the brokers and 

work with those particular States. 

The CHAIRMAN. Mr. Clarkson, last August CMS wrote to your 

company that your firm’s sales of Medicare Advantage plans had 

drawn hundreds of complaints. The CMS letter was a pretty firm 

indictment of your sales-marketing and outreach activities. 

In the same way that I asked Mr. Bailey, I ask you: How do 

these things—recognizing nobody is perfect, you know; and I understand that. I have been in business all of my life and I understand 

imperfections. But I have always, in my own businesses, taken personal responsibility for anything that had gone wrong, and felt it 

was my job to be sure that those people who represented us were 

as thoroughly checked out and trained, you know, as was humanly 

possible and that any infraction was a severe indictment of my 

companies, as well as my management. 

It was just not acceptable for people to act unscrupulously or 

fraudulently or intentionally misrepresenting a product. I mean, 

that was beyond the pale. 

Now, if that is the position in your company, why aren’t we almost perfect, recognizing that we can’t be perfect? But why aren’t 

we almost perfect? 

Mr. CLARKSON. Senator, I can appreciate your question and your 

comments. 

We have made progress as an organization, but we are not perfect. There were several factors that contributed to the correctiveaction plan: Our relative newness to using brokers in a marketplace—we moved to a condensed selling cycle, so there were shorter 

periods of open enrollment; the relative newness of the private feefor-service plan—it was introduced in 2003, but really didn’t begin 

to get or gain momentum until the fourth quarter of 2005. The 

market response was immense. 

As we described, we went from relatively no enrollment to 

178,000 members in 2006. That is explosive growth for any type of 

135

product. We had challenges with our integration with PacifiCare 

and we had infrastructure issues. We made modest projections of 

enrollment that we, quite frankly, Senator, blew right past, and did 

not have some of the infrastructure in place to manage the business. 

The CHAIRMAN. Ms. Margulis, in your testimony, you outlined a 

very impressive regimen of training and education program for 

your sales representatives and broker agents at Humana. That 

being the case, how did you get into such difficulty with CMS, 

winding up in a corrective-action plan and also have serious problems with the State of Oklahoma, as was outlined by the commissioner who testified before you? 

Ms. MARGULIS. Mr. Chairman, first, any violation is an issue. As 

I mentioned in my testimony, Humana has been in the Medicare 

business for 20 years. Likewise, we are not perfect and we seek 

continuous quality improvement. 

The CMS audit of us occurred in 2005. We did make extensive 

changes to our program. As the last witness mentioned, we, too—

while we have a very large employed sales force, we also contract 

with independent agents primarily through agencies. 

As a result of increased complaints, we took corrective actions. 

We are responsible for both our employed agents and also our contracted agents. They are all appointed. We set up a compliance contract with agencies after that CMS audit and after we received significant numbers of complaints. We established a compliance agreement with our delegated agencies that specified what was required 

of us and them. We even terminated one agency in the process. 

Furthermore, we worked with a former NAIC staffer for the Senior Issues Committee to develop a suitability assessment, since 

many of the complaints stemmed from the fact that people did not 

know they were buying a Medicare Advantage product and not a 

Medicare-supplement product. 

We have had a verification process in place since 1991. That 

verification process has been modified over time. Based on complaints that we receive, we modify our processes. 

We also, based on both what happened with the Oklahoma Department of Insurance as well as CMS, have implemented within 

our internal audit department at Humana a complete internal 

audit of all of the areas. 

We seek to improve each day. Ways in which we are are in my 

testimony. 

Again, the sales allegations and those that are founded are a 

very small percentage; considerably less than one percent of all 

sales. Even so, that is more than we want. We give you our commitment, as we have the States, to work to find a way that it is 

even less than what it is today. 

The CHAIRMAN. All right. Before I turn it over to Senator Wyden, 

I just want to make the point that this Committee, just like you, 

wants to do its job well. You know our job is consumer protection. 

Without trying to be unfair, our job is consumer protection, and 

I think you understand that and you accept that. You would expect 

and accept for us to be very scrupulous in doing our job. The only 

way we can do our job is if you do your job. 

136

So, you know, we need to work in a cooperative way, obviously; 

not necessarily adversarial, but, certainly, cooperative. To the extent that we disagree, we have to find ways in which to move forward that will provide maximum consumer protection. You know, 

that is our job and that is your job, too. 

You can, I hope, look forward to the kind of an involvement from 

this Committee that will result in the only thing that we want, 

which is almost zero mistreatments of people who sign up to do 

business with your companies. That is your goal. Our job is to oversee you, which, I am sure, you understand and accept. 

You know, personally, I am looking forward to working with you 

to be sure that in the months and years ahead, we do not have 

problems with people who sign up with your companies to do business—you know, the very least that they expect—right?—is that it 

is honest, straightforward; that there is nothing there that is misrepresented. 

I mean, that is the very least that people who do businesses with 

your companies have a right to expect. Isn’t that true? I mean, any 

disagreement with that? 

Mr. Bailey. 

Mr. BAILEY. No disagreement with that. 

The CHAIRMAN. Mr. Clarkson. 

Mr. CLARKSON. No disagreement, Senator. 

The CHAIRMAN. Ms. Margulis. 

Ms. MARGULIS. No, sir—zero tolerance. 

The CHAIRMAN. Ms. Ignagni. 

Ms. IGNAGNI. Absolutely no disagreement, sir. I think you are absolutely right. We are going to take the responsibility of addressing 

these issues affirmatively, very specifically, and in an accountable 

fashion. 

The CHAIRMAN. That is great. I appreciate that. 

Ms. IGNAGNI. Thank you. 

The CHAIRMAN. Senator Wyden. 

Senator WYDEN. Thank you, Mr. Chairman. I just want to comment you, first of all, for all your leadership. This has been an excellent hearing. You have really shone a hot light on this problem, 

where seniors are getting ripped off. It is clearly not an isolated 

case. There is a pattern. 

I am very appreciative that you are going to stay at it and get 

to the bottom of it. You will have my full support in that effort, Mr. 

Chairman. I commend you for it. 

Ms. Margulis, you made a statement in the course of your testimony that disturbs me very much. I want to make sure I understand it and give you a chance to amplify so the record is clear. 

You said that the Federal law doesn’t have to change here. You 

said that there are already adequate tools to deal with it. 

Do you continue to assert that position? 

Ms. MARGULIS. We believe that the Federal Government, working together with the States, can, indeed, ensure consumer protection. 

Senator WYDEN. Well, that, then—in fact, let’s make sure I can 

get the views of everybody else on the record on that as well. 

Mr. Clarkson, do you agree with that—that Federal law does not 

need to change here? 

137

Mr. CLARKSON. I think we have to look at what is going to be 

most beneficial to the beneficiary. 

Senator WYDEN. Just a yes or no. Do you think Federal law 

needs to change? Do you believe, as Ms. Margulis said, that there 

are already adequate tools in Federal law to deal with it? Just a 

yes or no. 

Mr. CLARKSON. No, Senator. 

Senator WYDEN. You think Federal law may have to change? 

Mr. CLARKSON. No, I do not think Federal law needs to change. 

Senator WYDEN. Very good. 

Then, Mr. Bailey, yes or no—do you think Federal law needs to 

change? 

Mr. BAILEY. I think the tools have been provided to us, but we 

need much more communication between all of the parties involved. 

Senator WYDEN. OK. 

What you three have now stated on the record is contrary to 

what the insurance commissioners have told us earlier. What the 

insurance commissioners—Mr. Dilweg and Ms. Holland—have 

said—and it is at page five and six of Mr. Dilweg’s testimony—is 

that under the Medicare Advantage statute, they have got authority as it relates to brokers and as it relates to those individuals, 

but very limited authority over the actual insurance companies. 

They would like to have actual authority over insurance companies, actual legal authority. That is why I asked them about the 

applicability of the Medigap law. 

So what you have stated here, on the record, is contrary to what 

the insurance commissioners have stated earlier—they say they 

need. Now, that is not very different than what happened the 10 

years that I was battling to get those Medigap changes. 

I want to assure you—I want to assure each of your companies—

I am not going to wait 10 years to have this corrected. It is not 

going to happen again. I don’t think Chairman Kohl is going to 

allow it and I don’t think Republicans of the U.S. Senate are going 

to allow it. 

We are going to drain this swamp because this is not an isolated 

set of instances. There has been a pattern here. By the way, it is 

given a bad name to the many good people who are offering private 

health insurance. I have got many of them in my State. We have 

the largest incidence in our State in the country—in Portland—of 

managed care. We have had a long history of private roles. 

So you are having older people ripped off and also giving a bad 

name to the many people in private insurance who do a good job. 

I and others are not going to accept it. 

Now, what are we going to do to get you on the same wavelength 

as the insurance commissioners who described a very different position than you all have stated? 

Let’s start with you, Ms. Margulis. 

Ms. MARGULIS. Senator, first, with regard to appointment in the 

States, Humana has a policy to appoint our agencies. So the State, 

indeed, does know who represents Humana. 

As I mentioned to you, we take full responsibility for delegated 

agents or contracted agents, as we do with our employed agents. 

So my suggestion would be that CMS and the States work together 

138

so that appointment is required of companies. That will give the insurance commissioners information to work directly with the insurers. 

I might add that it is, from where I sit, our responsibility to work 

with both State and Federal regulators. 

Senator WYDEN. You are still reflecting a position that is contrary to what these insurance commissioners are saying they need 

in terms of tools. I would urge you—and we will keep the record 

open, you know, for you on this—read what Commissioner Dilweg 

says at page five and six. He is talking about how he has the tools 

for Medicare Advantage as it relates to State regulation of the 

agents and brokers. 

He is saying he doesn’t have the tools with respect to the companies. He needs those tools. Ms. Holland said that as well. 

I just think it is unfortunate—we are interested, as the Chairman has said, in working with all of you. I am not one who thinks 

that private insurance ought to be put out of business. I mean, I 

have written a universal-coverage health bill—the Healthy Americans Act—that has that role for private health insurance. But this 

has got to change. 

So I will hold the record open for you on this. If either of you 

two other individuals, Mr. Clarkson or Mr. Bailey, would like to 

add anything—but I don’t think this is the right way to end a hearing, when the private companies, after a pattern of abuse—it is revealed that private companies are then taking a position which is 

contrary to what the insurance commissioners say they need. That 

is something that we are going to revisit. 

Ms. Ignagni, do you want to add anything? 

Ms. IGNAGNI. Yes, sir. Would you consider a suggestion? 

Senator WYDEN. Sure, of course. 

Ms. IGNAGNI. What we have laid out as a community are some 

very specific, measurable standards that go beyond what we are 

being required to do today. 

We are going to be now initiating dialog with CMS, working collaboratively with CMS. We found out about these issues in listening to the insurance commissioners and advocacy groups around 

the country. 

We are very comfortable with CMS proceeding to accept these 

recommendations and being in dialog about continuing to add to 

the standards we are required to meet. That is point No. 1. 

Point No. 2, which I think is something that the insurance commissioners talked about and could be done today, is for the NAIC 

and every insurance commissioner to agree on a single standard 

that would be established at the State insurance-commissioner 

level to require us very specifically to set up terms and conditions 

under which we report bad practices, whether they be agent or 

broker or our own employees. We think that absolutely needs to be 

done—not simply dismissals for cause, but at sub-par practice. 

I think these two issues could be taken together. What you have 

out there is inconsistent approaches to brokers. Now that we understand that, we have made some specific recommendations. We 

are fully comfortable with CMS proceeding along these lines. We 

would like to be in dialog with you and add to those recommendations. 

139

We think the State appointment process also, as Ms. Margulis 

has said, does offer us an opportunity. So, I think, taken together, 

you are looking at a fabric of accountability mechanisms that don’t 

exist today. So we hope we have started something positive here. 

We want to be very transparent about it. We are going to be 

working with all parties, including advocacy organizations, because 

we think they have a lot of important learnings to add to this important issue. 

Senator WYDEN. I appreciate that. There is no question at all 

that steps are being taken by your organization, by all of the three 

companies. 

What I find troubling, however, is when the insurance commissioners—the lead commissioners like Commissioner Holland, Commissioner Dilweg—come in, state for the record in their testimony 

that they need additional tools because the Federal Government 

has limited their authority, and then, we have the companies saying, ‘‘No, we can do all this with the current tools.’’ That still leaves 

me very troubled. 

We are going to continue to follow this up. We will leave this for 

the record. There is no doubt that steps can be taken by the agency 

called CMS, the private companies. Steps ought to be taken immediately. You have made it clear that that is going to be the case. 

But there still is a significant gap between what the insurance 

commissioners have told us today they need and what the three 

companies have said that they are willing to support. So we will 

continue to revisit this and continue to have a discussion about it. 

One last question, then, if I might, for the three companies—

starting with you, Ms. Margulis. Just go down the row. How did 

this problem get out of hand? It seems to me you all have described 

various programs, verification programs. Ms. Margulis talked about 

the training programs and the like. But it was clear this was going 

to be a big market. 

I have got a Wall Street Journal article here, recently, talking 

about Humana making 66 percent of its net income from Medicare 

Advantage this year. I mean, it was clear it was going to be a big 

market. I think it would be valuable to have, on the record, from 

each of you, your perspective as to how this problem got out of 

hand. 

Ms. Margulis. 

Ms. MARGULIS. We, as I mentioned, Senator, do have and always 

have had a zero-tolerance policy. When allegations come to our attention, we seek to investigate and to take corrective action. 

The allegations that we have, no matter how many they are, are 

troubling, but in terms of the number of members whom we have, 

are small. 

Senator WYDEN. But that is——

Ms. MARGULIS. However——

Senator WYDEN. That is not, ma’am, what the Oklahoma Insurance Department said. 

The Oklahoma Insurance Department said that there were many 

problems. My question is, given that the regulators are saying that 

there are many problems, I would like to hear your thoughts about 

how it got out of hand. Because if a company has a zero-tolerance 

policy and then an insurance regulator documents that there are 

140

many problems, that would suggest to me that the zero-tolerance 

policy wasn’t working particularly well. 

I am just interested in getting your sense of how things got out 

of hand. 

Let me say that, in the past, in terms of our experience, we have 

had employed sales representatives and a strong program; although, there have been sales complaints in that process, as well, 

which we have addressed. 

As one of the witnesses mentioned, there are short enrollment 

periods during which we marketed throughout the country, which 

caused us to contract with a number of independent agents. We 

needed to strengthen the program for the contracted sales force. 

That is what we put into place going forward. We have, as we have 

gone forward, worked to reduce the number of contracted agents 

who sell our products. 

As I mentioned, last year, for the 2007 season, we had about 82 

percent of our sales coming from employed agents. So there was 

strengthening of the training programs. 

There were complaints that people were not receiving full and 

fair disclosure with regard to the kind of products that they were 

buying, which caused us to re-look at our verification processes 

that had been in place for years, but, obviously, did not address the 

new products that were in the market that needed additional clarification. 

So we made some mistakes, Senator. We put into place mechanisms to address those. We are not perfect today. Let me mention 

two more mechanisms. 

We need to be making callbacks to people who have purchased 

our product to make sure that the sales experience was what it 

should have been and fully disclose to people what they were buying. Secondarily, we, as I mentioned, are working very hard to 

see—and we will work with States and CMS to see if we can’t have 

some sort of national registry for reporting infractions; not just 

those that are caused by people who violate our marketing code of 

ethics, but where there are demonstrable trends and complaints. 

Senator WYDEN. Mr. Clarkson, how did problems get out of 

hand? 

Mr. CLARKSON. Thank you, Senator. 

I, first of all, would say that we understand our accountability 

to this and accept that responsibility for these issues. During the 

open-enrollment period, we made changes in terms of the selling 

cycle and the length of time that is open for enrollment. 

We introduced a private fee-for-service plan, which was designed 

to serve traditionally underserved markets, specifically the rural 

market, where older Americans have not had an opportunity for 

traditional insurance products to be offered in those areas because 

of network issues, because of coverage issues and because of staff 

issues in terms of being able to place people in those remote areas. 

In addition to that, Senator, we underestimated the popularity of 

this plan and we had, and experienced, explosive growth without 

having an infrastructure in place to support that as effectively as 

what our members and our providers are entitled to. 

Senator WYDEN. What does that mean, that, ‘‘There wasn’t an infrastructure in place’’? There wasn’t training? I mean, you know, 

141

are marketing abuses infrastructure? I mean, what does that 

mean? 

Mr. CLARKSON. I am referring to training mechanisms, broker 

oversight mechanisms; the ability for the IT infrastructure to handle enrollment, claim processing; our customer service areas; of 

which we have, over the course of 2006 and into 2007, have made 

much progress and advances in all of those areas that we would 

love to be able to share with you. But we have work to do. 

Senator WYDEN. Mr. Bailey, how did problems get out of hand? 

Mr. BAILEY. WellCare‘s experience with the new private fee-forservice product, which has proved to be extremely popular with the 

Medicare beneficiaries is less than 20 weeks old. It is somewhat of 

a hybrid between fee-for-service and managed care plan. 

I think the challenges we faced were in educating ourselves, all 

of our partners, and the beneficiaries—we have developed new 

compliance initiatives. I think the secret shopper program is going 

to help us in gauging beneficiary satisfaction with marketing and 

making sure that they are not given inappropriate information. 

We are very excited about the inbound enrollment-verification 

process calls. We are going to be talking to Medicare beneficiaries 

at the point of enrollment, with another WellCare representative 

on the phone, other than the broker, to make sure the beneficiary, 

clearly understands the implications of joining a private fee-forservice plan. Heretofore, we were not doing that. We are going to 

be doing that now. 

Coupled with the back-end post-enrollment calls we have been 

doing, we hope to minimize instances of inappropriate marketing 

even more. So when we do come here in the future, there will be 

even less problems to discuss. 

I do want to say I believe these inappropriate marketing by 

agents are the exception and not the rule. It doesn’t mean they are 

acceptable. It doesn’t mean we don’t have a zero-tolerance policy. 

But we are doing everything we can. We are open to ideas from the 

Committee. We support the AHIP principles and will work with 

our colleagues here to make sure that we are doing all that we can 

do. 

Senator WYDEN. Mr. Chairman, I think your hearing has covered 

it. I am glad that you are going to keep the hot light of the congressional-hearing process and your gavel on this. 

I will tell you, based on everything that I have heard, I think 

there is a lot of heavy lifting left to do because it is clear that the 

insurance commissioners feel they need additional tools to deal 

with the problem. We have had three companies go on the record 

as indicating that the existing tools are sufficient. 

So I look forward to following this up with you. Given how many 

complaints there have been from our constituents, I think moving 

quickly now, while people see that your Committee is going to stay 

at it, is particularly helpful. 

I look back at the history of Medigap. Again and again, interest 

would flag and people would move on to another subject. With you 

and your capable staff, we are going to stay at this now and get 

it done and get it done quickly. 

142

I look forward to working with you, Senator Smith. Of course, my 

colleague and friend from Oregon will be working as well on a bipartisan way. I thank you. 

The CHAIRMAN. Thank you very much, Senator Wyden. Your experience with Medigap has really been beneficial here today. I 

think it points the way in terms of the directions in which we need 

to travel. 

We do appreciate your presence here today, folks. I have no 

doubt you want to be as perfect as human beings can be, understanding that 100 percent is hard to get to. But I believe you want 

to get as close to 100 percent as we can get. 

I think that there is a lot of opportunity for us to work together 

to get there in a way that would cast positive light on all of us and, 

particularly, you, because these are your companies. We know you 

want to be regarded as A-plus players in the industry. We have no 

doubt about that. 

So we will work together. We will get a lot done. Again, we appreciate you being here today and we are looking forward to working with you. Thank you so much. 

This hearing is closed. 

[Whereupon, at 1:58 p.m., the Committee was adjourned.] 

(143)

A P P E N D I X 

PREPARED STATEMENT OF SENATOR ROBERT P. CASEY, JR. 

I want to thank you Chairman Kohl for holding this hearing on such a critical 

issue to our older citizens. I am grateful to have the opportunity to hear from the 

impressive panels of witnesses you have brought together on the issue of the marketing and sale of Medicare Advantage Plus. 

The Medicare Modernization Act of 2003 made some significant changes regarding 

benefit options available to Medicare beneficiaries. Part D, the Medicare prescription drug benefit, was initiated with the MMA. Another significant change was an 

increase in payments by the government to private insurance plans, also known as 

Medicare Advantage (MA) plans, that offer Medicare benefits. The original intent 

of this provision was to encourage participation, competition and enrollment. Payments to Medicare Advantage plans average anywhere from 12% to 18% higher 

than payments to traditional Medicare fee-for-service providers. 

I am deeply concerned about troubling reports I have heard from my state about 

the marketing tactics of Medicare Advantage Plans. These reports have come from 

the Department of Aging and concern citizens who are enrolled in the Pennsylvania 

Pharmaceutical Assistance Contract for the Elderly, also known as the PACE Program. With the advent of Medicare Part D, seniors had the option of enrolling in 

PACE Plus Medicare, thus supplementing prescription drug coverage under PACE 

with the federal Medicare Part D program. The PACE program currently serves 

about 15% of the 65-plus population in Pennsylvania. 

The PA Department of Aging, which administers the PACE Program, has informed my office that literally hundreds of Medicare beneficiaries have reported 

being misled and in some cases even deceived into enrolling in Medicare Advantage 

plans by the independent agents who sell these private plans, a practice known as 

‘‘slamming.’’ Specifically the beneficiaries have complained of being subjected to high 

pressure sales pitches about benefits and coverage offered. I understand that seniors 

who are concerned about the high cost of healthcare and prescription drugs are 

often told they will pay less on a private plan, only to find out that just the opposite 

is true. It is particularly troubling because MA plans receive financial incentives 

from the government for removing beneficiaries from Medicare and enrolling them 

in a private plan. 

According to reports and some of the testimony we will hear this morning, this 

is also happening I states all over the country. Older citizens may end up enrolling 

in plans that are not appropriate for their needs. They may not find out until they 

go to a regular doctor’s visit that their doctor is no longer covered under the Medicare Advantage program in which they are now enrolled. Another troubling aspect 

is the question of jurisdiction over these disputes. The Center for Medicare and 

Medicaid Service (CMS) oversees MA plans and claims sole authority to regulate the 

corporate providers that sell these plans. Yet states clearly have a compelling interest in protecting their citizens against fraud. This is an egregious situation that 

must be resolved quickly and comprehensively. I will be working with the Aging 

Committee and Pennsylvania state officials to get to the bottom of this problem and 

ensure that our senior citizens are well protected from such deceptive and misleading practices. 

RESPONSES TO SENATOR KOHL’S QUESTIONS FROM ABBY BLOCK

Question. How many complaints has CMS received regarding the marketing and 

selling of Medicare Advantage plans? How have these complaints been resolved? 

Answer. Between December 2006 and April 2007, CMS received approximately 

2,731 complaints related to Medicare Advantage marketing issues. Most of these 

complaints are received via 1–800–MEDICARE, phone, fax, and through CMS Regional Offices. Of the 2,731, 1,925 have been closed and 806 are still open. 

144

Question. Do you analyze complaint data to identify trends, poor business practices, and other large thematic concerns in specific geographic areas? 

Answer. Yes. Complaints received through 1–800–MEDICARE are logged into a 

Complaint Tracking Module (CTM), which was designed to allow CMS to better 

identify sponsor-specific, plan type-specific, and area or region-specific trends. The 

CTM captures and tracks Medicare Part C and D complaints to facilitate immediate 

and longitudinal oversight for the Medicare Advantage and Medicare Drug Benefit 

Programs. 

Question. What is CMS doing proactively to anticipate and prevent problems with 

sales and marketing of Medicare Advantage plans? 

Answer. With the significant expansion of MA enrollment we remind organizations that they are responsible for the actions of sales agents/brokers whether they 

are employed or contracted. Organizations must ensure agents/brokers are properly 

trained in both Medicare requirements and the details of the products being offered. 

Employees of an organization or independent agents or brokers acting on behalf of 

an organization may not solicit Medicare beneficiaries door-to-door for health-related 

or non-health-related services or benefits. Medicare Advantage organizations must 

provide strong oversight and training for all marketing activities. This is especially 

critical for the marketing of private fee-for-service (PFFS) plans, which are unfamiliar to many beneficiaries and providers. 

CMS has established policies for MA plans to follow in order to protect beneficiaries from inappropriate sales tactics. For example, CMS requires that plans use 

only State-licensed marketing representatives; monitor marketing representative activities to ensure compliance with applicable laws and policies; ensure that the identity and other information of a marketing representative is reported to a State when 

required; and ensure that terminations for cause are reported to the appropriate 

State agency, if a State has such a requirement. 

Because organizations are required to use only a State-licensed, registered, or certified individual to market a plan, if a State has such a requirement, CMS expects 

an organization to comply with a reasonable request from a State insurance department, or other State department that licenses individuals for the purpose of marketing insurance plans, which is investigating a person that is marketing on behalf 

of a organization, if the investigation is based on a complaint filed with the State 

insurance or other department. CMS also encourages an organization to report a 

person that markets on the plan’s behalf to the appropriate State entity if an organization believes that the person is violating a State’s licensing, registration, certification, insurance or other law. 

RESPONSES TO SENATOR SMITH’S QUESTIONS FROM ABBY BLOCK

Question. What are the findings from the Secret Shopper program, and what actions will CMS be making in response to any concerns raised by the secret shoppers? 

Answer. Because CMS has received an increasing number of complaints from 

Medicare beneficiaries resulting from PFFS marketing activities, we investigated 

the practices of sales agents in the field to evaluate which marketing requirements 

and guidelines may have been violated. These complaints range from minor to egregious. To help CMS assess the proliferation of non-compliant PFFS marketing tactics, auditors from our contractor observed 42 sales events in varying geographic 

locals nationwide under a ‘‘Secret Shopper’’ initiative. The auditors observed many 

areas of violation and identified specific compliance concerns. Medicare program violations were documented in the following general categories: (i) incentives, (ii) preferential targeting of healthier beneficiaries (‘‘cherry picking’’); (iii) misrepresentation 

of potential charges/fees, and (iv) misrepresentation of plan rules/services. The top 

four violations were:

1. Failure to clearly communicate the deeming process. 

2. Failure to clearly communicate provider or network restrictions with the PFFS 

plan. 

3. Failure to communicate that if a beneficiary obtains a service not covered under 

PFFS that the beneficiary is responsible for the cost. 

4. Failure to clearly explain the charges for which the prospective member will 

be liable.

CMS takes any violation of our marketing policies very seriously. We will be closely monitoring plan marketing activities, and will take appropriate corrective action 

where necessary to protect Medicare beneficiaries from being misled or harmed. 

Question. What recourse does a beneficiary have who has been misled into enrolling in a MA plan, and can you please explain the process for disenrollment? 

145

Answer. CMS has the legal authority to establish a Special Election Period (SEP) 

for exceptional circumstances. In the case where a beneficiary has been misled into 

enrolling in an MA plan, we believe an SEP is appropriate. This SEP would allow 

the beneficiary to disenroll from one plan and enroll in another or return to Original 

Medicare. The beneficiary may request disenrollment from their plan either in writing or electronically (if the plan offers that option), or by calling 1–800–MEDICARE. 

Follow Up Questions: 

Question a. How does CMS publicize the disenrollment process to beneficiaries, 

plans, SHIPS, and advocacy groups? 

Answer. Retroactive disenrollment actions are performed on a complaint/request 

basis. The SHIPs, 1–800 Medicare customer service representatives and caseworkers, and beneficiary advocate partners are aware of the availability of such actions when appropriate. 

Question b. Is there a way for CMS to simplify and better publicize the 

disenrollment process? 

Beneficiaries can call 1–800–Medicare to disenroll, which we believe is a very simple and well-understood option. The availability of customer service representatives 

at 1–800–Medicare to meet a variety of beneficiary needs and handle complaints is 

well publicized. 

Question c. For the period January 2005 through May 2007, how many retroactive 

disenrollments from MA plans have been applied for? Of the foregoing, please specify the type of MA plan (HMO, PFFS, etc.) to which the request relates. 

Question d. For the period January 2005 through May 2007, how many retroactive Disenrollments from MA have been granted, and on what basis? Of the foregoing, please specify the type of MA plan (HMO, PFFS, etc.) to which the request 

relates. 

Answer for c and d. In Calendar Year 2006, there were 303,732 disenrollments 

from PFFS MA/MA–PD plans and 1,374,212 disenrollments from non-PFFS MA/

MA–PD plans. Of the total disenrollments in 2006, 74,922 were retroactive. 

From January 2007 to April 2007, there were 136,359 disenrollments from PPFS 

MA/MA–PD plans and 387,953 disenrollments from non-PPFS MA/MA–PD plans. Of 

the January to April 2007 disenrollments, 8,693 were retroactive. 

These disenrollment figures include routine enrollment changes made during open 

enrollment periods. Disenrollments due to death are not included. Some beneficiaries may have had multiple disenrollments during these timeframes. 

Comparable data on disenrollments between January 2005 and December 2005 is 

currently unavailable due to the transition in database systems from 2005 to 2006. 

Question. Many stakeholders have suggested implementing a national registry of 

agents and brokers as one mechanism to create greater accountability and enhance 

oversight of sales agents. What is CMS’ perspective regarding the utility of this registry? 

Answer. CMS will be gathering agent/broker information and will make that information available to States. While this is does not constitute a national registry, 

it would serve the purpose of informing State regulators of which agents and brokers are selling specific Medicare managed care products for specific organizations. 

CMS also is exploring the feasibility of making this information available to the 

general public. 

Question. In light of the state law preemption provisions of the Medicare Modernization Act (MMA), can state laws on appointment of agents be lawfully implemented by states, or instead, would the MMA need to be amended to restore state 

appointment laws? 

Answer. Organizations have State appointment of agent laws with which they can 

voluntarily comply, and often do. At the same time, as noted above, CMS will be 

gathering agent/broker information and make that information available to States 

that have signed the MOU with CMS. 

Follow Up Questions: 

Question a. Commissioner Delwig has suggested that Congress look to Medigap. 

As a jurisdictional model for oversight of the MA program. Is that a sound approach, 

and why or why not? 

Answer. We question that approach. Medicare Advantage plans differ from 

Medigap plans in some significant ways. For example, Medigap plans are paid for 

entirely by the purchaser (i.e., either a beneficiary or an employer/former employer) 

and they supplement Medicare. Medicare Advantage plans, in contrast, provide all 

original Medicare benefits and in some cases additional benefits. The Medicare Advantage program is run and heavily subsidized by the Federal government and for 

that reason we believe that oversight of this program must remain at the Federal 

level. 

146

Question b. It is my understanding that in relation to the Memorandum of Understanding with the states, CMS will be implementing a secure website for states to 

access regarding complaints received by CMS. Can you provide more information 

about this website, e.g., what types of information will it contain, what entities will 

have access, when it will be operational, etc.? 

Answer. The purpose of the website is to create a place where MOU States can 

easily access documentation pertaining to compliance and enforcement actions that 

CMS has undertaken in the Medicare Advantage and prescription drug programs. 

The types of information that will be available on this website, which is targeted 

to be operational by the end of the summer, include:

• Summaries of CMS program audits 

• Civil monetary penalty letters 

• Intermediate sanction letters (e.g., freezing marketing and enrollment activity) 

• Letters announcing the Agency’s intent to terminate a Medicare managed 

care or prescription drug organization contract 

• Letter announcing the Agency’s intent to non-renew a Medicare managed care 

or prescription drug organizations contract 

• Individual complaints received by CMS where individual marketing agents or 

persons are named.

Question. For the period January 2005 to May 2007, how many complaints has 

CMS received related to sales and marketing of Medicare Advantage (MA) plans? 

In your response, please indicate: Please see the attached spreadsheets for answers 

to the following questions. 

• 1. for each month during the period January 2005 to May 2007, a monthly 

numerical summary of the type of plan to which the complaint relates (HMO, PFFS, 

etc.); 

• 2. for each month during the period January 2005 to May 2007, a summary 

of the type of complaint received (e.g., alleged inappropriate enrollments, questions 

about broker tactics, etc), and the number of each type of complaint; 

• 3. for each month during the period January 2005 to May 2007, of the complaints received each month, how many complaints presently are closed, and how 

many remain open; 

• 4. a yearly summary indicating the originating source of the complaint, e.g., 

beneficiary, SHIP, state department of insurance, etc.; 

• 5. a yearly summary of complaints received, complaints closed, and complaints remaining open; 

• 6. a yearly summary setting forth the average resolution time for closing complaints; and, 

• 7. for each month during the period January 2005 to May 2007, the number 

of complaints received by CMS relating to MA plans offered by each of the following 

entities—Humana, WellCare, and United Health Care.

Question. For the period January 2005 to May 2007, for Humana, WellCare and 

United Health Care MA plans, how many complaints has CMS received with respect 

to slow payments to providers? 

Answer. Between December 2006 and May 2007, CMS has received 24 complaints 

related to slow payments to providers. Nine concern Humana, one concerns 

WellCare, and 14 concern United Health Care. Prior to December 2006 and the establishment of the Complaint Tracking Module (CTM), CMS did not have one central method for collecting and classifying complaints and therefore cannot provide 

data for January 2005 to November 2006. 

Question. For the period January 2005 to May 2007, how many disciplinary actions has CMS taken against plans in relation to sales and marketing of Medicare 

Advantage (MA) plans? In your response, please indicate for each month during the 

period January 2005 to May 2007, the number and type of disciplinary action(s) undertaken (e.g., warning letter, corrective action plan, civil monetary penalties, contract termination, etc.) and the name of the plan against which the action was 

taken. 

Answer. This question is answered in combination with the follow-up question, 

below. 

Question. For the period November 2005 to May 2007, how many disciplinary actions has CMS taken against plans in relation to sales and marketing of Medicare 

Part D plans? In your response, please indicate: for each month during the period 

November 2005 to May 2007, the number and type of disciplinary action(s) undertaken (e.g., warning letter, corrective action plan, civil monetary penalties, contract 

termination, etc.) and the name of the plan against which the action was taken.

147


38618.176
148


38618.177
149

RESPONSES TO SENATOR BLANCHE L. LINCOLN QUESTIONS FROM ABBY BLOCK

Question 1. My state office in Little Rock has received many calls from constituents who have been the victims of misleading sales and marketing pitches for Medicare Advantage plans. Here are just two examples: 

In one case, insurance agents went into low-income housing buildings for seniors 

(housing projects) and set up shop in common rooms. They offered free food or $15 

Wal-Mart gift cards to residents, and signed up the seniors for MA plans. The company listed all the doctors who were supposedly on their plan, but many of these 

doctors were not in the plan, and one of the listed doctors was actually dead. 

Another example is misleading marketing strategies related to the MA plans 

logos. One company in Arkansas used a logo that implied that it is selling Medicare 

with extra perks (MedicareExtra is in big letters and the company name in small 

letters). Many people switched to this plan because they believed it was a better 

version of Medicare. 

Also, the agents call themselves ‘‘Medicare Specialists’’ when they are selling their 

plans. This made the seniors believe that they are just improving their Medicare 

coverage rather than switching to a new system. 

Companies and agents like this are clearly misleading seniors. Are there any 

plans to tighten the marketing guidelines to prevent these types of practices in future? Has CMS heard of other cases like this and what type of action is the agency 

taking to remedy marketing violations such as this? 

Answer. The Centers for Medicare & Medicaid Services’ (CMS’) priority is to ensure that Medicare beneficiaries have accurate and meaningful information necessary to help them make informed decisions about their Medicare health care and 

prescription drug coverage options. CMS shares your concerns and therefore, has 

been working diligently to implement stronger oversight requirements to ensure better accountability of marketing activities conducted by MA organizations. 

In general, CMS is taking actions aimed at strengthening our oversight of the 

overall Medicare marketplace, and taking specific actions against any organization 

that we suspect are violating Medicare program requirements. MA organizations 

that directly employ or contract with a person to market an MA plan must ensure 

that a plan representative or agent complies with the applicable MA and Medicare 

Part D laws, Federal health care laws and CMS policies, which include CMS’ Marketing Guidelines. In order to ensure that the marketing activities and outreach of 

these plans is accurate and complies with all program requirements, CMS has taken 

a proactive approach in developing additional MA oversight features. 

Question 2. I am concerned that seniors seemed to be getting blamed when they 

receive misleading information and sign up for the wrong plan. 

For example, if a person disenrolls before the plan takes effect (in the same month 

of enrollment), he or she can disenroll and enroll in another plan. If the senior enrolls for the first time in a managed care plan, he or she can disenroll. It appears 

most of these cases are handled on a case-by-case basis. But the senior has to allege 

misinformation or fraud and be specific. Some of these people are just stuck until 

next year. 

When my staff has contacted the Regional Dallas CMS office about this, they have 

been told: ‘‘Don’t these people check to see if their doctors are on the provider lists?’’

I don’t think they are taking into account that salespeople are knocking on doors 

and pressuring the seniors into enrolling in their plans. In Arkansas, there are a 

high percentage of uneducated seniors, not to mention those with cognitive problems, who may have difficulty understanding the different Medicare plans. 

Do you think that it is fair that senior who have been misled by sales agents have 

to prove that they received faulty information? How is this being addressed and do 

you have any recommendations for how we can better serve seniors when this occurs? 

Answer. CMS takes these concerns very seriously, and we are taking steps to ensure that beneficiaries are protected, and that there is better understanding of Private Fee-For-Service plans on the part of beneficiaries as well as providers. We are 

particularly concerned about reports of marketing schemes designed to confuse, mislead or defraud beneficiaries, and are taking vigorous action to address violations. 

Possible CMS enforcement responses to marketing violations range from issuing a 

corrective action plan, to suspension of enrollment, civil monetary penalties, or even 

termination of the plan from the program. 

CMS has the legal authority to establish a Special Election Period (SEP) for exceptional circumstances. In the case where a beneficiary has been misled into enrolling in an MA plan, we believe an SEP is appropriate. This SEP would allow the 

beneficiary to disenroll from one plan and enroll in another (or return to Original 

150

Medicare). The beneficiary may request disenrollment from their plan either in writing or electronically (if the plan offers that option), or by calling 1–800–MEDICARE. 

Question 3. I have several questions related to MA disenrollment. When individuals sign up for an MA plan, they may find out only afterward when they have received bills that they have been rejected both by the carrier for Original Medicare 

and their new Medicare Advantage plan. 

Individuals in this situation have the right to retroactively disenroll from the MA 

plan re-enroll in Original Medicare and have their provider resubmit claims to the 

Medicare carrier for payment. Few individuals are aware that they have these 

rights, however, and, even with the help of an advocate, it can be a difficult process. 

How are Medicare beneficiaries made aware that they have this right? Are the 

customer service operators at 1–800–Medicare aware of the right to a retroactive 

MA disenrollment? 

Answer. Retroactive disenrollment actions are performed on a complaint/request 

basis. The SHIPs, 1-800 Medicare Customer Service Representatives (CSR) and 

caseworkers, and beneficiary advocate partners are aware of the availability of such 

actions when appropriate. 

Question. Are they able to initiate and complete the process for a beneficiary in 

this situation? 

Answer. No, 1–800–MEDICARE CSRs are only able to process prospective 

disenrollments. Retroactive disenrollments are processed and sent to either the plan 

or a CMS Regional Office. 

Question. How long does it take to complete a retroactive disenrollment? 

Answer. A retroactive disenrollment from an MA plan entered into the CMS system online on a Monday, for example, would be processed and completed Monday 

night. The completed transaction would be available in the system by Tuesday 

morning. Once the disenrollment is complete, CMS notifies the plan of the change 

with a once weekly report. 

Question. Is the MA plan given any discretion on whether it will allow 

disenrollment in these situations? 

Answer. No. MA plans do not have discretion over disenrollment in these situations. 

Question. How many requests for retroactive enrollments has CMS received? 

Answer. In Calendar Year 2006, there were 303,732 disenrollments from PFFS 

MA/MA–PD plans and 1,374,212 disenrollments from non-PFFS MA/MA–PD plans. 

Of the total disenrollments in 2006, 74,922 were retroactive. 

From January 2007 to April 2007, there were 136,359 disenrollments from PPFS 

MA/MA–PD plans and 387,953 disenrollments from non-PPFS MA/MA–PD plans. Of 

the January to April 2007 disenrollments, 8,693 were retroactive. 

These disenrollment figures include routine enrollment changes made during open 

enrollment periods and disenrollments due to death. Beneficiaries may have had 

multiple disenrollments during these timeframes.

151


38618.178
152


38618.179
153


38618.180
154


38618.181
155


38618.182
156


38618.183
157

RESPONSES TO SENATOR SMITH’S QUESTIONS FROM COMMISSIONER DILWEG

Question 1—Preemption of State Laws 

Question. Why is a Memorandum of Understanding is necessary to facilitate what 

it seems should be occurring anyway, that is, the sharing of information between 

states and CMS? 

Answer. CMS maintains the MOU is necessary for the exchange of confidential 

agent and company information between CMS and state insurance regulators. Absent an MOU, CMS is unwilling to provide information on agent activity. 

Follow Up Questions: 

Question a. Can you tell the Committee what you hope to gain from the agreement, and is more needed? 

Answer. I am hopeful the MOU will lead to greater communications between 

states and CMS regarding MA complaints. While increasing shared information is 

a positive step, I do not believe it is the final answer to ensuring greater consumer 

protection from agent and company abuses. 

Question b. Many states would like to see a rollback of federal preemption provisions contained in the MMA, but plans maintain that it would be too onerous to 

comply with varying laws in 50 different states. Is there a middle ground that can 

be reached, for example, would it be a useful first step to restore state appointment 

laws? 

Answer. A rollback of federal preemption provisions would give me authority over 

insurance companies selling MA plans. As I mentioned in my testimony, I have all 

the regulatory tools I need. Federal pre-emption, however, prohibits me from using 

them to protect consumers purchasing MA plans. Without the ability to regulate the 

plans themselves, I am not able to provide input as to whether a marketing strategy, plan or advertisement is appropriate. Authority over the insurance companies 

would increase my ability to prevent abuses. It would allow me to hold companies 

responsible for inappropriate agent action. 

I put forth the Medigap regulatory model as a means to restore state commissioners’ authority over companies while also addressing industry concerns related 

to compliance with varying state laws. Under the Medigap model, there would not 

be 50 different laws regulating Medicare Advantage. Rather, states would enact one 

set of laws, developed by NAIC and CMS, to regulate MA. States electing not to 

enact the laws would remain pre-empted as they are now under the current federal 

regulatory structure for MA. 

It would be useful to restore state appointment laws given agent appointment by 

an insurance company creates a trackable link for states in determining which 

agents write MA coverage for which plans. However, there is some question as to 

whether CMS has the statutory authority to pre-empt state appointment laws. I 

would argue CMS does not have that authority. 

Question c. What is the most critical complication arising from the current bifurcated regulatory system in which states are enforcing licensing laws over agents, 

and CMS is exercising purview over the plans. 

Answer. Having regulatory authority over agents allows me to only address half 

the problem. Agents are not operating in a vacuum. They are responsible to a company that should be held accountable for the action of their agents, especially in 

those cases where company marketing and sales tactics are driving agent action. In 

cases where agents are initiating the problems, company accountability allows state 

regulators to turn to and require the insurers to fix the problems created by their 

sales force. Reaching the company with these complaints prevents further agent 

abuses. 

Under the current regulatory scheme state regulators are limited in what we can 

do to prevent abuses and are instead acting on a high number of complaints that 

result from abuses. Most state regulators do not have the resources to track down 

and respond to every inappropriate agent action. In order for me to do that I would 

have to increase my enforcement staff. 

MA complaints would be handled more efficiently and effectively if I could use my 

toolbox to investigate agents and companies collectively. This would allow for a 

much more proactive regulatory approach than states currently face. 

Question d. You advocate that Congress look to Medigap as a jurisdictional model 

for oversight of the Medicare Advantage program. In response, CMS has indicated 

that it is critical that the federal government maintain supervision and oversight 

of Medicare Advantage plans because in contrast to Medigap, which is purchased 

by beneficiaries with their own money, Medicare Advantage is federal program, MA 

plans are heavily federally funded, and the plans are CMS contractors. In light of 

the foregoing, is Medigap really the best jurisdictional model for overseeing the MA 

158

program? Can you point to other federal programs in which states are imbued with 

oversight of federal contractors? 

Answer. Under the Medigap regulatory model, CMS would retain ultimate regulatory authority over MA plans. CMS would merely be allowing those states that 

have enacted the federal regulatory program for MA (developed by NAIC and CMS) 

to enforce the laws. 

Beneficiaries are paying for MA with their own money. In addition to the part 

B premium, some pay a premium to the MA plans for additional coverage, including 

for prescription drugs. 

It is important to note that companies sponsoring MA plans are insurance companies required by federal law to be licensed in the states in which they provide MA 

coverage. It does not make sense to bifurcate the regulatory responsibilities for this 

coverage. 

As I mentioned earlier, CMS would have a significant role in developing the new 

regulatory provisions and would assure that the regulations CMS promulgates are 

properly enforced. 

Question 2—Complaints referred to CMS 

Question. For the period January 2006 through May 2007, how many MA marketing/sales complaints has your office referred to CMS, and of these complaints, 

how many remain unresolved? 

Answer. To date, we have not referred any formal complaints to CMS regarding 

marketing/sales issues. We contact the insurers and/or agents and attempt to resolve marketing/sales complaints. As part of the MOU we recently signed, we will 

share information about enforcement actions. The states and CMS are still finalizing the procedures for sharing this information. We do refer MA beneficiaries who 

call our office with MA plan problems to CMS for handling. 

Follow Up Question: 

Question a. How many agents/brokers have you identified that have been selling 

MA plans in you state, but have not been licensed in your state? 

Answer. We informed the insurers marketing MA products that we expected them 

to use only licensed agents. We have not identified any situations where unlicensed 

agents sold MA plans in Wisconsin. 

Question 3—National Registry for Agents/Brokers 

Question. Please elaborate on the concept of a national registry of agents, and explain your thoughts on what entity is best suited maintain the registry, what types 

of data the registry would contain, what types of complaints and/or disciplinary actions would result in an agent being placed on the registry, what parties would have 

access to the registry, and what the cost might be of implementing and maintaining 

such a measure? 

Answer. I was a bit surprised to read in the AHIP response that it was looking 

forward to working with CMS and NAIC on a national producer registry for insurance agents who sell MA. There is already a national registry of insurance agents, 

the National Insurance Producer Registry. Insurers can access information in the 

public portion of this database, the Producer Data Base (PDB). The PDB is an electronic database consisting of information relating to insurance agents and brokers 

(producers). The PDB links participating state regulatory licensing systems into one 

common repository of producer information. The PDB also includes data from the 

Regulatory Information Retrieval System (RIRS) to provide a more comprehensive 

producer profile. Through PDB, industry is able to access all public information related to a producer provided by the participating state insurance departments. The 

product is designed to assist insurers in exercising due diligence in the monitoring 

of agents and brokers to reduce the incidence of fraud. Currently, PDB contains information on over 3.8 million producers. Information available includes:

• Demographics—name, date of birth, addresses 

• License Summary—state of license, license number, issue date, expiration 

date, license type/class, residency, lines of authority, status, status reason, status/

reason effective date. 

• Company appointment information such as company, effective date, termination date and termination reason. 

• Regulatory Actions—State of action, entity role, origin of action, reasons for 

action, enter date penalty/fine/forfeiture, effective date, file reference, time/length of 

dates.

All of the above information is supplied by the states to PDB. The information 

is updated on a regular basis, usually daily or as submitted by states. 

Access to the PDB is sold on a subscription basis. There is a $75 annual fee per 

password and a $1.34 charge per ‘‘look up’’ of an entity in PDB. A ‘‘look up’’ includes 

159

all the available license information being supplied by participating states for an individual producer, business entity, or company. 

Question 4—CMS’ Marketing Guidelines 

Question. Do CMS’ marketing guidelines provide sufficient protections for beneficiaries? In your response, please indicate your opinion regarding whether the marketing guidelines allow any unacceptable practices. 

Answer. I believe CMS marketing guidelines unintentionally promote possible 

sales and marketing abuses in some areas. For example, the guidelines promote 

cross-selling of other products during the sale of Medicare products under the theory 

of financial planning for the Medicare-eligible. Agents sell seniors unrelated and 

sometimes unsuitable insurance products—including Medicare Advantage plans, annuities, life insurance policies, funeral policies, and other types of products. These 

other products are much more lucrative to the agents than Medicare Part D plans. 

Medicare Advantage plans are being reimbursed at an amount that is significantly 

higher than the cost of original Medicare; on average between 111% and 119% higher. As a side note, financial incentives tied to the MA plans are very likely driving 

the abuses we are seeing today. 

CMS marketing guidelines allow MA plans to change the cost-share provisions 

and premiums annually. This is a very significant problem. All stability in coverage 

for the beneficiary is lost. MA plans do not provide the stability and consistency people are accustomed to having in their health plans from year to year. In contrast, 

the Medigap model would provide that needed stability. Medigap plans are guaranteed renewable, meaning plans cannot unilaterally change coverage from year-toyear except to adjust to original Medicare’s changes of its deductibles and co-payments. 

The CMS guidelines seem to be written first for promoting the products and second for protecting the beneficiary. 

I feel that developing marketing and sales guidelines through a collaborative process, using the NAIC Medigap regulatory model, with CMS, state insurance regulators, the insurance industry, and consumer groups that the guidelines will accomplish protecting the consumer and the market place from abusive practices thereby 

promoting these products as valuable alternatives to the buying public. 

RESPONSES TO SENATOR LINCOLN’S QUESTIONS FROM COMMISSIONER DILWEG

Question. Commissioner, you mentioned in your testimony the unscrupulous practice of agents signing up people with dementia into an inappropriate plan. How 

widespread do you think this is? What kind of protective measures are there for 

these persons? 

Answer. My agency has received complaints regarding MA policies sold to people 

who have legal guardians appointed to make decisions on their behalf. The plans 

were sold without the guardians’ consent. I do not have documentation of dementia 

specific cases but certainly have seen cases where developmentally disabled individuals purchased plans without being fully aware of what they were committing to. 

While I cannot quantify how widespread this is, the fact that it has happened at 

all sends a red flag and indicates to me that it is happening in the market place. 

Individuals who feel an agent selling MA plans has acted inappropriately can file 

a complaint with my office. As I mentioned in my testimony, I can use my regulatory enforcement tools against bad agents but I can’t get at the insurers employing 

the agents. The ability to do so would hold companies employing agents accountable 

for their misconduct and would certainly help in preventing agent abuses. 

Question. You mentioned in your written testimony that Medicare Advantage 

plans can scale back benefits from year to year and seniors may not understand the 

changes and expect to get what they signed up for and at particular prices. How 

frequently are plans changing benefits and prices? Are seniors notified about these 

changes and how? 

Answer. Insurers offering MA products are allowed by CMS to change benefits 

and prices every year. OCI is not notified or involved in the process and therefore 

I do not have information regarding the number of plans that have made changes. 

I can tell you that most plans changed either benefits, prices or both in 2007. My 

point in mentioning these changes in my testimony was to demonstrate the burden 

these constant changes place on seniors—it means they have to re-evaluate their 

plan decision every year and try to make comparisons between plans that are all 

very different. 

CMS sets the standards for the notification of changes and the format for the notices which have to be filed with CMS. I believe they have to provide notice of plan 

changes by November 1 for changes effective the following January 1. 

160

RESPONSE TO SENATOR KOHL’S QUESTION FROM COMMISSIONER HOLLAND

Question. Your office took marketing enforcement action against a Medicare Advantage plan sponsor, Humana, despite what we were told is a pre-emption of your 

authority to do that. In fact, Humana, in its written testimony, cites that preemption. Why did you take those actions? 

Answer. Due to the high volume of consumer complaints Oklahoma received, we 

initiated a targeted market conduct examination. The examination was targeted at 

the agents’ conduct, over which we retain oversight. Humana’s claims practices that 

would have been violations of Oklahoma law, if not for federal preemption, were uncovered during the examination and was not the basis for the authority to conduct 

the examination. 

RESPONSES TO SENATOR SMITH’S QUESTIONS FROM COMMISSIONER HOLLAND

Question 1—Preemption of State Laws 

Question. Why is a Memorandum of Understanding necessary to facilitate what 

it seems should be occurring anyway, that is, the sharing of information between 

states and CMS? 

Answer. Federal and state privacy laws, in particular, hinder the ability of state 

Departments of Insurance and CMS to share critical information about consumer 

complaints regarding carriers or agents and brokers. The MOU establishes that the 

information shared will remain confidential and not be misused by the regulator. 

The MOU allows for the free and open sharing of information between the state and 

CMS. 

Follow Up Questions: 

Question a. Can you tell the Committee what you hope to gain from the agreement, and is more needed? 

Answer. As the insurance commissioner for the State of Oklahoma, I hope to receive complaints involving agents and brokers from CMS and send complaints involving carriers to CMS. 

More importantly, I hope to receive information from CMS on how and when complaints are resolved and what complaints are being received in other states against 

companies selling insurance in my state. My understanding is that CMS is currently 

working on a database that could be accessed by states that have signed the MOU 

and provide them with this much-needed information. However, we are still awaiting this information. 

Question b. Many states would like to see a rollback of federal preemption provisions contained in the MMA, but plans maintain that it would be too onerous to 

comply with varying laws in 50 different states. Is there a middle ground that can 

be reached, for example, would it be a useful first step to restore state appointment 

laws? 

Answer. First, I would like to point out that MA plans operated very successfully 

before MMA rolled back state regulation of the plans—and without all of the consumer problems that have since arisen. 

Second, I do think a middle ground exists. As suggested by Commissioner Dilweg 

of Wisconsin at the hearing, a single set of marketing rules could be developed and 

adopted by the states, which would then regulate the marketing practices of the 

plans. This model has worked with Medicare supplemental plans (Medigap) and 

would work in this instance, as well. 

Question c. What is the most critical complication arising from the current bifurcated regulatory system in which states are enforcing licensing laws over agents, 

and CMS is exercising purview over the plans. 

Answer. The inability of states to establish the marketing guidelines to be used 

by agents and brokers and hold plans responsible for the appointment, training and 

oversight of agents and brokers severely limits the ability of state regulators to do 

their job. 

Question d. You advocate that Congress look to Medigap as a jurisdictional model 

for oversight of the Medicare Advantage program. In response, CMS has indicated 

that it is critical that the federal government maintain supervision and oversight 

of Medicare Advantage plans because in contrast to Medigap, which is purchased 

by beneficiaries with their own money, Medicare Advantage is federal program, MA 

plans are heavily federally funded, and the plans are CMS contractors. In light of 

the foregoing, is Medigap really the best jurisdictional model for overseeing the MA 

program? Can you point to other federal programs in which states are imbued with 

oversight of federal contractors? 

Answer. While MA plans receive some federal funding, they are far from federal 

contractors. When a consumer purchases an MA plan, they enter into a contract 

161

with that plan to provide payment for certain health services. As with other health 

insurance carriers, the state’s responsibility is to ensure this contract was not entered into fraudulently or via unethical or misleading sales practices. 

It must also be noted that the consumer does contribute quite a bit to the cost 

of this coverage. First, the Part A portion of the premium was contributed by the 

consumer while he or she was employed. Second, the consumer must pay a portion 

of the Part B premium. Third, the consumer is, in most cases, required to pay an 

additional premium for the additional coverage provided by the MA plan (similar 

to Medigap coverage). 

Question 2—Complaints referred to CMS 

Question. For the period January 2006 through May 2007, how many MA marketing/sales complaints has your office referred to CMS, and of these complaints, 

how many remain unresolved? 

Answer. Due to the system established by CMS for complaints, the complaints are 

not referred by our office to CMS; rather the beneficiary must call 1–800–MEDICARE to make the complaint. However, in an attempt to serve our consumers, we 

do call CMS. When we call 1–800–MEDICARE on behalf of a beneficiary, we have 

trouble getting through, and when we do we speak to someone, it’s difficult to get 

any response. We have referred 138 complaints to CMS. Again, due to the structure 

established by CMS, they do not report to us if or when the complaints have been 

resolved. 

Follow Up Questions: 

Question a. How many agents/brokers have you identified that have been selling 

MA plans in you state, but have not been licensed in your state? 

Answer. The appointment process compels the insurer to verify the licensure of 

an agent because they cannot appoint an agent without a valid license. The only 

way to determine to what extent which insurers are utilizing unlicensed agents is 

to conduct targeted market conduct examination. 

With that being said, the targeted market conduct exam we conducted on 

Humana was inclusive of both Medicare Part C and D sales. We found 68 agents 

to be unlicensed as a result of that examination. 

Question 3—National Registry for Agents/Brokers 

Question. Please elaborate on the concept of a national registry of agents, and explain your thoughts on what entity is best suited to maintain the registry, what 

types of data the registry would contain, what types of complaints and/or disciplinary actions would result in an agent being placed on the registry, what parties 

would have access to the registry, and what the cost might be of implementing and 

maintaining such a measure? 

Answer. Such a national registry of agents and brokers has been in place since 

1996. The National Insurance Producer Registry (NIPR) is a non-profit affiliate of 

the National Association of Insurance Commissioners and provides a national database of producers and allows state regulators to communicate and coordinate oversight. 

Question 4—CMS’ Marketing Guidelines 

Question. Do CMS’ marketing guidelines provide sufficient protections for beneficiaries? In your response, please indicate your opinion regarding whether the marketing guidelines allow any unacceptable practices. 

Answer. The current marketing guidelines developed by CMS are not adequate to 

protect consumers. By allowing practices such as cross-selling, the guidelines encourage much of the unethical behaviors we are seeing in the market today. Further, it is obvious by the number of problems that currently exist in the market that 

CMS has inadequate resources which are necessary for enforcement deployed in the 

states. Thus, we maintain our assertion that CMS should work with the state regulators who already have the necessary resources and experience to protect their consumers. 

RESPONSES TO SENATOR SMITH’S QUESTIONS FROM SHERRY MOWELL

Question 1—National Registry for Agents/Brokers 

Question. Please elaborate on the concept of a national registry of agents, and explain your thoughts on what entity is best suited maintain the registry, what types 

of data the registry would contain, what types of complaints and/or disciplinary actions would result in an agent being placed on the registry, what parties would have 

access to the registry, and what the cost might be of implementing and maintaining 

such a measure? 

Answer. In my opinion, a national registry would need to be maintained at the 

federal level. Each consumer complaint would need to be investigated and, if found 

162

legitimate, the federal regulator would take appropriate action to restrict or prohibit 

an individual from selling any Medicare product. (I would suggest a sliding scale 

of punishment, with the most severe punishment being to completely and permanently bar an agent from selling any Medicare product.) The registry should be set 

up so that the public could check to see if an individual is under investigation (without full disclosure to the public of the details of the investigation); states should 

have full access for state licensing issues. Depending on the severity of the punishment, the states could use that information to take appropriate action against the 

individual agent license. (Congress should also consider modifying the federal law 

to enable states to take actions against licensed companies for company wrongdoing.) 

Any company engaging in Medicare business should have an obligation to notify 

the registry of suspected agent wrongdoing. Also, I would recommend that, prior to 

being approved to sell Medicare, an agent be required to acknowledge that the agent 

is aware of the ramifications of potential wrongful acts. 

I anticipate that the cost to implement such a registry and to employ adequate 

staff to conduct investigations would be substantial—you would need investigators 

in all 50 states to investigate each complaint. Investigators would need to be able 

to go into the field and meet with the complainant (the Medicare recipient). This 

would also require administrative attorneys to enforce the regulations and follow 

through with administrative orders. 

If Medicare gave the states the jurisdiction that we have suggested during the 

Senate hearing, this system is already set up on a state-by-state basis. Each state 

already investigates insurance fraud at different levels. Through the NAIC, the 

states report actions taken against individuals and companies. Thus, when an 

agent’s license is revoked in one state, it is unlikely that he or she will be given 

a license in another state. 

Question 2—CMS’ Marketing Guidelines 

Question. Do CMS’ marketing guidelines provide sufficient protections for beneficiaries? In your response, please indicate your opinion regarding whether the marketing guidelines allow any unacceptable practices. 

Answer. No. The guidelines set out violations but do not provide for punishment. 

In our experience, if a company dismisses an agent for his or her practice, the agent 

just moves to the next company. The states do not even know a problem exists unless the consumer contacts us directly. However, in the State of Georgia, if a company dismisses an agent, the company must notify the state of the dismissal and 

of the reason for the dismissal. If wrongdoing occurs the company is obligated to 

notify the state. 

RESPONSES TO SENATOR SMITH’S QUESTIONS FROM ALBERT SOCHOR

Question 1—National Registry for Agents/Brokers 

Question. Please elaborate on the concept of a national registry of agents, and explain your thoughts on what entity is best suited maintain the registry, what types 

of data the registry would contain, what types of complaints and/or disciplinary actions would result in an agent being placed on the registry, what parties would have 

access to the registry, and what the cost might be of implementing and maintaining 

such a measure? 

Answer: There is already a national registry process in place. It’s called National 

Insurance Producer Registry (NIPR). Insurance companies, insurance agents and 

state insurance departments all use and have access to this registry. It has the capability of handling all that you have asked. Cost is set up on an as used basis. 

This would give CMS and the states a gathering sight for complaints, compliance 

and data. All insurance companies are required by the state insurance departments 

to use NIPR to appoint agents. (See attachment for more information) Web Site: 

http://www.licenseregistry.com/

Question 2—CMS’ Marketing Guidelines 

Question. Do CMS’ marketing guidelines provide sufficient protections for beneficiaries? In your response, please indicate your opinion regarding whether the marketing guidelines allow any unacceptable practices. 

Answer: No, if it had been doing so we wouldn’t be experiencing the difficulties 

we have. The marketing guidelines do not allow any unacceptable practices; the 

problems are enforcement and accountability. You cant dictate compliance. Humana 

was the only company that had agents actually appoint with them and not contract 

through a third party, they also had the most comprehensive training (two days in 

school) and testing. Yet they had the most complaints. I have yet to read where 

Humana, their agencies or their agents have been fined for their infractions. What 

163

would help beneficiaries is when they call 1–800–Medicare they should get help and 

guidance as to what to do when the beneficiary has made a mistake or has been 

taken advantage of. As I stated in my testimony, I and many other agents and beneficiaries have spoken with CMS and MA Company’s service reps and have been 

given the wrong information. Beneficiaries and being told they are ‘‘Locked In’’ until 

the end of the year and are not being advised about the ‘‘Trial Period.’’ All the CMS 

reps would have to do is asked the beneficiary a few questions when they call; such 

as, ‘‘Is this your first time on an MA plan? Did you drop a Medicare Supplement 

policy to join this MA plan?’’ ‘‘Have you called the company? What was their response?’’ CMS needs to be the advocate for these beneficiaries. They claim it’s their 

program and the companies are their contractors. CMS needs to be handling the 

problems and doing it right, not SHICP or other entities. Senator Wyden was right 

when he said ‘‘We need to drain this swamp.’’ As I stated in my testimony, all MA, 

MAPD and PDP plans need to be standardized to stop the confusion. Commissions 

need to be lowered and levelized to stop the churning and the incentive to cheat. 

You must get rid of the ‘‘Lock In’’ to give beneficiaries the freedom of choice. This 

will give them confidence that if they make a mistake or if something in the plan 

changes and it is not what they want, they can get out. I also believe that you need 

to have an equitable reimbursement rate to relieve the burden that it puts on the 

current Medicare system. The Federal and the State systems already had programs 

in place to protect the poor before MA plans came along; it was called Medicaid and 

the QMB and SLMB programs. These worked for years to help the poor with their 

medical costs. 

RESPONSES TO SENATOR SMITH’S QUESTIONS FROM KAREN IGNAGNI

Question 1—National Registry for Agents/Brokers 

Question. Please elaborate on the concept of a national registry of agents, and explain your thoughts on what entity is best suited maintain the registry, what types 

of data the registry would contain, what types of complaints and/or disciplinary actions would result in an agent being placed on the registry, what parties would have 

access to the registry, and what the cost might be of implementing and maintaining 

such a measure? 

Answer. We are calling for strengthening of the processes and criteria for reporting broker and agent misconduct to state agencies, not creating a national registry. 

Uniform processes and criteria would enhance the ability of states regulators, plan 

sponsors, and the Centers for Medicare & Medicaid Services (CMS) to strengthen 

safeguards against broker misconduct. 

At the same time, we are aware that the National Association of Insurance Commissioners (NAIC) has an existing database, the National Insurance Producer Registry (NIPR). AHIP is committed to working collaboratively on an expedited basis 

with the NAIC, CMS, and other interested parties to confirm whether NIPR or another mechanism could provide a workable vehicle for timely access to expanded information about misconduct. We believe that NIPR has the potential to serve as a 

platform that would enable this initiative to move forward more quickly, and we are 

in discussions with the NAIC about the functionality and data submission processes 

for this database, as well as NAIC’s evaluation of the potential for an expanded role 

for NIPR. We understand that NIPR already contains information for brokers and 

agents whose licenses have been terminated, along with termination date and reason. 

We also are prepared to work with NAIC, CMS and others on such operational 

issues as reporting criteria, data submission mechanisms, and data use and access. 

We believe that in these areas, as well, existing processes could provide a sound 

basis for moving forward. For example, State licensure laws include a variety of categories of broker and agent misconduct, processes for reporting such misconduct, 

and a range of disciplinary action when misconduct is verified through prescribed 

processes. We believe that a joint effort to review the critical elements of these laws, 

establish standard criteria that could be used across the country to enhance the 

breadth and timeliness of information reported, and make the resulting data available through a centralized database, such as NIPR could improve the ability of 

States and plans to take more effective preventive and corrective action regarding 

misconduct. 

We have not yet developed a cost estimate for this project because it will be the 

product of the joint effort described above. 

Question 2—CMS’ Marketing Guidelines 

164

Question. Do CMS’ marketing guidelines provide sufficient protections for beneficiaries? In your response, please indicate your opinion regarding whether the marketing guidelines allow any unacceptable practices. 

Answer. CMS’ marketing guidelines require plan sponsors to follow a wide range 

of requirements that are designed to protect beneficiaries including requirements for 

the content and scope of marketing materials, the conduct of marketing activities 

and the qualifications and role of contracted brokers and agents. We believe these 

guidelines establish an effective foundation for holding plan sponsors accountable 

and for achieving CMS and plan oversight of broker/agent conduct but—in light of 

the concerns about marketing conduct that have been identified—we support efforts 

to clarify and strengthen this guidance. Specifically, we support the issuance of 

more detailed guidance, based on the principles outlined in the AHIP Board of Directors statement we submitted with our testimony to address the serious concerns 

discussed at the May 16 hearing. 

Question 3—SHIP Hotline Numbers 

Question. Please provide a list of your members’ SHIP hotline numbers. To address privacy concerns, please provide two documents as follows:

• One document should be labeled ‘‘Document A.’’ Document A should list your 

member plans and corresponding SHIP hotline numbers. Document A will not be 

published in the hearing transcript. Please mark Document A as ‘‘Not for Publication.’’

• One document should be labeled ‘‘Document B.’’ Document B should provide 

a list of your member plans, and a yes/no acknowledgment next to each members’ 

name as to whether the phone number has been provided on Document A. Document B will be entered into the hearing transcript.

165


38618.184
166


38618.185
167


38618.186
168


38618.187
169


38618.188
170


38618.189
171


38618.190
172


38618.191
173


38618.192
174

RESPONSES TO SENATOR LINCOLN’S QUESTIONS FROM HEIDI MARGULIS

Question. I have heard from my state office that about 25% of the complaints we 

receive about Medicare Part D are from people who have signed up for a managed 

care type plan without understanding that their providers aren’t participating. The 

salespeople are telling the seniors that the plan they represent is as good or is better than the plan the senior is enrolled in. 

How is Humana handling this situation and how does your company reign in 

salespeople who are misleading seniors about the plans? 

Answer. Within Humana’s sales agent training program, we train agents to fully 

and fairly disclose to beneficiaries that Private Fee for Service enrollees may see 

any provider that is willing to accept Humana’s payment terms and conditions. Our 

CMS-approved sales presentation includes this information and our enrollment 

verification scripting (please see Attachment #1) addresses this issue as well. During the verification process, we specifically inform the member of this rule and that 

the member should confirm their provider’s willingness to accept the plan. Additionally, agents can forward provider information to our Provider Relations’ education 

staff to request they communicate with providers about the PFFS plan, in the event 

the provider is unaware of how a PFFS plan works and how they will be paid. We 

have a team of Provider Relations representatives who conduct educational sessions 

in communities for providers and who provide ongoing outreach to them. Providers 

can also directly contact this staff. 

Humana has a sales investigation unit outside our Medicare Sales department 

that investigates all allegations that come to our attention. Specific remedial actions 

are in place, including termination and reporting to state Departments of Insurance 

for those findings of statutory cause. Further, for many years, we have had a policy 

in place that incents best practice selling and disincents bad sales practices. Agents 

do not receive commission for members who disenroll within the first 90 days of enrollment—this is known as our ‘‘chargeback policy.’’

Question. What evidence do you have that the corrective action plans have been 

effective? 

Answer. Agent complaints are tracked and agent files maintained with investigation reports and findings. Agent personnel files also contain monitoring, corrective 

actions and other remedies. If repeat allegations on the same topic or related allegations occur, further disciplinary action, up to and including termination may be warranted. 

Question. I am concerned that some cognitively impaired persons are being taken 

advantage and signed up for plans that they did not understand. Agent Mowell 

noted in her testimony that one agent went to a facility and signed up individuals 

who were mentally disabled for Part D and then switched them to a MA plan without the knowledge of the patient or their guardian. 

How does Humana ensure that agents are not taking advantage of beneficiaries 

with mental disabilities? You noted in your written testimony that Humana has a 

verification system, which is used to ensure that the beneficiary or authorized representative understands the MA plan and the basic rules. Can you please walk me 

through this system and how it works? 

Answer. Our sales training program includes a section on senior vulnerabilities. 

We also monitor sales through our verification process, local management and 

through sales-related complaints. Our sales program does not target specific groups 

of vulnerable beneficiaries and cold-calling without an appointment or agreement on 

the part of relevant parties violates our sales practice policies. 

HUMANA’S MEDICARE ADVANTAGE ENROLLMENT VERIFICATION

PROCESS

• Since 1991, Humana has used an enrollment verification process to confirm 

a beneficiary’s intent to enroll in a Medicare Advantage (MA) plan and his/her understanding of plan rules. This process has been updated over time to reflect new 

requirements, new technology and better approaches to beneficiary health literacy 

needs. 

• Following a beneficiary’s completion of an enrollment application, the agent 

phones a toll-free number that connects with an interactive voice response (IVR) 

system. The beneficiary has the option of completing the verification through the 

IVR system or by speaking directly with a customer care representative (verification 

staff are not in the sales organization). Both the IVR system and the customer care 

representative (verification staff are not in the sales organization). Both the IVR 

system and the customer care representative utilize a CMS-approved script that includes questions related to plan rules as well as confirms the beneficiary’s underVerDate 0ct 09 2002 12:20 Dec 11, 2007 Jkt 000000 PO 00000 Frm 00178 Fmt 6601 Sfmt 6601 H:\DOCS\38618.TXT SAGING1 PsN: JOYCE
175

standing that the plan in which they are enrolling is not a Medicare Supplement 

plan, that the plan is not a stand-alone prescription drug plan and that the beneficiary’s providers must accept Humana payment terms and conditions (Humana 

pays the same as what Medicare pays). Telephonic verifications are recorded. 

• During the verification process, if the IVR detects hesitation or a negative response, the system automatically transfers the beneficiary to a live customer care 

representative. If the customer care representative detects hesitation or the beneficiary negatively responds or the beneficiary does not understand a provision, the 

verification system is stopped and the agent is instructed to explain the relevant 

provisions to the beneficiary. If, at a later time, the beneficiary wants to enroll, the 

verification process begins anew. 

• Humana tries to verify all sales. If for some reason, the verification is not 

completed telephonically, or the application is completed online without a sales representative, an outbound call is made to the beneficiary by a customer care representative after the application is processed. If the beneficiary cannot be reached, 

a letter is mailed to the beneficiary. 

• All telephonic enrollments are recorded and the recording serves as the 

verification. These enrollees also receive a verification letter. 

• Stand-alone PDB enrollees receive an outbound verification letter. 

• The Verification Unit is staffed Monday-Sunday: 8AM–11PM ET. The IVR 

line is available 24/7. 

• Beginning within the next months, Humana will be implementing an outboud 

verification system with a customer service representatives contacting members 

post-sale in accordance with new CMS guidance. As well, Humana is in the process 

of designing a secret shopper program to evaluate sales experiences. 

• In addition to our verification process, Humana has had in place for many 

years a commission chargeback policy. This policy stipulates that agents do not receive commissions on sales that terminate prior to the first 90 days of enrollment. 

This policy was designed to promote best-practice techniques.

176


38618.193
177


38618.194
178


38618.195
179


38618.196
180


38618.197
181


38618.198
182


38618.200
183


38618.201
184


38618.202
185


38618.203
186


38618.204
187


38618.205
188


38618.206
189


38618.207
190


38618.208
191


38618.209
192


38618.210
193


38618.211
194


38618.212
195


38618.213
196


38618.214
197


38618.215
198


38618.216
199


38618.217
200


38618.218
201


38618.219
202


38618.220
203


38618.221
204


38618.222
205


38618.223
206


38618.099
207


38618.100
208


38618.101
209


38618.102
210


38618.103
211


38618.104
212


38618.105
213


38618.106
214


38618.107
215


38618.108
216


38618.109
217


38618.110
218


38618.111
219


38618.112
220


38618.113
221


38618.114
222


38618.115
223


38618.116
224


38618.117
225


38618.118
226


38618.119
227


38618.120
228


38618.121
229


38618.122
230


38618.123
231


38618.124
232


38618.125
233


38618.126
234


38618.127
235


38618.128
236


38618.129
237


38618.130
238


38618.131
239


38618.132
240


38618.133
241


38618.134
242


38618.135
243


38618.136
244


38618.137
245


38618.138
246


38618.139
247


38618.140
248


38618.141
249


38618.142
250


38618.143
251


38618.144
252


38618.145
253


38618.146
254


38618.147
255


38618.148
256


38618.149
257


38618.150
258


38618.151
259


38618.152
260


38618.153
261


38618.154
262


38618.155
263


38618.156
264


38618.157
265


38618.158
266


38618.159
267


38618.160
268


38618.161
269


38618.162
270


38618.163
271


38618.164
272


38618.165
273


38618.166
274


38618.167
275


38618.168
276


38618.169
277


38618.170
278


38618.171
279


38618.172
280


38618.173
281


38618.174
282

Æ


38618.175