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The National Association of Insurance Commissioners has published recommendations that would give state agencies more regulatory authority over the sales and marketing of Medicare Advantage and Medicare prescription-drug plans if passed by Congress. The committee that developed the proposals in a so-called white paper already has been successful with two issues included in a recent Medicare act.

Since the enactment of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), a number of troubling problems and abuses in the marketing and sales of Medicare private plans have been reported to the state insurance commissioners.

The MMA included provisions that prohibited state regulators from holding plans accountable for their marketing practices, the acts of their agents or from providing assistance to consumers enrolled in Medicare private plans.

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"State insurance regulators firmly believe that limiting the states' regulatory authority over Medicare private plans has severely hurt consumers and has preempted the states from enforcing their laws regarding unfair trade practices laws," said NAIC President and Kansas Insurance Commissioner Sandy Praeger. "In many cases, the states have been unable to address abuses in marketing and sales practices because they cannot properly assist consumers who file complaints about a plan sponsor."

America's Health Insurance Plans, known as AHIP, which represents insurance companies such as




UnitedHealth Group

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, did not respond to a request for comment.

Wisconsin Insurance Commissioner Sean Dilweg, chairman of the NAIC senior issues task force, provided copies of complaints received by his office, mainly regarding senior citizens unknowingly agreeing to buy Medicare Advantage plans.

One case involved a woman with dementia. Dilweg said that, unlike with Medigap, the state insurance commissioners do not have regulatory oversight. He said he is dissatisfied with the current situation in which he must, as commissioner, refer residents with cases of abuse to CMS.

"Typically, we regulate proactively to prevent abuses rather than react," Dilweg said.

The white paper represents a landscape of elderly-related issues. A road map of the rules for Medicare were discussed in a sub-group with input from various parties, including state insurance regulators, the Centers for Medicare and Medicaid Services (CMS), industry groups such as AHIP and


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, consumer groups including the AARP and the Kaiser Family Foundation.

The white paper is a discussion document representing differing points of view and is intended as a working document for policy makers. Two of the points were enshrined into law two months ago when the new Medicare Improvement for Patients and Providers Act was passed, banning cold calling, door-to-door sales and cross-selling of non-health products.

"It is a very good start," said Dilweg.

Dilweg said the larger issue is state authority. He has already testified before Congress' Ways and Means health sub-committee. He will be working through Sen. Herb Kohl of Wisconsin, chairman of the Special Committee on Aging, to reintroduce legislation, first revealed in 2007, in the next session.

"We applaud the significant strengthening of the rules to counter street-level agent abuses seen in the past three Medicare Advantage enrollment periods," said Bryce Williams, president and CEO of Extend Health, an authorized enrollment agency for Medicare Advantage plans.

Some of the suggestions made by state insurance regulators include:

  • Rolling back federal preemption provisions over Medicare Advantage and Part D prescription coverage plans to the way it was prior to the MMA, in order to allow states to better protect consumers.
  • Discouraging the use of vague and confusing plan names.
  • .
  • Developing suitability standards in the sale of all Medicare private plans.
  • Requiring agents and brokers to meet state continuing education requirements.

The white paper also includes a detailed background and analysis of the issue, including recent efforts to strengthen marketing rules by Congress and CMS, as well as information-sharing efforts between CMS and state insurance regulators. Ratings issues financial strength ratings for 4,000 life, health, annuity, and property/casualty insurers are available at no charge on the

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Gavin Magor joined Ratings in 2008, and is the senior analyst responsible for assigning financial strength ratings to health insurers and supporting other health care-related consumer products, including Medicare supplement insurance, long-term care insurance and elder care information. He conducts industry analysis in these areas. He has more than 20 years' international experience in credit risk management, commercial lending and analysis, working in the U.K., Sweden, Mexico, Brazil and the U.S. He holds a master's degree in business administration from The Open University in the U.K.