CMS Statement on Agent and Broker Marketplace Activity

In response to the recent story by KFF reporter Julie Appleby about rogue agents switching ACA exchange enrollee plans without their knowledge or permission, the Centers for Medicare & Medicaid Services (CMS) have released a statement about the actions they're taking to resolve the issue:

CMS is committed to protecting consumers in the Marketplace. CMS has received reports of consumers in HealthCare.gov states whose coverage was switched by agents and brokers without their knowledge. In response, CMS is taking swift actions to protect consumers from unauthorized activity by agents and brokers, and to root out bad actors who are violating CMS rules.  

First and foremost, CMS continues to ensure that affected consumers receive assistance to minimize the impact from these unauthorized activities. These actions include retroactively restoring or cancelling coverage and updating tax forms to ensure consumers do not suffer adverse tax implications when unauthorized activity occurs. Consumers should call the Marketplace Call Center at 1-800-318-2596 (TTY: 1-855-889-4325) to report unauthorized activity associated with their Marketplace enrollment so the Marketplace can promptly resolve any coverage issues. 

CMS suspends and terminates agents’ and brokers’ Marketplace privileges when they violate CMS rules or commit fraud. Our regulations require agents and brokers to obtain and document consumer consent before enrolling a consumer in Marketplace coverage or updating a consumer’s Marketplace coverage. CMS is working closely with state departments of insurance and law enforcement partners to share information and optimize resources to combat unauthorized and fraudulent activity in the Marketplaces.   

In addition to enforcement activities, CMS is evaluating all regulatory, operational, and technological options to prevent unauthorized activity. CMS' technical teams are rapidly evaluating options for additional system controls to help block unauthorized or fraudulent activity in the near term. In the longer term, CMS will also evaluate options for system changes to help curtail unauthorized and fraudulent activities without creating roadblocks for consumers to obtain the coverage they need. 

I mean, that all sounds great I guess, but I have no idea how effective it will be. My colleague Andrew Sprung has posted a very good follow-up deep dive into this troubling problem:

The fraud is egregious, but hard to pin down. As Appleby noted, CMS guidance states explicitly that a broker must obtain consent before switching an enrollee’s plan or making any other changes to her application. Ronnell Nolan, president and CEO of Health Agents for America (HAFA), said that a whistleblower has revealed training materials from a call center perpetrating this fraud that explicitly instruct agents not to ask for consent and not to tell prospective clients that the agent will switch them into a new plan.

...Shutting down the bad actors — not to mention prosecuting them — is tricky, however — notwithstanding that they must put their name and professional identifier, the “National Producer Number” (NPN) on the application to get paid. When reporting the unauthorized switch, says Shelli Quenga of the nonprofit brokerage at the South Carolina-based Palmetto Project, a broker can’t make a consumer complaint — the consumer has to do that.

...An executive at a web broker says that many of the bad actors who switch enrollees’ plans without their consent get their “clients” from lead generators — companies that post the misleading ads and sell respondents’ contact information to brokers — and that many of the victims of unauthorized plan switching were also initially enrolled by brokers using lead generators. Those who are susceptible are targeted serially. The lead brokers are hard to shut down, as many of them operate overseas and hide their tracks.

Ironically, the strengthening of the ACA itself may be part of the problem: The dramatic increase in zero-premium plans thanks to the ARPA/IRA's enhanced subsidies (as well as some states implementing proper Premium Alignment procedures and others implementing their own supplemental subsidies means that there are several million enrollees who never receive an invoice at all, meaning it can take months for them to find out they've been switched to a different plan if they never actually utilize their insurance coverage.

Add to that the year-round Special Enrollment Period for enrollees earning less than 150% FPL and you can easily see how unscrupulous actors could be more inclined to take advantage of such an opening.

...Prevalence? Quenga, in South Carolina, says that the Palmetto Project has flagged 34 cases that have agent-of-record/permission issues, out of about 3,500 enrollments — roughly 1%. A web broker executive reports that about 0.5% of applications processed on their platform result in a complaint — and agents are incentivized to complain if an account is switched away from them. Not every unauthorized account switching is reported, and not every complaint reflects actual malfeasance, but these snapshots perhaps give some sense of scale in a marketplace of 21 million enrollees.

Assuming the actual issue is between 0.5 - 1.0% nationally, that would mean perhaps 100K - 200K people this year, which is still an unacceptable number.

The problem should be solvable. Appleby points out that the state-based marketplaces generally require more information before a broker can access a policy they’re not already named on — generally by requiring two-factor authorization. In Colorado, Louise Norris tells me, the enrollee is sent a code that the presumptive new broker must enter to access the account. Three brokers working in HealthCare.gov states whom I spoke to, however - -including Quenga from the nonprofit Palmetto Project — agreed that requiring client approval in real time could seriously inhibit enrollment. Brokers often do their client work at one time — say, during the day — and then execute the applications at a separate time. Toward the end of Open Enrollment in particular, time is of the essence, and clients can be hard to reach quickly.

I agree that would slow things down but I'm still inclined to err on the side of security and verification here.

...Another possibility is requiring the client’s direct signoff not when the application is submitted but afterward, when the broker seeks payment. That would impose some administrative burden, but not during the enrollment process, when time is of the essence. 

The downside of this solution is that I'm not sure what would happen if the enrollee needed treatment in between these phases, but it should at least dramatically reduce the instances since the whole reason bad actors do this is to pocket the commissions.

Sprung's entire piece is excellent and well worth a read. In the end, it boils down to this:

...The percentage of bad actors may be small, but they can do a high volume of transactions and wreak a lot of havoc. New controls are plainly needed.

Indeed.