Pay-for-referrals raises questions

By Carol Gentry
2/6/2009 © Florida Health News

Some Medicare health plans in Florida are paying insurance brokers “referral fees” of hundreds of dollars for every beneficiary they steer to their company for enrollment. Payments range from $300 at Coventry to $500 at Care Plus, a subsidiary of Humana. 

Brokers say they can make more money on referrals than they’d get for actually enrolling Medicare beneficiaries in plans themselves, which is a lot more work. Under new rules issued by the Centers for Medicare and Medicaid Services last year, brokers must do careful documentation -- including both paperwork and tape recordings -- to prove they fully disclosed and explained information about the plan being considered.

They also worry the referral fees may not be kosher because they exceed the cap on sales commissions CMS issued in late December. Those caps rolled back the commissions to $400 for a first-time enrollee in a Medicare Advantage plan and $200 if a member of one plan wanted to switch to another for 2009. Most enrollments fall into the latter category.
 
"I don't understand why you'd pay someone more for referring a client to a company than ...to write the business," said Hillsborough County broker Nat Markowitz. "It makes no sense."

He suggested CMS would take a dim view of the referral fees. CMS spokesman Peter Ashkenaz said officials there are studying the issue to see whether the fees comply with the rules.

The highest offer for referral fees, agents say, comes from Care Plus, a subsidiary of Humana. It’s paying $500 for each customer steered to the company for enrollment in Medicare Advantage, one agent’s documents show.

Mitchell Lubitz, spokesman for Humana and Care Plus, declined to discuss the referral fees. He said business dealings between the company and independent brokers are proprietary and confidential. 

The worst thing about the commission caps, agents say, is that CMS imposed them six weeks after they had already enrolled many customers for 2009 with the expectation of higher pay. So agents saw a steep drop in income – from an average of $500 for a renewal a year ago to $200 today. Many are fed up and say they plan to walk away from the business. 

Contact Carol Gentry by e-mail or at 727-410-3266.