Improper Marketing of Health Plans

Last Updated: 1/31/2024

Issue: With a rapidly aging population and citizens’ growing dependence on traditional Medicare, Medicare Advantage health insurance plans have become one of the fastest-growing segments in the market. The number of Medicare Advantage plans available to beneficiaries has more than doubled since 2018. The Administration for Community Living (ACL) reports that people aged 65 and older represented 17% of the population in 2020, with expected growth to 22% by 2040. Unfortunately, many of these Medicare Advantage insurance products are promoted and sold using misleading information or a lack of detail, resulting in consumers being saddled with large, unaffordable bills or a lack of coverage entirely.

Background: Since their inception in 2008, Medicare Advantage plans, which combine Medicare Parts A and B with Part D prescription coverage, have become increasingly popular and, as of 2023, serve 51% of the eligible Medicare population, according to the KFF. Their popularity is only expected to grow, with the Congressional Budget Office (CBO) estimating that 62% of all Medicare beneficiaries will be enrolled in Medicare Advantage plans by 2033.

As Medicare Advantage plans have grown in popularity, the marketing and sales tactics used to promote them have become increasingly aggressive, resulting in a sharp increase in complaints to the federal Centers for Medicare & Medicaid Services (CMS). Television advertisements constitute a large portion of companies’ marketing efforts, often featuring celebrity endorsers, seniors engaging in physical activities, and government-issued Medicare cards. They also tout low costs and extra benefits while using language to imply Medicare recipients will miss out on benefits they are entitled to if they do not purchase a Medicare Advantage plan. Based on data from 1,200+ advertisements and 640,000+ airings between Oct. 1, 2022, and Dec. 1, 2022, analysts found that “information about coverage under traditional Medicare is rarely included in television ads, leaving beneficiaries with an incomplete view of their coverage options and the tradeoffs among them.”

Medicare Supplement Insurance (Medigap) plans are an alternative to Medicare Advantage plans available for purchase by Medicare-eligible beneficiaries. The most recent data shows that 40.8%, or 12.5 million people, purchased Medigap coverage to supplement their Medicare benefits as of 2021.

Status: U.S. Sen. Ron Wyden (D-OR) launched an inquiry in August 2022 into “potentially deceptive marketing practices by Medicare Advantage plans that exploit seniors and people with disabilities.” Additionally, in response to consumer issues and concerns, CMS implemented a rule to revise the Medicare Advantage (Part C), Medicare Prescription Drug Benefit (Part D), Medicare cost plan, and Program of All-Inclusive Care for the Elderly (PACE) regulations and implement changes for contract year 2024. These changes are “related to Star Ratings, marketing and communications, health equity, provider directories, coverage criteria, prior authorization, passive enrollment, network adequacy, and other programmatic areas.”

As stated in its 2023 priorities, the NAIC is working to create a customized search tool that will enable consumers to access the license status of insurance producers selling health insurance. The NAIC also continually strives to improve information sharing across state departments to spread the word about individuals and entities known to mislead consumers or misrepresent product details and offerings. Further actions by the NAIC will include ongoing coordination with federal agencies and amending model laws to provide state insurance departments with regulatory authority over third-party marketing organizations and insurance lead generators.

The Improper Marketing of Health Insurance (D) Working Group is currently charged with reviewing existing NAIC models and guidelines that address the use of lead generators for sales of health insurance products and identifying models and guidelines that need to be updated or developed to address current marketplace activities. Additionally, revisions have been recommended for the Unfair Trade Practices Act (#880), with the most recent draft from October 2023 currently being considered for adoption.

Working Group members will also assist and guide state and federal insurance regulators in monitoring improper health plan marketing and coordinating appropriate enforcement actions with other NAIC committees, task forces, and working groups.