Senator Elizabeth Warren Criticizes Medigap Sales Incentives in New Report

Federal and state regulators are being urged to increase their oversight of insurance agents and brokers selling Medigap policies, the private supplemental coverage owned by millions of people with traditional Medicare that pays out-of-pocket costs.

These brokers received paid vacations and cash bonuses to enroll customers in plans offered by specific companies, according to a report released Wednesday by Senator Elizabeth Warren, the Massachusetts Democrat.

“Giant insurance companies have free rein to scam millions of seniors in Medigap, offering agents lavish vacations to steer unknowing beneficiaries into more expensive plans,” Ms. Warren said in a statement. “Regulators must act to make sure seniors aren’t getting fleeced.”

The report found that at least 32 Medigap insurers were associated with reward programs, either directly or through third parties. These incentives are legal, but can create financial reasons for agents to recommend more expensive policies or plans from a single insurer.

Unlike the sale of Obamacare policies, brokers and agents offering Medicare plans are under no obligation to offer every policy or tell customers about how they select plans for customers, said Gretchen Jacobson, vice president of the Medicare program at the Commonwealth Fund, a nonprofit group that funds health care research. This week, the fund released a report looking at the choices people make in buying the plans, based on discussions with brokers and agents.

Someone hoping to lower their premiums may want to pick a plan with a high deductible, but a broker typically earns higher commissions by steering customers to more costly plans that have more generous coverage.

Brokers also tend to make more when someone chooses a private Medicare Advantage plan. Individuals who pick a Medicare Advantage plan and then want to switch to the traditional program may have difficulty. In most states, insurers can either deny someone coverage or charge them higher prices if they have a medical condition that is potentially expensive.

While federal dollars go to help pay for Medicare Advantage, Medigap is paid for privately by consumers or employers and is largely overseen by state insurance regulators rather than the federal government. Federal officials have standardized the kind of Medigap policies available and play some role in their oversight.

People who want to make sure they know their options should check in with their state insurance regulators, said Casey Schwarz, senior counsel for education and federal policy for the Medicare Rights Center, which helps people navigate the program. The states disclose all of the Medigap plans sold and how much they cost, Ms. Schwarz said, and can usually be found on regulators’ websites. “It is not super easy to find in some states, but it is there,” she said.

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