MW Brokers accused of steering seniors into a Medicare Advantage 'trap'

By Brett Arends

Concerns are being raised that many seniors have been sold the insurance plans against their interests

Some 33 million Americans, most of them seniors, get their health insurance through a privatized Medicare Advantage plan instead of regular, government-run Medicare.

But new fears are now being raised that many may have been sold the wrong plan, against their interests, by brokers and salesmen putting profits before people.

Experts from the Cornell University medical school, writing in the Journal of the American Medical Association, warn that many brokers are receiving commissions potentially totaling thousands of dollars per client to "steer" people into Medicare Advantage and away from traditional Medicare even if that isn't in their best interest.

This follows a bombshell lawsuit just filed by the U.S. Department of Justice accusing many insurance brokers of taking illegal "kickbacks" from insurance companies to sell seniors on certain Medicare Advantage plans regardless of whether it's the right plan for them.

The brokers and the insurance companies, to be sure, deny the accusations and insist they will fight the Justice Department lawsuit.

In the latest issue of JAMA, Cornell's Lawrence Casalino, Amelia Bond and Dhruv Khullar calculate that an insurance broker can land nearly $6,000 in lifetime commissions by selling a 65-year-old a privatized Medicare Advantage plan. Meanwhile they will likely earn only "50% to 70%" as much if the client instead opts for government-run original Medicare, supplemented by private Medigap and Part D prescription plans.

Federal regulations cap sales commissions on Medicare Advantage plans at $626 in the first year, they write. But the broker is allowed to get up to half that amount, or $313, for every year the enrollee stays on the policy. As people aged 65 have an average life expectancy of 18 years, "this generates $5,947 in commissions" for a Medicare Advantage policy, the Weill Cornell Medical College researchers point out.

Meanwhile, commissions that a broker is likely to get for selling Medigap and Part D private health plans to an enrollee in traditional, government-run Medicare "are likely to sum to 50% to 70% of this total," they estimate.

That would be $3,000 to $4,200.

Worse, they argue, seniors missold Medicare Advantage plans then find themselves in a "trap" - their word. "It is very difficult for most beneficiaries, once enrolled in MA, to switch to traditional Medicare," they write. That's because, with a few exceptions, those who want to switch from Medicare Advantage to original Medicare may find it difficult, very expensive or even impossible to secure a supplemental "Medigap" policy to cover the 20% of costs that original Medicare doesn't pay.

You are generally - again, with a few exceptions - only guaranteed a good deal on Medigap when you are first able to sign up, at age 65. Medicare Advantage, like Hotel California (or a lobster trap) is easier to get into than to leave.

Many beneficiaries "do not understand ... that by enrolling in MA, they are making what is likely to be an irreversible, lifelong decision," the researchers write.

They have fresh data to show the effect of this. Four states - Maine, Massachusetts, Connecticut and New York - make it easy to leave Medicare Advantage by guaranteeing a good deal on Medigap if an enrollee does. And in those states, as a result, between 2014 and 2022 the numbers of "high need" patients switching back to original Medicare is nearly 400% higher than in the other 46 states, they found.

The National Association of Benefits and Insurance Professionals, the trade association of the insurance brokers, disagreed. "Due to lower renewal commissions, the gap between Medicare Advantage $(MA)$ and Medicare Supplement (Med Supp) compensation narrows after a few years," the organization said in a statement. "The difference in MA plan compensation is often just a few dollars."

Instead NABIP blamed insurance companies for the misselling of Medicare Advantage plans, accusing them of "aggressive and misleading marketing targeting seniors."

Meanwhile insurance broker Danielle Roberts of Boomer Benefits said the big problems are a "broken" regulatory system for brokers and sharply rising premiums for Medigap policies. "The idea that agents steer business into Medicare Advantage for higher commissions just doesn't pan out when you consider how most of us run our businesses," she says. "The vast majority of insurance agents are local, hometown agents who build their entire agency based around a long-term relationship with a client. If we put them into a plan that doesn't suit them, another agent will come in and steal that client right out from underneath."

Earlier this month, the Justice Department accused some of the biggest Medicare Advantage insurance companies and brokerage networks of running an illegal kickback scheme worth "hundreds of millions of dollars" to steer seniors into certain Medicare Advantage plans against the clients' interests. The department, in a detailed, 217-page complaint, accused insurers Humana $(HUM)$, Elevance (formerly Anthem) $(ELV)$ and Aetna (acquired in 2018 by CVS $(CVS)$) of using various schemes to get around regulatory barriers to pay extra money to insurance brokers eHealth $(EHTH)$, its affiliate GoHealth and SelectQuote to push its plans. All the companies say they vigorously deny the allegations and plan to fight them in court.

Whether anyone has behaved illegally is a matter for the courts. But Medicare Advantage, which cost taxpayers about $500 billion last year, is big business. As the late Charlie Munger used to say, "Show me the incentives, and I'll show you the outcome."

-Brett Arends

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May 19, 2025 14:26 ET (18:26 GMT)

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