LD 416 – “An act to protect seniors and the public from unfair health insurance sales practices”

Testimony of Rep. Sharon Anglin Treat

February 27, 2007

Insurance & Financial Services Committee

Senator Sullivan, Representative Brautigam, and fellow members of the Insurance & Financial Services Committee. I am very pleased to be the sponsor of LD 416, “AN ACT TO PROTECT SENIORS AND THE PUBLIC FROM UNFAIR HEALTH INSURANCE SALES PRACTICES.” I already had an interest in addressing the problems this bill seeks to prevent when I was approached by the Bureau of Insurance to sponsor this legislation, and I look forward to working with the rest of the committee to see that we pass an effective consumer protection measure.

This legislation will help protect our most vulnerable citizens from sales tactics that are confusing and potentially coercive, and which could lead to the unintentional purchase of unnecessary or inappropriate insurance and financial services products. Although there are federal rules in place which provide some consumer protections, right now the Bureau lacks the authority to enforce those rules, which in any event apply to the insurance companies and not the producers.

As I am sure you all know by now, the Part D Medicare drug benefit is itself a very confusing program. The sign-up process is complicated and stressful. I did the research for my own parents and even now, am not 100% certain that I gave them the best advice. And I am a lawyer and spend all day both in my legislative duties and my other job running a prescription drug public policy group, trying to understand these issues.

Imagine being a frail elderly person subjected to cold call and door to door sales techniques that confuse the Part D program with Medicare Advantage plans and other insurance options. Unlike other types of insurance, Medicare and Medicare Part D products are really are not "optional" products for seniors and disabled Medicare beneficiaries. Medicare beneficiaries should be able to accept an offer to discuss their Medicare options without being subjected to an unwanted sales pitch for other types of products.

The confusing array of private plan options for drug and medical coverage can make people with Medicare vulnerable to deception and pressure tactics. The dual eligibles (those who qualify for Medicaid as well as Medicare – the most poor and disabled of the elderly) are particularly vulnerable and also those most likely to be targeted, because they are allowed to switch Part D drug plans once a month, whereas other enrollees may do so only once a year. The result is that those who are most vulnerable to pressure tactics are also most likely to be subjected to such tactics.

There is a strong incentive for producers to solicit Part D enrollees to sign up for other Medicare products. According to the Medicare Rights Center:

“Insurance companies typically pay brokers about $500 for every person they enroll in a Medicare Advantage plan offering both medical and drug coverage, more than five times the commission they pay for signing someone up for a plan that just covers drugs and allows the individual to stay in Original Medicare. As a result, counselors across the country last year answered thousands of calls from individuals who found themselves in a Medicare Advantage plan when they thought they were signing up just for drug coverage. These individuals were often saddled with high medical bills when they discovered their doctors would not accept their new plan, or the plan imposed high cost sharing for major medical expenses.”

We know from the experience of the area agencies on aging that we do have some problems here in Maine. The Bureau informs me that producers have contacted staff about advertising seminars designed to generate sales leads, asking what the standards are for advertising the seminars. Producers generally want to maintain high standards and generally just want to know what the applicable standards are. At the same time, it is important for the Bureau of Insurance to have the statutory tools to address the actions of those few producers who may be inclined to use advertisements that "fail to disclose in a conspicuous manner a purpose of the marketing is insurance sales solicitation and that contact will be made by an insurance producer or insurance company."

A recent report issued by the Medicare Rights Center and the California Health Advocates [attached] confirms that abuses are widespread (“After the Goldrush: The Marketing of Medicare Advantage and Part D Plans: Regulatory Oversight of Insurance Companies and Agents Inadequate to Protect People with Medicare,” January 2007). This study looked at Part D marketing tactics throughout the country and found significant problems. It makes a series of recommendations for states to better address these problems, including:

• Extending insurance law protections to Part D sales practices, including provisions on misrepresentation of policies;
• Providing for fines for violations;
• Requiring 24 hour advance notice by producers before entering a home to sell life insurance or annuities, with the notice containing an enumeration of rights;
• Ensuring that a producer disciplined for Part D violations (whether by the federal CMS or the State) is barred from selling other Medicare Part D product in the state.

LD 416 addresses some, but not all of these recommendations, and I encourage the committee to look at potentially amending the bill to incorporate additional provisions.

It is to the credit of the producers here in Maine that they are supporting many of the provisions of LD 416, as well as extending this legislation to address door-to-door sales tactics. I agree with the producers that including the federal CMS provisions as part of Maine law may be an effective way to address many of these issues. This is something we have done before in the prescription drug area, making the rules on misleading advertising part of the state Unfair Trade Practices Act.

However, I encourage the committee to go beyond the federal rules to craft a Maine-specific law, if the CMS rules do not adequately address all of the problems that have been identified. As I have not had the opportunity to sit down with the producers to discuss in detail their concerns about Section 2 of the bill, I do not yet know where I stand on the concerns raised in their memo. However, I am very encouraged by the producers’ willingness to work closely with the bill sponsors, the Committee and the Bureau to get this right. I am confident we can come up with an effective measure that protects our most vulnerable citizens, without imposing unnecessary burdens or confusing the situation even more for the producers who will be bound by its provisions.

Thank you.