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You are here: Home . rules . 2007 . 1109-059

SUBCHAPTER B. MEDICARE ADVANTAGE PLANS, MEDICARE ADVANTAGE PRESCRIPTION DRUG PLANS, AND MEDICARE PART D PLANS

28 TAC §§19.101 - 19.104

1. INTRODUCTION. The Commissioner of Insurance adopts on an emergency basis, to take immediate effect, new Subchapter B, §§19.101 - 19.104, establishing qualifying license types for persons marketing Medicare Advantage Plans, Medicare Advantage Prescription Drug Plans, and Prescription Drug Plans (Medicare plans) under federal marketing guidelines specified in "Medicare Marketing Guidelines for: Medicare Advantage Plans (MAs), Medicare Advantage Prescription Drug Plans (MAs-PDs), Prescription Drug Plans (PDPs) and 1876 Cost Plans," second revision, July 25, 2006, published by the Centers for Medicare and Medicaid Services (CMS guidelines). As required by the Government Code §2001.034(a) - (b), the Commissioner has found for the following reasons that there is imminent peril to the health and welfare of certain Medicare beneficiaries of this state, including Texas' senior citizens, who are confronting significant healthcare decisions, and thereby, has determined that it is necessary to adopt this emergency rule. The Department has received increasing numbers of reports that Medicare beneficiaries of this state are being fraudulently and dishonestly deceived by licensed insurance agents into enrolling in Medicare plans that are unsuitable for those Medicare beneficiaries due to either other insurance or existing medical treatment concerns. These changes often place Medicare beneficiaries at severe medical risk when they are no longer able to obtain continuing medical care from their existing physicians and care facilities, and financial risk when the costs of the replacement plans exceed those of their existing insurance and other suitable available coverage. Even if care is available, the fact that it is only available from an unfamiliar and/or limited source may result in Medicare beneficiaries, to their detriment, not seeking or receiving the care to which they are justly entitled and possible irreversible physical decline or death.

Many of these complaints allege that this activity is being done in particular by temporary agents. Pursuant to §§4001.152 - 4001.154 of the Insurance Code, temporary agents are appointed upon only eight days' notice to the Department by insurers, health maintenance organizations, or other insurance agents to solicit insurance without prior training or passing a qualifying examination demonstrating knowledge of the products they will be selling. In this Order, the term "temporary license" is used to refer to a license issued under §§4001.152 - 4001.154 of the Insurance Code, and the term "permanent license" is used to refer to a license issued to a person satisfying the qualifications required for Texas resident insurance agents licensed under the Insurance Code §§4001.105 and 4001.106 and nonresident insurance agents licensed under §§4056.052 - 4056.054. Pursuant to §4001.155 of the Insurance Code, the temporary license is valid for 90 days after issuance. Pursuant to §4001.156 of the Insurance Code, a temporary license may not be issued to or renewed by the same individual more than once in a consecutive six-month period. Therefore, the individuals who obtain temporary licenses are able to market the Medicare plans for 90 days and are able to renew the temporary license to extend the period that they are able to act as a temporary agent without meeting all of the requisites for individual insurance agents who are licensed pursuant to §§4001.105, 4056.052, and 4056.053 of the Insurance Code.

Further, the next annual enrollment period for Medicare plans is limited to November 15, 2007, through December 31, 2007, unless extended to March 15, 2008. This brief period presents an opportunity for persons that would not otherwise be able to qualify for a permanent agent license to obtain access to a significant portion of this market with a temporary license. This short period, in which millions of senior citizens and other Medicare beneficiaries will be seeking to purchase essential coverage, will allow an untrained, unqualified, or unscrupulous insurance agent who lacks knowledge and experience to take advantage of tens or hundreds of persons who themselves are under substantial time pressure to make complex and important healthcare choices. This situation is unlike normal marketing environments in which insurance agents must locate and solicit potential consumers, and consumers have more time to consider and make informed decisions on such important health coverage matters. Therefore, the short enrollment period and the large numbers of Texas Medicare beneficiaries who will be seeking health coverage during this short period are major factors in the Commissioner's decision to adopt an emergency rule to respond to the recent increasing reports of fraud and abuse. The Department's ability to otherwise act before November 15 when the enrollment cycle begins is limited, and an emergency rule is the most efficient and comprehensive action available.

This emergency rule is necessary to respond in a timely and comprehensive manner to address the problems demonstrated by the recent increasing reports of fraud and abuse resulting from untrained, unqualified, and unscrupulous insurance agents actively marketing Medicare plans to unsuspecting consumers enrolling in Medicare plans. This rule will enhance the Department's ability to regulate insurance agents engaging in these activities and work in conjunction with the Department's enforcement authority to prevent the harm that certain agents may try and inflict upon Texas' senior citizens and other Medicare beneficiaries. Additionally, the emergency rule is necessary to prevent future actions of untrained, unqualified and unscrupulous persons to prey on vulnerable citizens. The emergency rule limits the license types of those authorized to market Medicare plans; prohibits insurers, health maintenance organizations, and agents from appointing and using temporary agents in the marketing; and imposes certain reporting requirements; all of which are necessary preventative measures to protect Texas' senior citizens and other Medicare beneficiaries. These preventative measures will provide an additional means to address the problem.

This rule limits the marketing of Medicare plans to insurance agents holding permanent licenses. The rule also prohibits insurers, health maintenance organizations, or insurance agents from appointing temporary agents to market Medicare plans offered pursuant to federal law, regulations and CMS marketing guidelines, allowing their appointed temporary agents to market Medicare plans pursuant to federal law, regulations and CMS marketing guidelines, or from assisting in the enrollment of individuals in Medicare plans that have been marketed by temporary agents or unlicensed individuals, other than those individuals specifically authorized to market Medicare plans under the CMS Guidelines.

With respect to permanent agents, the rule requires organizations marketing these plans to give notice to the Department of licensed insurance agents they employ or contract with and notice of the termination for cause of a Department-licensed marketing representative's employment or contract. The required reporting of termination for cause is particularly important in enabling the Department to identify and take quick action against those insurance agents that might attempt to use the federal marketing scheme to hide fraudulent and dishonest practices from Department review. Under federal law, the marketing of Medicare plans is regulated by federal authorities as outlined in the CMS guidelines. Additionally, CMS does not have authority to take direct action against an insurance agent's state-issued license. Although the Department cannot take direct action against an insurance agent for a violation of federal guidelines, the Department has authority under the Insurance Code §4005.053(b)(5) to revoke an insurance agent's license or otherwise discipline an insurance agent for engaging in fraudulent and dishonest practices. The requirement in the rule for direct notice to the Department that an insurance agent has been terminated for a violation of the CMS guidelines or other cause as outlined in the rule will allow the Department to identify persons who have used their insurance agent's license to engage in fraudulent and dishonest practices to prey on Texas' senior citizens and other Medicare beneficiaries.

These requirements are indicated as being available to the states under the CMS guideline. The CMS guidelines provide "It is of paramount importance to CMS that a beneficiary enrolls in a plan that the beneficiary chooses based on the beneficiary's needs." (CMS guidelines, page 129). Further, CMS guidelines provide "An organization must utilize only a state licensed, certified, or registered individual to perform marketing, if a state has such a marketing requirement." (CMS guidelines, page 130). The CMS guidelines also provide "If a state has a law that requires an organization to report to the state:

"The identity and other information of a marketing representatives [ sic] that is marketing the organization's plan(s), the organization must ensure that its marketing representative is reported to the state, in a format required by the state; and

"The termination of a marketing representative's employment or contract, an organization must report a termination for cause to the appropriate state agency or ensure that its subcontractor(s) or downstream subcontractor(s) reports the termination for cause to the appropriate state agency, in a format required by the state." (CMS guidelines, page 130).

The Insurance Code §§4051.051(3) and 4054.051(9) mandate that a person hold a general property and casualty license or a general life, accident, and health insurance license if the person acts as an insurance agent who writes any other kind of insurance as required by the Commissioner for the protection of the insurance consumers of this state. CMS guidelines clearly contemplate that state law may limit those persons suitable to sell such a product to a particular license type, and further, under Texas state law, it is within the Commissioner's authority to determine which classification of licensed insurance agent is authorized to market such products in accordance with applicable Texas statutes.

Further, with respect to the required notice of employment, contracting, and termination for cause of the licensed insurance agent imposed under the adopted sections, these requirements are consistent with Texas laws. The Insurance Code §4001.206 requires that the termination of an insurance agent appointment for cause be reported to the Commissioner. Under the Insurance Code Chapter 4001, all Texas insurance agents must be appointed before they can represent an insurer, and notice of an appointment by either an insurer or another insurance agent is notice of a contractual relationship. Pursuant to the Insurance Code §4001.204, the insurance agent must be appointed to act for an insurer; it is only notice of that agreement that is required under §4001.202(b) to be sent to the Department within 30 days following the appointment along with the non-refundable fee set by the Department. Notice of termination of an appointment for cause is notice that the insurance agent's employment or contractual relationship has been terminated for cause. Thus, while federal law pre-empts the Texas statutory requirement that the insurance agent be "appointed" by an insurer, the payment of the $10 appointment fee and the Department's procedural requirements to comply with Texas insurance agent notice forms, the requirements under the adopted sections are consistent with the CMS guidelines to the extent that they require notifying the Department of an insurance agent's employment or contract and termination of an insurance agent's employment or contract.

Significantly, the Department has determined that this emergency rule will not significantly diminish the available number of insurance agents that are authorized to market Medicare plans. As of November 1, 2007, 162,848 individuals held permanent general life, accident, and health insurance agent licenses, while only 774 individuals held temporary general life, accident and health insurance agent licenses. However, even a small number of unscrupulous insurance agents can take advantage of tens or hundreds of Medicare beneficiaries who rely on these insurance agents to provide them with health coverage that is appropriate for their circumstances.

Based on the foregoing facts, the Commissioner has determined that Texas Medicare beneficiaries faced with the vitally important healthcare choice of choosing a suitable Medicare plan, or choosing other coverage, are in imminent peril from unqualified and/or unscrupulous persons engaging in fraudulent marketing of Medicare plans. Concomitantly, there is imminent peril to the health and welfare of these Medicare beneficiaries. A Medicare beneficiaries' unsuitable choice may result in the Medicare beneficiary no longer being able to obtain care from a known physician or provider, confusion as to where and how to seek care, and potentially physical illness or death. Therefore, it is necessary to adopt these sections on an emergency basis to ensure that Texas Medicare beneficiaries faced with significant and complex healthcare choices are provided with proper and informed guidance from insurance agents holding permanent licenses who have demonstrated their knowledge concerning health insurance coverages and not from untrained, unqualified, and/or unscrupulous persons engaging in fraudulent marketing of Medicare plans.

The protection afforded to consumers by these adopted sections will also be achieved through reporting requirements that will result in the Department having necessary information on Department-licensed insurance agents engaged in marketing these plans. This information will enable the Department to exercise the necessary regulatory oversight to identify any insurance agent that may be acting in violation of the law in marketing Medicare plans to the detriment of unsuspecting consumers and to take prompt action to stop the illegal activity.

Section 19.101 provides definitions of terms used in this subchapter. Section 19.102(a) authorizes permanently licensed general life, accident and health insurance agents to market Medicare plans. Section 19.102(b), consistent with the Insurance Code §4051.053, authorizes permanently licensed general property and casualty insurance agents to market Medicare plans, to the extent that the Medicare plans are marketed through a property and casualty insurer authorized to sell those products in this state. Section 19.102(c) clarifies that no other license type is authorized to market Medicare plans.

Because an individual must be appointed by an insurer, health maintenance organization, or insurance agent under Insurance Code §4001.153 to receive a temporary license, the appointment of a temporary agent to engage in marketing CMS plans is also prohibited under this rule. Section 19.103(a) - (c) prohibit an insurer, health maintenance organization, or insurance agent from appointing a temporary agent to market Medicare plans, from allowing any temporary agent that it has appointed to market Medicare plans, and from assisting or participating in enrolling any individual in a Medicare plan contract marketed by a temporary agent or an unlicensed person, unless the unlicensed person is specifically authorized to engage in the activity under the CMS guidelines. Section 19.103(d) requires an insurer, health maintenance organization, or insurance agent to report in writing any violation of this section to the Department within four days of discovering the violation.

Section 19.104(a) requires the organization offering the Medicare plans to inform the Department of all licensed insurance agents employed by or contracted with the organization to market Medicare plans, and further requires the organization to report to the Department all licensed insurance agents employed by or contracted with the organization that are terminated for cause. Section 19.104(b) requires the organization offering the Medicare plans to require its subcontractors to inform the Department of all licensed insurance agents employed by or contracted to the subcontractor market Medicare plans, and further requires the organization to require the subcontractors to report to the Department all licensed insurance agents employed by or contracted to the subcontractor that are terminated for cause. Section 19.104(c) specifies termination reasons that constitute "for cause" for purposes of this rule. Section 19.104(d) specifies the procedures for reporting this information to the Department.

2. STATUTORY AUTHORITY. Sections 19.101 - 19.104 are adopted under the Government Code §2001.034 and the Insurance Code §§4001.003(8), 4001.005, 4001.201, 4001.204, 4001.205, 4001.206, 4051.051(3), 4051.053, 4054.051(9) and 36.001. The Insurance Code §4001.003(8) provides a definition of person for use in Insurance Code Title 13, which concerns insurance agent licensing. The Insurance Code §4001.005 authorizes the Commissioner to adopt rules necessary to implement Insurance Code, Title 13 and meet the minimum requirements of federal law, including regulations. The Insurance Code §4001.201 requires insurance agents to be appointed before acting as an agent on behalf of an insurer. The Insurance Code §4001.204 clarifies that an appointment is the agreement between the insurer, or insurance agent, and the appointed insurance agent, while the document filed with the Department is only notice of that agreement. The Insurance Code §4001.205 allows insurance agents to appoint subagents, and requires the same notice of agreement to be filed with the Department, and specifies that Insurance Code §4001.206 applies to terminations of subagents for cause. Section 4001.206 requires that the insurer or insurance agent immediately file with the Department a statement of the facts relating to the termination for cause and the date and the cause of the termination. The Insurance Code §4051.051(3) mandates that a person hold a general property and casualty license or a general life, accident, and health insurance license if the person acts as an insurance agent who writes any other kind of insurance as required by the Commissioner for the protection of the insurance consumers of this state. The Insurance Code §4051.053 authorizes a person holding a general property and casualty insurance agent license to write health and accident insurance for a property and casualty insurer authorized to sell those insurance products in this state. The Insurance Code §4054.051(9) mandates that a person hold a general life, accident, and health insurance license if the person acts as an insurance agent who writes any other kind of insurance as required by the Commissioner for the protection of the insurance consumers of this state. The Insurance Code §36.001 provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of the state. The Government Code §2001.034 authorizes a state agency to adopt administrative rules on an emergency basis without prior notice and hearing under certain statutorily specified circumstances, including a finding that there is imminent peril to the public health, safety, or welfare.

3. TEXT.

SUBCHAPTER B. MEDICARE ADVANTAGE PLANS, MEDICARE ADVANTAGE PRESCRIPTION DRUG PLANS, AND MEDICARE PART D PLANS

§19.101. Definitions. The following words and terms when used in this subchapter shall have the following meanings unless the context clearly indicates otherwise.

(1) CMS--Centers for Medicare and Medicaid Services.

(2) CMS marketing guidelines--CMS' published marketing guidelines for use by Medicare Advantage Plans, Medicare Advantage Prescription Drug Plans, Prescription Drug plans and 1876 Cost Plans, as revised July 25, 2006 and inclusive of all subsequent revisions.

(3) Medicare Plans--Medicare Advantage Plans, Medicare Advantage Prescription Drug Plans, and Prescription Drug Plans as described in the CMS marketing guidelines.

(4) Organization--A person that contracts with CMS to offer Medicare plans including Medicare Advantage Plans, Medicare Advantage Prescription Drug Plans, and Prescription Drug Plans.

(5) Permanent license--A license issued to a person satisfying all the requirements of the Insurance Code §§4001.105, 4056.052, and 4056.053. The term does not include an individual temporarily licensed under the Insurance Code §§4001.151 - 4001.154.

(6) Person--An individual, partnership, corporation, or depository institution as defined in the Insurance Code §4001.003(8).

(7) Subcontractor(s) and downstream subcontractor(s)--Persons under contract with the organization to market Medicare plans as described and used in the CMS marketing guidelines.

§19.102. Agent Authority to Market Medicare Advantage Plans, Medicare Advantage Prescription Drug Plans, and Medicare Prescription Drug Plans.

(a) Persons holding a current permanent general life, accident, and health insurance license under the Insurance Code §4054.051 are authorized to act as marketing representatives to market Medicare plans pursuant to federal law, regulations and CMS marketing guidelines.

(b) In accord with the Insurance Code §4051.053, persons holding a current permanent general property and casualty insurance agent license under the Insurance Code §4051.051 are qualified to act as marketing representatives to market Medicare plans pursuant to federal law, regulations and CMS marketing guidelines, only to the extent that the Medicare plans are offered by a property and casualty insurer authorized to sell those products in this state.

(c) Unless qualifying under subsections (a) or (b) of this section, department licensees, including individuals holding a temporary general life accident and health insurance agent license or a temporary general property and casualty insurance agent license, are not qualified to act and are prohibited from acting as marketing representatives to market Medicare plans offered pursuant to federal law, regulations, and CMS marketing guidelines.

§19.103. Insurer, Health Maintenance Organization, and Agent Prohibitions Relating to Appointment and Use of Temporary Agents.

(a) An insurer, health maintenance organization, or insurance agent is prohibited from appointing a temporary agent for the purpose of marketing Medicare plans.

(b) An insurer, health maintenance organization, or insurance agent is prohibited from using any temporary agent that it has appointed to market Medicare plans.

(c) An insurer, health maintenance organization, or insurance agent is prohibited from assisting or participating in enrolling any individual in a Medicare plan contract marketed by a temporary agent or an unlicensed person, unless the unlicensed person is specifically authorized to engage in the activity under the CMS guidelines.

(d) An insurer, health maintenance organization, or insurance agent is required to report in writing any violation of this section within four calendar days of discovering the violation to the Enforcement Division, Compliance Intake Unit, Mail Code 110-1A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104 or as directed by the Department.

§19.104. Reporting Requirements for Organizations Marketing Medicare Advantage Plans, Medicare Advantage Prescription Drug Plans, and Medicare Part D Plans.

(a) Organizations marketing Medicare plan(s) in this state are required to report to the department as specified in subsection (d) of this section:

(1) the first, middle and last name; mailing address and department-issued license number of department-licensed marketing representatives that are marketing Medicare plan(s) and the date the employment or contract commenced and the date the employment or contract terminated; and

(2) the termination for cause of a department-licensed marketing representative's employment or contract and:

(A) the date of the event giving rise to the termination; and

(B) the date of the termination.

(b) An organization marketing Medicare plans in this state through subcontractor(s) and downstream subcontractor(s) is required to ensure that its subcontractor(s) or downstream subcontractor(s) report to the department as specified in subsection (d) of this section:

(1) the first, middle and last name; mailing address and department-issued license number of department-licensed marketing representatives that are marketing the organization's plan(s) and the date the employment or contract commenced and the date the employment or contract terminated; and

(2) the termination for cause of a department-licensed marketing representative's employment or contract and:

(A) the date of the event giving rise to the termination; and

(B) the date of the termination.

(c) As used in this section, the term "for cause" is defined as one or more of the following reasons:

(1) violation of CMS marketing guidelines;

(2) violation of the terminating person's Medicare plan's marketing guidelines;

(3) any reason, or cause, that is required to be reported to CMS;

(4) fraudulent or dishonest activity; and

(5) misrepresentation of a Medicare plan or insurance contract.

(d) Persons required to report a department-licensed marketing representative's employment or contract, or report the termination for cause of a department-licensed marketing representative's employment or contract, shall within 10 days following the employment, contracting, or termination for cause submit the information required in this section in a written report of the event to the department. Reports of "for cause" terminations must include an additional statement of the facts relating to the termination and the date and cause of the termination. Reports must be sent to: Licensing Division, Mail Code 107-1A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.



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