Federal court blocks Medicare pay cap rule

The ruling applies to all Medicare agents, not just the parties to the lawsuit.

A federal judge in Texas has blocked the Centers for Medicare & Medicaid Services from enforcing new rules on Medicare agent pay.

If the suspension survives the court challenge, it would apply to all Medicare agents across the U.S.

U.S. District Judge Reed O’Connor issued the ruling in response to Americans for Beneficiary Choice et al. v. the U.S. Department of Health and Human Services et al. and Council for Medicare Choice et al. v. HHS et al. The defendants include CMS, which is part of HHS, and the heads of HHS and CMS.

“General relief makes sense here,” O’Connor wrote in an opinion explaining his ruling.

CMS and HHS want their pay rules to apply to all agents, and plaintiffs need stability for the entire Medicare plan distribution system, not just themselves, O’Connor added.

O’Connor said he stayed enforcement of the judgment because he believes CMS will lose in court, in part because the company did not clearly explain why the agent’s pay increase was $100 and not more.

Representatives for CMS and the plaintiff were not initially available for comment.

What does it mean: The 2025 annual enrollment period for Medicare Advantage plans is scheduled to begin October 15 and run through December 7.

Some agents and support providers say that including the new CMS rules in 2025 coverage would create chaos because insurers and distributors do not have time to incorporate the new rules into budgets and systems.

If critics of the policy are right, the new order could prevent a collapse in the upcoming enrollment period.

History: CMS now sets the manufacturer compensation limit at $611 for the sale of new Medicare Advantage plans and $305 for renewals.

CMS says insurers use high support service fees to win over agents and distort the market.

The agency announced in April that it would raise the salary cap by $100 but would not exempt support services provided by distributors.

Plaintiffs in the Texas lawsuits allege that the current value of the distributors’ support services is likely more than $200 per beneficiary.

Source: CMS