Medicare Program; Revisions to the Medicare Advantage and Prescription Drug Benefit Programs: Clarification of Compensation Plans, 67406-67414 [E8-27041]

Download as PDF 67406 Federal Register / Vol. 73, No. 221 / Friday, November 14, 2008 / Rules and Regulations Unfunded Mandates Reform Act of 1995 (UMRA) (Public Law 104–4). This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104–113, section 12(d) (15 U.S.C. 272 note). DEPARTMENT OF HEALTH AND HUMAN SERVICES VII. Congressional Review Act Medicare Program; Revisions to the Medicare Advantage and Prescription Drug Benefit Programs: Clarification of Compensation Plans The Congressional Review Act, 5 U.S.C. 801 et seq., generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of this final rule in the Federal Register. This final rule is not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). List of Subjects in 40 CFR Part 180 Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements. Dated: October 31, 2008. Lois Rossi, Director, Registration Division, Office of Pesticide Programs. Therefore, 40 CFR chapter I is amended as follows: ■ PART 180—[AMENDED] 1. The authority citation for part 180 continues to read as follows: ■ Authority: 21 U.S.C. 321(q), 346a and 371. 2. Section 180.557 is amended by alphabetically adding the following commodity to the table in paragraph (a) to read as follows: ■ § 180.557 Tetraconazole; tolerances for residues. (a) * * * sroberts on PROD1PC70 with RULES Commodity Parts per million * * * Grape .............................. * * * * * * * * * * * 0.20 * [FR Doc. E8–26946 Filed 11–13–08; 8:45 am] BILLING CODE 6560–50–S VerDate Aug<31>2005 15:52 Nov 13, 2008 Jkt 217001 Centers for Medicare & Medicaid Services 42 CFR Parts 422 and 423 [CMS–4138–IFC2] RIN 0938–AP52 Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Interim final rule with comment period. AGENCY: SUMMARY: This interim final rule with comment period (IFC) revises the regulations governing the Medicare Advantage (MA) program (Part C), and prescription drug benefit program (Part D). This IFC sets forth new requirements governing the marketing of Part C and Part D plans which by statute must be in place at a date specified by the Secretary, but no later than November 15, 2008. The new marketing requirements, which set forth new limits on the compensation that can be paid to agents or brokers with respect to Part C and Part D plans, are based on authority under provisions in the Medicare Improvements for Patients and Providers Act (MIPPA) that became law on July 15, 2008. DATES: Effective date: These regulations are effective on November 10, 2008. Comment date: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on December 15, 2008. ADDRESSES: In commenting, please refer to file code CMS–4138–IFC2. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (please choose only one of the ways listed) 1. Electronically. You may submit electronic comments on specific issues in this regulation to http:// www.regulations.gov. Follow the instructions for ‘‘Comment or Submission’’ and enter the filecode to find the document accepting comments. 2. By regular mail. You may mail written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS–4138– PO 00000 Frm 00048 Fmt 4700 Sfmt 4700 IFC2, P.O. Box 8016, Baltimore, MD 21244–8016. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments (one original and two copies) to the following address only: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS–4138–IFC2, Mail Stop C4–26–05, 7500 Security Boulevard, Baltimore, MD 21244–1850. 4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to either of the following addresses: a. Room 445–G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201; (Because access to the interior of the HHH Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) b. 7500 Security Boulevard, Baltimore, MD 21244–1850. If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786– 7195 in advance to schedule your arrival with one of our staff members. Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period. Submission of comments on paperwork requirements. You may submit comments on this document’s paperwork requirements by following the instructions at the end of the ‘‘Collection of Information Requirements’’ section in this document. For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: Camille Brown, 410–786–0274, or Chevell Thomas, 410–786–1387. SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the E:\FR\FM\14NOR1.SGM 14NOR1 Federal Register / Vol. 73, No. 221 / Friday, November 14, 2008 / Rules and Regulations comment period on the following Web site as soon as possible after they have been received: http://regulations.gov. Follow the search instructions on that Web site to view public comments. Comments received timely will be also available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1–800–743–3951. sroberts on PROD1PC70 with RULES I. Background A. Overview of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108–173) was enacted on December 8, 2003. The MMA established the Medicare prescription drug benefit program (Part D) and made revisions to the provisions in Medicare Part C, governing what is now called the Medicare Advantage (MA) program (formerly Medicare+Choice). The MMA directed that important aspects of the new Medicare prescription drug benefit program under Part D be similar to, and coordinated with, regulations for the MA program. The MMA also directed implementation of the prescription drug benefit and revised MA program provisions by January 1, 2006. The final rules for the MA and Part D prescription drug programs appeared in the Federal Register on January 28, 2005 (70 FR 4588 and 70 FR 4194, respectively). Many of the provisions relating to applications, marketing, contracts, and the new bidding process, for the MA program, became effective on March 22, 2005, 60 days after publication of the rule, so that the requirements for both programs could be implemented by January 1, 2006. All of the provisions regarding the new Part D prescription drug program became effective on March 22, 2005. As we gained more experience with the MA program and the prescription drug benefit program, we proposed to revise areas of both programs and issued a proposed rule on May 16, 2008 (73 FR 28556) that would have clarified existing policies or codified current guidance for both programs. Several of these proposed regulatory revisions were overtaken by statutory provisions enacted in the Medicare Improvements VerDate Aug<31>2005 15:52 Nov 13, 2008 Jkt 217001 for Patients and Providers Act (MIPPA) (Pub. L. 110–275), enacted on July 15, 2008. These MIPPA provisions directly address in statute several issues we proposed to address through rulemaking, and thus superseded our rulemaking in these areas. B. Relevant Legislative History and Overview The Balanced Budget Act of 1997 (BBA) (Pub. L. 105–33) established a new ‘‘Part C’’ in the Medicare statute (sections 1851 through 1859 of the Social Security Act (the Act)) which provided for a Medicare+Choice (M+C) program. Under section 1851(a)(1) of the Act, every individual entitled to Medicare Part A and enrolled under Medicare Part B, except for most individuals with end-stage renal disease (ESRD), could elect to receive benefits either through the original Medicare program or an M+C plan, if one was offered where he or she lived. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA), Public Law 106–111, amended the M+C provisions of the BBA. Further amendments were made to the M+C program by the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106–554), enacted December 21, 2000. As noted above, the MMA was enacted on December 8, 2003. Title I of the MMA added a new ‘‘Part D’’ to the Medicare statute (sections 1860D–1 through 1860D–42) creating the Medicare Prescription Drug Benefit Program, the most significant change to the Medicare program since its inception in 1965. Sections 201 through 241 of title II of the MMA made significant changes to the Part C program. Title II of the MMA renamed the M+C program the MA program and included new payment and bidding provisions, new regional MA plans and special needs plans, reestablished authority for medical savings account (MSA) plans that had been provided in the BBA on a temporary basis, and made other changes. Title I of the MMA created prescription drug benefits under Medicare Part D, and a new retiree drug subsidy program. Both the MA and prescription drug benefit regulations were published separately, as proposed and final rules, though their development and publication were closely coordinated. On August 3, 2004, we published in the Federal Register proposed rules for the MA program (69 FR 46866) and the prescription drug benefit program (69 FR 46632). In response to public PO 00000 Frm 00049 Fmt 4700 Sfmt 4700 67407 comments on the proposed rules, we made several revisions to the proposed policies for both programs. For further discussion of these revisions, see the respective final rules (70 FR 4588) and (70 FR 4194). As noted above, on July 15, 2008, the Medicare Improvements for Patients and Providers Act became law, making several significant new revisions to the MA and Part D prescription drug benefit programs. On September 18, 2008, we published an interim final rule with comment period, Revisions to the Medicare Advantage and Prescription Drug Benefit Programs (73 FR 54226), that revised the regulations governing the MA program, prescription drug benefit program, and section 1876 cost plans to reflect new statutory requirements enacted in MIPPA. This included new requirements governing the marketing of Part C and Part D plans. Specifically, among other things, the September 18, 2008 regulations established requirements governing MA plan and prescription drug plan (PDP) compensation structures designed to ensure that agents and brokers enroll individuals in the MA plan or PDP that best meets their health care needs. The provisions regarding compensation structures in the September 18, 2008 rule were effective upon publication, and public comments are being accepted until November 17, 2008. II. Provisions of the Interim Final Rule In the section that follows, we discuss the revisions made in this interim final rule with comment period to the regulations in 42 CFR parts 422 and 423 governing, respectively, the MA and prescription drug benefit programs. Medicare Advantage and Prescription Drug Program Marketing Requirements (Subparts V)—Broker and Agent compensation (§ 422.2274 and § 423.2274) Section 103(b)(1)(B) of MIPPA charged the Secretary with establishing guidelines to ‘‘ensure that the use of compensation creates incentives for agents and brokers to enroll individuals in the Medicare Advantage plan that is intended to best meet their health care needs.’’ Section 103(b)(2) of MIPPA applies these same guidelines to PDP sponsors. On September 18, 2008 we published the new Medicare regulations, Medicare Advantage and Prescription Drug Benefit Programs; Final Marketing Provisions (73 FR 54208) and Revisions to the Medicare Advantage and Prescription Drug Benefit Programs (73 FR 54226), and a guidance document to E:\FR\FM\14NOR1.SGM 14NOR1 sroberts on PROD1PC70 with RULES 67408 Federal Register / Vol. 73, No. 221 / Friday, November 14, 2008 / Rules and Regulations assist plans in implementing these new regulations. Among other things, these new rules were intended to implement the MIPAA requirement to ensure that agents or brokers enroll beneficiaries based on the plan that ‘‘best meet[s] their health care needs’’ by imposing requirements pertaining to agent and broker compensation designed to reduce existing financial incentives to enroll a beneficiary in a new plan based on the agent or broker’s financial interests rather than the beneficiary’s health care needs. These rules provided that, after a beneficiary is enrolled in an MA plan or PDP by an agent or broker, a renewal compensation would be paid for five years after the initial compensation, and that if any agent or broker enrolls the beneficiary in a different plan of a ‘‘like plan type’’ during this five-year period, renewal compensation would be paid. A ‘‘like plan type’’ refers to PDP, MA or MA–PD, or cost plan (as defined in 422.2274(a)(3)(i) and 423.2274(a)(3)(i)). This renewal compensation will apply whether or not the new enrollment is in the same or a new (receiving) organization. The renewal compensation will be paid by the organization offering the plan into which the enrollment occurs, and the amount of the renewal compensation will be based on that organization’s compensation structure. That organization will pay renewal compensation for the remainder of the cycle provided that the enrollment remains with that organization. Thus, the agent or broker will receive compensation at the renewal rate, as described above, whether the enrollee stays in the same plan, or moves to a different plan of a like type, regardless of whether the move is within the existing organization or to a different organization. However, if an enrollee moves to a plan of a different plan type (as defined in 422.2274(a)(3)(ii) and 423.2274(a)(3)(ii)) within the existing organization, the agent or broker may receive compensation at the initial rate. This is designed to ensure that recommendations will be based on the best interests of the beneficiary as MIPPA required. Under the September 18th regulations, compensation in the initial year in this six-year cycle could not exceed 200 percent of the amount paid for renewal years. We released additional guidance on October 8 and 17, 2008 to further clarify the marketing requirements contained in these new rules. On October 24, 2008, we rescinded the October 8, 2008 guidance memorandum in light of concerns about how the compensation guidance was VerDate Aug<31>2005 15:52 Nov 13, 2008 Jkt 217001 being interpreted. Based on comments and complaints about how the September 18, 2008 regulations were being implemented, we became concerned that MA and Part D plans were misinterpreting our intent in the compensation structure requirements in § 422.2274(a) and § 423.2274(a) by proposing structures under which compensation in the initial year in the cycle was less than the renewal years and renewal compensation varied from year to year. First, in limiting the amount by which the initial year compensation can exceed the compensation paid for the five renewal years in the six-year cycle, the regulations clearly contemplated that the initial year compensation would be higher than the renewal compensation level. The very purpose of the regulatory scheme, ensuring that an entity does not get the benefit of a initial year level of compensation for moving a member to another plan after the first year, is clearly premised on this assumption. In addition, we believed that the words of the regulation text made clear that, once a plan chooses an appropriate renewal amount, this fixed renewal amount would be paid for all five renewal years of the six-year cycle in question. Sections 422.2274(a)(1) and 423.2274(a)(1) refer to the ‘‘first year compensation’’ amount being ‘‘no more than 200 percent of the compensation paid for selling or servicing the enrollee in each individual subsequent renewal year * * *.’’ (Emphasis added). Thus, we believed that the current regulations made clear that the renewal ‘‘compensation paid’’ for a renewal year, whatever that amount is, be paid for ‘‘each’’ of the five ‘‘individual’’ renewal years of the six-year cycle. Because, as noted, we have received reports of compensation structures that are inconsistent with the intent of the September 18 interim final rule with comment period, we are revising the regulations to expressly specify in §§ 422.2274(a)(1) and 423.2274(a)(1) that the aggregate (commissions, bonuses, etc.) of the compensation amount paid for selling or servicing an enrollee during each of the 5 individual renewal years of a six-year cycle must be fair-market value for the work performed and no more, and no less, than 50 percent of the aggregate (commissions, bonuses, etc.) of the compensation amount paid for that beneficiary in the initial year of the sixyear cycle. These new regulations are necessary to achieve the original intent of the September 18, 2008 regulations. We recognize this is a significant change in approach to a compensation structure PO 00000 Frm 00050 Fmt 4700 Sfmt 4700 from September 18, 2008, interim final rule with comment period, where the first year in the six-year cycle could not exceed 200 percent of the amount paid for renewal years, which was modeled after the National Association of Insurance Commissioner’s compensation requirements for Medicare supplemental policies. We are making this change, however, to modify the difference between initial year compensation rates and renewal rates to better ensure that agents and brokers enroll beneficiaries in a plan that is intended to best meet the beneficiaries’ health care needs. We do not currently have the administrative capability to communicate to plans as part of our enrollment acceptance process whether an individual enrolling in a plan in 2009 is a new enrollee to Part C or Part D, or an individual who, under the compensation structure provided for in this interim final rule, is subject to the renewal compensation level rather than the initial compensation level. Thus, we are in this interim final rule, for 2009 only, initially deeming all individuals enrolling in a plan to be in the first year of the five renewal years in the six-year cycle provided for under these regulations. This means that for enrollments with effective dates in 2009, the MA or PDP plan initially pays the renewal compensation amount to the broker or agent enrolling an individual. Several times in 2009, we will run a report identifying those beneficiaries enrolled in an MA plan or PDP who were newly entitled or enrolled from original Medicare. We will sort the report by plan and send each organization the list of enrollees in a plan offered by that organization, for which, if an agent or broker wrote the policy, that agent or broker would be entitled to an initial compensation amount. Organizations can use the report to identify the agents or brokers who are entitled to an initial compensation amount. Under this interim final rule, organizations will be required to adjust the compensation from renewal compensation in these cases only to the amount that would have been paid in compensation for an initial enrollment under the six year cycle in question. For the remainder of 2009, this interim final rule requires that organizations pay agents and brokers an initial compensation when a beneficiary enrolls in an MA plan during the beneficiary’s Initial Coverage Election Period (ICEP) or in a PDP during the Initial Enrollment Period (IEP). This approach enables organizations to compensate agents and brokers for the E:\FR\FM\14NOR1.SGM 14NOR1 sroberts on PROD1PC70 with RULES Federal Register / Vol. 73, No. 221 / Friday, November 14, 2008 / Rules and Regulations additional work involved in explaining all of the attributes of an MA plan (and the Part C program generally) or a PDP (and the Part D program generally) to a beneficiary who has had no prior experience with Part C or Part D, while at the same time reducing the financial incentive for moving a beneficiary who is in a renewal cycle (and is thus already familiar with these types of products) to a new plan that may be contrary to his or her health care needs. In addition to the above changes to the September 18, 2008 regulations, we are also in this interim final rule addressing the amount paid in agent and broker compensation for 2009 and beyond. We have received information that some organizations are proposing to offer extremely generous compensation in 2009 far in excess of amounts paid for the previous three years by the organization in question, or substantially in excess of the amounts paid generally in the area for the plan type involved. We are concerned about the financial incentive to enroll beneficiaries in a new plan that is created by the potential for an agent or broker to receive such a substantial increase in compensation relative to the amount he or she would be paid for a renewal in the beneficiary’s current plan. We also believe that these excessive compensation structures are detrimental to sustaining an enrollee’s long term relationship with the plan in which he or she is enrolled. In order to protect against the incentive that such a substantially higher compensation level may create to enroll beneficiaries in a different plan even when doing so might not be in their best interest, and to ensure that beneficiaries’ long term relationships with their plans are preserved for as long as they are in the beneficiary’s interest, we are also in this interim final rule establishing a requirement that compensation levels under the new regulatory scheme must satisfy one of two regulatory standards. For an organization that offered plans in 2006, and used agents and brokers to sell its Medicare products, the MA organization or PDP sponsor offering the plan can comply with our new rules if the ‘‘initial year’’ compensation under the six-year cycle provided for under this rule is the same, adjusted for inflation, that was paid for the same plan type in the same area by the MA or PDP organization, as applicable, in 2006, and the MA or PDP organization certifies to that effect. The inflation adjustment will be based on the average change in MA plan growth rates for MA organizations and Part D growth rates for Part D organizations, as published in the MA VerDate Aug<31>2005 15:52 Nov 13, 2008 Jkt 217001 and Part D rate announcements published on the first Monday in April. Because 2009 is initially deemed to be the first renewal year in the six-year cycle, this means that the organization will initially pay 50 percent of the inflation adjusted amount of the initial enrollment compensation it paid in 2006 for the plan type in question. Unless the 2009 compensation amount is adjusted to be changed to an initial enrollment compensation amount as discussed above, this renewal amount will also be paid by the current organization for the remainder of the renewal years in the six-year cycle (for example, 2010 through 2013), assuming that the enrollee remained enrolled in the current organization in the same plan type. If an agent or broker moves the enrollee to a like-plan type in a different organization, the new organization will pay renewal compensation for the remainder of the cycle at the new (receiving) organization’s renewal compensation amount. Organizations that offered plans in an area in 2006 will also have another option, which will be the only option for organizations that did not offer a plan of the type in question in the area involved in 2006 or did offer a plan of the type in question in 2006, but did not use agents and brokers to sell that product. Under this alternate test, renewal compensation initially paid in 2009 must be 50 percent of an initial rate that was determined, based on market analysis to be commensurate with the ‘‘market’’ rates paid by all organizations in the geographic area for an initial enrollment in the plan type in question during 2006 and 2007, also adjusted for inflation based on changes in MA and Part D growth rates. Essentially, any rates in excess of what was paid by organizations in the area must be justified. We will reserve the right to determine, based on data we receive from MA and Part D contractors, whether the compensation amount proposed meets this test. See the chart below for a reference regarding the required six-year compensation cycle. We note that for purposes of both of the foregoing tests, the ‘‘area’’ in which the plan is offered corresponds to the area the organization uses to determine any geographic adjustments to the amount of compensation paid. If the organization pays the same amount in each county, or MSA, or Statewide, that would be the area in question. For 2010 and subsequent years, the compensation amount paid to an agent or broker for an initial enrollment of a Medicare beneficiary into an MA or PDP plan is the prior year’s compensation PO 00000 Frm 00051 Fmt 4700 Sfmt 4700 67409 adjusted by the change in MA rates for MA plans as published in the MA rate announcement and the change in the Part D rates for PDP plans as published in the Part D rate announcement. CMS releases annually the rate announcements for MA and Part D to publish on the first Monday in April. We have removed and reserved § 422.2274(a)(2) and § 423.2274(a)(2) as it is redundant to § 422.2274(a)(1)(iii) and § 423.2274(a)(1)(iii) in this rule. We invite comment on the extent to which the compensation structure, or some alternative compensation structure, will promote long-term relationships (that are based on the beneficiaries’ interests) between beneficiaries and the plans in which they are enrolled. We are particularly interested in comments on whether this goal would be served (1) by providing for higher levels of compensation for an initial enrollment in Part C or Part D (given the added costs of explaining how the programs work) than for a change in enrollment from one Part C plan or Part D plan to another, (2) by establishing a flat fee schedule, or (3) by providing for lower payments in early years and higher payments in the renewal years, or in later renewal years, to incentivize agents or brokers to keep enrollees in the same plan rather than giving them an incentive to move enrollees. We note that, to the extent that the high levels of agent or broker compensation that have been reported are already in place for 2008, and were not included in bids for 2008, we intend to ensure in our review of bids for 2010 that these additional uncovered costs are not included in 2010 bid amounts. Similarly, if the compensation paid for 2009, even under this new interim final rule, exceeds the amount assumed in the bids submitted this spring for 2009, we will similarly ensure in our bid review that these 2009 costs are not built into bids for 2010. These new requirements will apply to the compensation paid to the agent or broker who actually enrolls the beneficiary, whether that agent or broker is paid directly by the MA organization or PDP sponsor, or by an intermediate entity, such as a ‘‘Field Marketing Organization’’ (FMO) or similar type entity that has been retained to sell a plan’s Medicare products on its behalf. We are also concerned about amounts paid to FMOs or other similar type entities for their services that do not necessarily flow down to the agent or broker who deals with the beneficiary. Examples of such services are training, material development, customer service, direct mail, and agent recruitment. E:\FR\FM\14NOR1.SGM 14NOR1 67410 Federal Register / Vol. 73, No. 221 / Friday, November 14, 2008 / Rules and Regulations Specifically, we are concerned that these FMOs or other similar entities could engage in a ‘‘bidding war’’ with respect to payments they retain, agree to contract to recruit agents, or perform other services only for MA and PDP organizations that are the ‘‘highest bidders’’ for their services. Thus, in this interim final rule, in addition to limiting the compensation that is ultimately paid to agents or brokers as set forth above, we are requiring that, for organizations that contract with FMOs or pay other similar type entities, any amount paid to such a third party must be fair-market value and may not exceed an amount that is commensurate with the amount that organization paid to a third party for similar services in each of the prior two years. Finally, we have learned that some organizations did not post their compensation structures by October 15, 2008, but instead posted them after they had the opportunity to review competitors’ compensation structure postings. In fact, it appears that some organizations have yet to post their compensation levels. In light of the new requirements set forth in this interim final rule with comment period, MA and PDP organizations must submit compensation structures paid for the 3 previous years, and the compensation structures for the upcoming plan year in accordance with our instructions. This information must be submitted to the following mailbox: MA_PDPSales Compensation@cms.hhs.gov (there is an underscore between ‘‘MA_PDP’’) no later than the date we specify. For MA and PDP organizations that did not sell products through agents and brokers in any of these years, they would not be required to provide information for those years. Nevertheless, all MA and PDP organizations must respond to the data requests in accordance with our instructions. In addition, if the MA and PDP organization contracts with an FMO or other third party, the compensation structure paid to each third party in each of the past three years, and the compensation structure for 2009, should be reported. We will consider an organization that does not submit compensation structure information for the appropriate years to us by the date indicated to be out of compliance with our marketing requirements and the organization will face potential sanctions and/or other penalties. An organization’s submission must include a signed certification from its CEO or CFO (or other authorized senior official). MA and PDP organizations must distribute their rates by November 15, 2008 to agents, brokers, and other third parties under contract to sell Medicare Advantage and Part D plans. Once plans distribute their 2009 compensation rates and submit that information to CMS, they cannot change the rate without prior CMS approval. Based on public comments and discussions with the industry, we realize that while our current compensation regulations are relevant to the way independent agents and brokers are compensated, the relationship and compensation arrangements between MA and Part D organizations and employed agents is very different. As a result, the new compensation requirements in this interim final rule will not apply to employed agents. CMS considers agents employed if the employed agent sells exclusively for one organization and receives a set salary in addition to any compensation tied to volume of sales. We are interested in receiving public comments on what, if any, compensation requirements should apply to employed agents. In accordance with the above new requirements, we will investigate outliers whose current compensation is not reasonable in light of the compensation paid during the previous three years and compensation paid in that geographic area by similar plan types to ensure that organizations are in compliance with our requirements and take enforcement action as appropriate, including requiring organizations to be prepared to adjust the compensation rates submitted to CMS, or to take other steps to ensure that beneficiaries’ interests are not harmed by the excessive compensation paid. In addition, as noted in the preamble to the September 18, 2008 interim final rule (73 FR 54239), all parties should be mindful that their compensation arrangements including arrangements with FMOs and other similar type entities must comply with the fraud and abuse laws, including the anti-kickback statute. REQUIRED SIX-YEAR COMPENSATION CYCLE Year 1—‘‘Initial year compensation’’ While not initially applicable for 2009, the first year compensation assumed as part of the six-year cycle will either be the amount paid by the MA organization or PDP sponsor for the plan type in question in the area for 2006, or an amount commensurate with the market rate in the area for the plan type in 2006 and 2007, adjusted for inflation. This rate will apply in 2009 if an adjustment is required in the case of a beneficiary new to Part C or Part D. Year 2—‘‘Renewal compensation’’ (2009) Year 3—‘‘Renewal compensation ’’ Year 4—‘‘Renewal compensation ’’ Year 5—‘‘Renewal compensation ’’ Year 6—‘‘Renewal compensation ’’ This amount must be no more and no less than half the assumed initial amount under the sixyear cycle. Same amount as year 2. Same amount as year 2. Same amount as year 2. Same amount as year 2. sroberts on PROD1PC70 with RULES III. Response to Comments Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowledge or respond to them individually. We will consider all comments we receive by the date and VerDate Aug<31>2005 15:52 Nov 13, 2008 Jkt 217001 time specified in the DATES section of this preamble, and, when we proceed with a subsequent document, we will respond to the comments in the preamble to that document. PO 00000 IV. Waiver of Proposed Rulemaking, Full 60-Day Comment Period, and Delay in Effective Date A. Waiver of Proposed Rulemaking and Full 60-Day Comment Period We ordinarily publish a notice of proposed rulemaking in the Federal Frm 00052 Fmt 4700 Sfmt 4700 E:\FR\FM\14NOR1.SGM 14NOR1 Federal Register / Vol. 73, No. 221 / Friday, November 14, 2008 / Rules and Regulations sroberts on PROD1PC70 with RULES Register and allow a 60-day public comment on the proposed rule. The notice of proposed rulemaking includes a reference to the legal authority under which the rule is proposed, and the terms and substances of the proposed rule or a description of the subjects and issues involved. This procedure can be waived, however, if an agency finds good cause that a notice-and-comment procedure is impracticable, unnecessary, or contrary to the public interest and incorporates a statement of the finding and its reasons in the rule issued. In addition, under section 1871(b)(1)(B) of the Act, prior notice and comment are not required when ‘‘a statute establishes a specific deadline for the implementation of a provision and the deadline is less than 150 days after the date of the enactment’’ of the statute in which the deadline is contained. The MIPPA was enacted on July 15, 2008. The deadline for issuing the compensation rules included in this interim final rule with comment period are required by MIPPA to be in effect on a date specified by the Secretary, but no later than November 15, 2008, which is less than 150 days after enactment of MIPPA. For this reason, we find good cause to waive the proposed rulemaking requirement and to shorten the customary 60-day comment period to 30 days. B. Waiver of Delay of Effective Date In addition, since the provision discussed above which is required by statute to be in effect by a date specified by the Secretary, but in no case later than November 15, 2008, we find good cause to waive the 30-day delay in effective date that would otherwise apply under section 1871(e)(1)(B)(i) of the Act and section 553(d) of the Administrative Procedure Act (APA). Section 553(d) of the APA and section 1871(e)(1)(B)(i) of the Act ordinarily require that a regulation be effective no earlier than 30 days after publication. Under section 553(d)(3) this requirement can be waived for good cause, and under section 1871(e)(1)(B)(ii) this requirement can be waived if necessary to comply with statutory requirements, or if a delay is contrary to the public interest. As noted above, Congress enacted MIPPA on July 15, 2008 and directed that many of the marketing provisions including the provision related to agent/ broker compensation in this rule be effective on a date specified by the Secretary, but in no event later than November 15, 2008, so that they could be implemented in time for this fall’s marketing for the 2009 plan year. As a result, we find good cause to waive the VerDate Aug<31>2005 15:52 Nov 13, 2008 Jkt 217001 APA delay of effective date, and find that a delay under section 1871 is contrary to the public interest. In addition, 5 U.S.C. section 801 generally requires that agencies submit major rules to the Congress 60 days before the rules are scheduled to become effective. This delay does not apply, however, when there has been a finding of good cause for waiver of prior notice and comment as set forth above. V. Collection of Information Requirements Under the Paperwork Reduction Act of 1995, we are required to provide 30day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues: • The need for the information collection and its usefulness in carrying out the proper functions of our agency. • The accuracy of our estimate of the information collection burden. • The quality, utility, and clarity of the information to be collected. • Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. We are soliciting public comment on each of these issues for the following sections of this document that contain information collection requirements (ICRs). A. ICRs Regarding Broker and Agent Compensation and Training of Sales Agents (§ 422.2274) Section 422.2274(d) states that upon CMS’ request, the organization must provide to CMS the information necessary for it to conduct oversight of marketing activities. Specifically, we are requiring all Medicare Advantage plans to post revised compensation structures to brokers or agents that conform precisely to our regulations and guidance (for 2009, these rates must be posted by November 15, 2008). We are further requiring organizations to submit their compensation structures for the previous years plus the current year to CMS (for example, 2009 plans must submit 2006 through 2009). In addition to the compensation structures, every complete submission must include a signed certification from the organization’s CEO or CFO (or other authorized senior official). The burden associated with this requirement is the PO 00000 Frm 00053 Fmt 4700 Sfmt 4700 67411 time and effort put forth by the organization to post the compensation structures and to provide the structures and certification to CMS. We anticipate it would take 1 organization 56 hours to fulfill this requirement. We estimate 670 MA organizations would be affected annually by this requirement. Therefore, the total annual burden associated with this requirement is 37,520 hours. In this interim final rule with comment period, we are collecting additional information to implement § 422.2274(d). We submitted a revision of the currently approved information collection request assigned to OMB control number 0938–0753. The information collection requirements contained in § 422.2274(d) will be included in the revised information collection request. B. ICRs Regarding Broker and Agent Compensation and Training of Sales Agents (§ 423.2274) Section 423.2274(d) states that the Part D sponsor provide information for it to conduct oversight of marketing activities upon CMS’ request. Specifically, we are requiring all Medicare Prescription Drug Plans to post revised compensation structures to brokers or agents that conform precisely to our regulations and guidance (for 2009, these rates must be posted by November 15, 2008). We are further requiring organizations to submit their compensation structures for the 3 previous years plus the current year to CMS (for example, 2009 plans must submit 2006 through 2009). In addition to the compensation structures, every complete submission must include a signed certification from the organization’s CEO or CFO (or other authorized senior official). The burden associated with this requirement is the time and effort put forth by the organization to post the compensation structures and to provide the structures and certification to CMS. We anticipate it would take 1 Part D sponsor 49 hours to fulfill this requirement. We estimate 87 Part D sponsors would be affected annually by this requirement. Therefore, the total annual burden associated with this requirement is 4,263 hours. The information collection requirements contained in § 423.2274 were submitted to OMB for approval as part of an emergency revision of the currently approved information collection request assigned to OMB Control Number 0938–0964. As reflected in the table that follows, the aggregate annual burden associated E:\FR\FM\14NOR1.SGM 14NOR1 67412 Federal Register / Vol. 73, No. 221 / Friday, November 14, 2008 / Rules and Regulations with the collection of information section for this rule totals 41,783 hours. TABLE 2—AGGREGATE ANNUAL BURDEN OMB control No. Burden per response (hours) Number of respondents Requirements Total annual burden (hours) 0938–0753 ....................................................................................................... 0938–0964 ....................................................................................................... 422.2274(d) 423.2274(d) 670 87 56 49 37,520 4,263 Total .......................................................................................................... ........................ ........................ ........................ 41,783 If you comment on these information collection and recordkeeping requirements, please do either of the following: 1. Submit your comments electronically as specified in the ADDRESSES section of this rule; or 2. Mail copies to the address specified in the ADDRESSES section of this rule and to the Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10235, New Executive Office Building, Washington, DC 20503, Attn: CMS Desk Officer, CMS–4138–IFC2, Fax (202) 395–6974. VI. Regulatory Impact Analysis sroberts on PROD1PC70 with RULES A. Overall Impact We have examined the impacts of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993, as further amended), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96–354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)). Executive Order 12866 (as amended by Executive Order 13258) directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). As a result of our analysis, this interim final rule does not meet the threshold of being economically significant and is consequently not a major rule. B. Regulatory Flexibility Analysis The RFA requires agencies to analyze options for regulatory relief of small VerDate Aug<31>2005 15:52 Nov 13, 2008 Jkt 217001 businesses, if a rule has significant impact on a substantial number of small entities. Under the RFA, we are not required to conduct an initial regulatory flexibility analysis for interim final rules. However, it is our longstanding policy to provide an analysis when we believe it would aid understanding of the effects of the interim final rule. We are providing a summary of the minimal costs associated with this interim final rule. Costs for preparing and reporting compensation structures to CMS are as follows: MA program $54.98 × 37,520 hours = $2,062,849. Costs for the PDP program are $54.98 × 4,263 hours = $234,379. The aggregate new burden costs are estimated to be $2,297,228. Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditure in any one year by State, local, or tribal governments, in the aggregate, or by the private sector, of $110 million. That threshold level is currently approximately $130 million. We anticipate that this interim final rule would not impose costs above the $130 million UMRA threshold on State, local, tribal governments, in the aggregate or by the private sector. Executive Order 13132 establishes certain requirements that an agency must meet when it issues a final rule that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. The changes and additions contained in this interim final rule do not impose new costs on states or local governments. Thus, there are no anticipated Federalism implications. C. Conclusion Given that we expect the cost of implementing this provision to be minimal and under the $100 million threshold; we did not conduct a full economic impact analysis with regard to those entities potentially impacted by these provisions, as outlined by the PO 00000 Frm 00054 Fmt 4700 Sfmt 4700 regulatory flexibility analysis or Section 1102(b) of the Act. In accordance with the provisions of Executive Order 12866, this final rule was reviewed by the Office of Management and Budget. List of Subjects 42 CFR Part 422 Administrative practice and procedure, Health facilities, Health maintenance organizations (HMO), Medicare, Penalties, Privacy, Reporting and recordkeeping requirements. 42 CFR Part 423 Administrative practice and procedure, Emergency medical services, Health facilities, Health maintenance organizations (HMO), Medicare, Penalties, Privacy, Reporting and recordkeeping. ■ For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services amends 42 CFR chapter IV as set forth below: PART 422—MEDICARE ADVANTAGE PROGRAM 1. The authority citation for part 422 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). Subpart V—Medicare Advantage Marketing Requirements 2. Section 422.2274 is amended by— A. Revising the introductory paragraph. ■ B. Revising paragraph (a)(1). ■ C. Removing and reserving paragraph (a)(2). The revisions read as follows: ■ ■ § 422.2274 Broker and agent requirements. For purposes of this section ‘‘compensation’’ includes pecuniary or non-pecuniary remuneration of any kind relating to the sale or renewal of a policy including, but not limited to, commissions, bonuses, gifts, prizes, E:\FR\FM\14NOR1.SGM 14NOR1 sroberts on PROD1PC70 with RULES Federal Register / Vol. 73, No. 221 / Friday, November 14, 2008 / Rules and Regulations awards and finders fees. ‘‘Compensation’’ does not include the payment of fees to comply with State appointment laws, training, certification, and testing costs; reimbursement for mileage to, and from, appointments with beneficiaries; or reimbursement for actual costs associated with beneficiary sales appointments such as venue rent, snacks, and materials. If a Medicare Advantage organization markets through independent (i.e., non-employee) brokers or agents, the following requirements must be met: (a) * * * (1) An MA organization (or other entity on its behalf) may provide compensation to a broker or agent for the sale of an MA product if the following requirements are met: (i) The compensation amount paid to the broker or agent for an initial enrollment of a Medicare beneficiary into an MA plan in 2009 is one of the following: (A) The compensation paid by the MA organization in the geographic area for initial enrollment for the plan type in question in 2006, adjusted by the average change in MA rates as published by CMS in the MA rate announcement; or (B) A compensation amount commensurate with the market rate for initial enrollments paid by (or on behalf of) MA organizations offering plans in the geographic area for the plan type in question during 2006 and 2007, adjusted by the average change in MA rates as published by CMS in the MA rate announcement. (ii) For 2010 and subsequent years, the compensation amount paid to an agent or broker for enrollment of a Medicare beneficiary into an MA plan is: (A) For an initial enrollment, the prior year’s initial compensation adjusted by the change in MA rates that CMS announces each year. (B) For renewals, an amount equal to 50 percent of the initial compensation in (A) above. (iii) The broker or agent is paid a renewal compensation for each of the next 5 years the enrollee remains in the plan in an amount equal to 50 percent of the initial year compensation amount (creating a 6-year compensation cycle). For purposes of paragraph (a)(1)(i), individuals enrolling in an MA plan in 2009 are initially deemed to be in the first renewal year (the second year) in the 6-year cycle. With respect to an individual identified by the MA organization as in an Initial Coverage Election Period (ICEP) or subsequently identified by CMS as in an ICEP or new VerDate Aug<31>2005 15:52 Nov 13, 2008 Jkt 217001 to the MA program, the individual is considered to be in the initial year of the 6-year cycle. The MA organization must adjust the compensation paid for these new enrollees from renewal compensation to the amount that would have been paid for an initial enrollment under the 6-year compensation structure initiated in the year the enrollment occurred. (iv) If the MA organization contracts with a third party entity such as a Field Marketing Organization or similar type entity to sell its insurance products, or perform services (for example, training, customer service, or agent recruitment), the amount paid to the third party must be fair-market value and must not exceed an amount that is commensurate with the amounts paid by the MA organization to a third party for similar services during each of the previous 2 years. (2) Reserved * * * * * PART 423—VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT 3. The authority citation for part 423 continues to read as follows: ■ Authority: Secs. 1102, 1860D–1 through 1860D–42, and 1871 of the Social Security Act (42 U.S.C. 1302, 1395w–101 through 1395w–152, and 1395hh). Subpart V—Part D Marketing Requirements 4. Section 423.2274 is amended by— A. Revising the introductory paragraph. ■ B. Revising paragraph (a)(1). ■ C. Removing and reserving (a)(2). The revisions read as follows: ■ ■ § 423.2274 Broker and agent requirements. For purposes of this section ‘‘compensation’’ includes pecuniary or non-pecuniary remuneration of any kind relating to the sale or renewal of a policy including, but not limited to, commissions, bonuses, gifts, prizes, awards and finders fees. ‘‘Compensation’’ does not include the payment of fees to comply with State appointment laws, training, certification, and testing costs; reimbursement for mileage to, and from, appointments with beneficiaries; or reimbursement for actual costs associated with beneficiary sales appointments such as venue rent, snacks, and materials. If a Part D sponsor markets through independent (i.e., non-employee) brokers or agents, the following requirements must be met: (a) * * * (1) A Part D sponsor (or other entity on its behalf) may provide PO 00000 Frm 00055 Fmt 4700 Sfmt 4700 67413 compensation to a broker or agent for the sale of a Part D plan only if the following requirements are met: (i) The compensation amount paid to the broker or agent for an initial enrollment of a Medicare beneficiary into a PDP in 2009 is either one of the following: (A) The compensation paid by the Part D sponsor in the area for an initial enrollment for the plan type in question in 2006, adjusted by the average change in Part D rates as published by CMS in the Part D rate announcement; or (B) A compensation amount commensurate with the market rate for initial enrollments paid by (or on behalf of) Part D sponsors offering plans in the geographic area for the plan type in question during 2006 and 2007, adjusted by the average change in Part D rates as published in the Part D rate announcement by CMS. (ii) For 2010 and subsequent years, the compensation amount paid to an agent or broker for enrollment of a Medicare beneficiary into PDP is: (A) For an initial enrollment, the prior year’s initial compensation adjusted by the change in Part D rates that CMS announces each year. (B) For renewals, an amount equal to 50 percent of the initial compensation in (A) above. (iii) The broker or agent is paid a renewal compensation for each of the next 5 years the enrollee remains in the plan in an amount equal to 50 percent of the initial year compensation paid (creating a 6-year compensation cycle). For purposes of paragraph (a)(1)(i), individuals enrolling in a PDP in 2009 are initially deemed to be in the first renewal year (the second year) in the 6year cycle. With respect to an individual identified by the PDP sponsor as in an Initial Enrollment Period (IEP) or subsequently identified by CMS as in an IEP or new to the Part D program, the individual is considered to be in the initial year of the 6-year cycle. The PDP Sponsor must adjust the compensation paid for these new enrollees from renewal compensation to the amount that would have been paid for an initial enrollment under the 6-year compensation structure initiated in the year the enrollment occurred. (iv) If the Part D sponsor contracts with a third party entity such as a Field Management Organization or similar type entity to sell its insurance products or perform services (for example, training, customer service, or agent recruitment), the amount paid to the third party must be fair-market value and must not exceed an amount that is commensurate with the amounts paid by the PDP organization to a third party E:\FR\FM\14NOR1.SGM 14NOR1 67414 Federal Register / Vol. 73, No. 221 / Friday, November 14, 2008 / Rules and Regulations for similar services during each of the previous 2 years. (2) Reserved. * * * * * (Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; and Program No. 93.774, Medicare—Supplementary Medical Insurance Program) Dated: October 31, 2008. Kerry Weems, Acting Administrator, Centers for Medicare & Medicaid Services. Approved: November 7, 2008. Michael O. Leavitt, Secretary. [FR Doc. E8–27041 Filed 11–10–08; 12:55 pm] BILLING CODE 4120–01–P DEPARTMENT OF HOMELAND SECURITY Federal Emergency Management Agency 44 CFR Part 64 [Docket No. FEMA–8051] Suspension of Community Eligibility Federal Emergency Management Agency, DHS. ACTION: Final rule. sroberts on PROD1PC70 with RULES AGENCY: SUMMARY: This rule identifies communities, where the sale of flood insurance has been authorized under the National Flood Insurance Program (NFIP), that are scheduled for suspension on the effective dates listed within this rule because of noncompliance with the floodplain management requirements of the program. If the Federal Emergency Management Agency (FEMA) receives documentation that the community has adopted the required floodplain management measures prior to the effective suspension date given in this rule, the suspension will not occur and a notice of this will be provided by publication in the Federal Register on a subsequent date. DATES: Effective Dates: The effective date of each community’s scheduled suspension is the third date (‘‘Susp.’’) listed in the third column of the following tables. FOR FURTHER INFORMATION CONTACT: If you want to determine whether a particular community was suspended on the suspension date or for further information, contact David Stearrett, Mitigation Directorate, Federal Emergency Management Agency, 500 C VerDate Aug<31>2005 15:52 Nov 13, 2008 Jkt 217001 Street, SW., Washington, DC 20472, (202) 646–2953. SUPPLEMENTARY INFORMATION: The NFIP enables property owners to purchase flood insurance which is generally not otherwise available. In return, communities agree to adopt and administer local floodplain management aimed at protecting lives and new construction from future flooding. Section 1315 of the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits flood insurance coverage as authorized under the NFIP, 42 U.S.C. 4001 et seq.; unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed in this document no longer meet that statutory requirement for compliance with program regulations, 44 CFR part 59. Accordingly, the communities will be suspended on the effective date in the third column. As of that date, flood insurance will no longer be available in the community. However, some of these communities may adopt and submit the required documentation of legally enforceable floodplain management measures after this rule is published but prior to the actual suspension date. These communities will not be suspended and will continue their eligibility for the sale of insurance. A notice withdrawing the suspension of the communities will be published in the Federal Register. Previously, FEMA has identified the Special Flood Hazard Areas (SFHAs) in these communities by publishing a Flood Insurance Rate Map (FIRM). The date of the FIRM, if one has been published, is indicated in the fourth column of the table. No direct Federal financial assistance (except assistance pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act not in connection with a flood) may legally be provided for construction or acquisition of buildings in identified SFHAs for communities not participating in the NFIP and identified for more than a year, on FEMA’s initial flood insurance map of the community as having flood-prone areas (section 202(a) of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4106(a), as amended). This prohibition against certain types of Federal assistance becomes effective for the communities listed on the date shown in the last column. The Administrator finds that notice and public comment under 5 U.S.C. 553(b) are impracticable and unnecessary because communities listed in this final rule have been adequately notified. PO 00000 Frm 00056 Fmt 4700 Sfmt 4700 Each community receives 6-month, 90-day, and 30-day notification letters addressed to the Chief Executive Officer stating that the community will be suspended unless the required floodplain management measures are met prior to the effective suspension date. Since these notifications were made, this final rule may take effect within less than 30 days. National Environmental Policy Act. This rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Considerations. No environmental impact assessment has been prepared. Regulatory Flexibility Act. The Administrator has determined that this rule is exempt from the requirements of the Regulatory Flexibility Act because the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits flood insurance coverage unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed no longer comply with the statutory requirements, and after the effective date, flood insurance will no longer be available in the communities unless remedial action takes place. Regulatory Classification. This final rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735. Executive Order 13132, Federalism. This rule involves no policies that have federalism implications under Executive Order 13132. Executive Order 12988, Civil Justice Reform. This rule meets the applicable standards of Executive Order 12988. Paperwork Reduction Act. This rule does not involve any collection of information for purposes of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. List of Subjects in 44 CFR Part 64 Flood insurance, Floodplains. Accordingly, 44 CFR part 64 is amended as follows: ■ PART 64—[AMENDED] 1. The authority citation for part 64 continues to read as follows: ■ Authority: 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of 1978, 3 CFR, 1978 Comp.; p. 329; E.O. 12127, 44 FR 19367, 3 CFR, 1979 Comp.; p. 376. § 64.6 [Amended] 2. The tables published under the authority of § 64.6 are amended as follows: ■ E:\FR\FM\14NOR1.SGM 14NOR1

Agencies

[Federal Register Volume 73, Number 221 (Friday, November 14, 2008)]
[Rules and Regulations]
[Pages 67406-67414]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-27041]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 422 and 423

[CMS-4138-IFC2]
RIN 0938-AP52


Medicare Program; Revisions to the Medicare Advantage and 
Prescription Drug Benefit Programs: Clarification of Compensation Plans

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Interim final rule with comment period.

-----------------------------------------------------------------------

SUMMARY: This interim final rule with comment period (IFC) revises the 
regulations governing the Medicare Advantage (MA) program (Part C), and 
prescription drug benefit program (Part D). This IFC sets forth new 
requirements governing the marketing of Part C and Part D plans which 
by statute must be in place at a date specified by the Secretary, but 
no later than November 15, 2008. The new marketing requirements, which 
set forth new limits on the compensation that can be paid to agents or 
brokers with respect to Part C and Part D plans, are based on authority 
under provisions in the Medicare Improvements for Patients and 
Providers Act (MIPPA) that became law on July 15, 2008.

DATES: Effective date: These regulations are effective on November 10, 
2008.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on December 15, 2008.

ADDRESSES: In commenting, please refer to file code CMS-4138-IFC2. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed)
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to http://www.regulations.gov. Follow the 
instructions for ``Comment or Submission'' and enter the filecode to 
find the document accepting comments.
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-4138-IFC2, P.O. Box 8016, Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments (one 
original and two copies) to the following address only: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-4138-IFC2, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to either of the following addresses:
    a. Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201;
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Camille Brown, 410-786-0274, or 
Chevell Thomas, 410-786-1387.

SUPPLEMENTARY INFORMATION:
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the

[[Page 67407]]

comment period on the following Web site as soon as possible after they 
have been received: http://regulations.gov. Follow the search 
instructions on that Web site to view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

A. Overview of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003

    The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA) (Pub. L. 108-173) was enacted on December 8, 2003. The 
MMA established the Medicare prescription drug benefit program (Part D) 
and made revisions to the provisions in Medicare Part C, governing what 
is now called the Medicare Advantage (MA) program (formerly 
Medicare+Choice). The MMA directed that important aspects of the new 
Medicare prescription drug benefit program under Part D be similar to, 
and coordinated with, regulations for the MA program.
    The MMA also directed implementation of the prescription drug 
benefit and revised MA program provisions by January 1, 2006. The final 
rules for the MA and Part D prescription drug programs appeared in the 
Federal Register on January 28, 2005 (70 FR 4588 and 70 FR 4194, 
respectively). Many of the provisions relating to applications, 
marketing, contracts, and the new bidding process, for the MA program, 
became effective on March 22, 2005, 60 days after publication of the 
rule, so that the requirements for both programs could be implemented 
by January 1, 2006. All of the provisions regarding the new Part D 
prescription drug program became effective on March 22, 2005.
    As we gained more experience with the MA program and the 
prescription drug benefit program, we proposed to revise areas of both 
programs and issued a proposed rule on May 16, 2008 (73 FR 28556) that 
would have clarified existing policies or codified current guidance for 
both programs. Several of these proposed regulatory revisions were 
overtaken by statutory provisions enacted in the Medicare Improvements 
for Patients and Providers Act (MIPPA) (Pub. L. 110-275), enacted on 
July 15, 2008. These MIPPA provisions directly address in statute 
several issues we proposed to address through rulemaking, and thus 
superseded our rulemaking in these areas.

B. Relevant Legislative History and Overview

    The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) established 
a new ``Part C'' in the Medicare statute (sections 1851 through 1859 of 
the Social Security Act (the Act)) which provided for a Medicare+Choice 
(M+C) program. Under section 1851(a)(1) of the Act, every individual 
entitled to Medicare Part A and enrolled under Medicare Part B, except 
for most individuals with end-stage renal disease (ESRD), could elect 
to receive benefits either through the original Medicare program or an 
M+C plan, if one was offered where he or she lived.
    The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (BBRA), Public Law 106-111, amended the M+C provisions of the BBA. 
Further amendments were made to the M+C program by the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554), enacted December 21, 2000.
    As noted above, the MMA was enacted on December 8, 2003. Title I of 
the MMA added a new ``Part D'' to the Medicare statute (sections 1860D-
1 through 1860D-42) creating the Medicare Prescription Drug Benefit 
Program, the most significant change to the Medicare program since its 
inception in 1965.
    Sections 201 through 241 of title II of the MMA made significant 
changes to the Part C program. Title II of the MMA renamed the M+C 
program the MA program and included new payment and bidding provisions, 
new regional MA plans and special needs plans, reestablished authority 
for medical savings account (MSA) plans that had been provided in the 
BBA on a temporary basis, and made other changes. Title I of the MMA 
created prescription drug benefits under Medicare Part D, and a new 
retiree drug subsidy program.
    Both the MA and prescription drug benefit regulations were 
published separately, as proposed and final rules, though their 
development and publication were closely coordinated. On August 3, 
2004, we published in the Federal Register proposed rules for the MA 
program (69 FR 46866) and the prescription drug benefit program (69 FR 
46632). In response to public comments on the proposed rules, we made 
several revisions to the proposed policies for both programs. For 
further discussion of these revisions, see the respective final rules 
(70 FR 4588) and (70 FR 4194).
    As noted above, on July 15, 2008, the Medicare Improvements for 
Patients and Providers Act became law, making several significant new 
revisions to the MA and Part D prescription drug benefit programs.
    On September 18, 2008, we published an interim final rule with 
comment period, Revisions to the Medicare Advantage and Prescription 
Drug Benefit Programs (73 FR 54226), that revised the regulations 
governing the MA program, prescription drug benefit program, and 
section 1876 cost plans to reflect new statutory requirements enacted 
in MIPPA. This included new requirements governing the marketing of 
Part C and Part D plans. Specifically, among other things, the 
September 18, 2008 regulations established requirements governing MA 
plan and prescription drug plan (PDP) compensation structures designed 
to ensure that agents and brokers enroll individuals in the MA plan or 
PDP that best meets their health care needs. The provisions regarding 
compensation structures in the September 18, 2008 rule were effective 
upon publication, and public comments are being accepted until November 
17, 2008.

II. Provisions of the Interim Final Rule

    In the section that follows, we discuss the revisions made in this 
interim final rule with comment period to the regulations in 42 CFR 
parts 422 and 423 governing, respectively, the MA and prescription drug 
benefit programs.

Medicare Advantage and Prescription Drug Program Marketing Requirements 
(Subparts V)--Broker and Agent compensation (Sec.  422.2274 and Sec.  
423.2274)

    Section 103(b)(1)(B) of MIPPA charged the Secretary with 
establishing guidelines to ``ensure that the use of compensation 
creates incentives for agents and brokers to enroll individuals in the 
Medicare Advantage plan that is intended to best meet their health care 
needs.'' Section 103(b)(2) of MIPPA applies these same guidelines to 
PDP sponsors.
    On September 18, 2008 we published the new Medicare regulations, 
Medicare Advantage and Prescription Drug Benefit Programs; Final 
Marketing Provisions (73 FR 54208) and Revisions to the Medicare 
Advantage and Prescription Drug Benefit Programs (73 FR 54226), and a 
guidance document to

[[Page 67408]]

assist plans in implementing these new regulations. Among other things, 
these new rules were intended to implement the MIPAA requirement to 
ensure that agents or brokers enroll beneficiaries based on the plan 
that ``best meet[s]their health care needs'' by imposing requirements 
pertaining to agent and broker compensation designed to reduce existing 
financial incentives to enroll a beneficiary in a new plan based on the 
agent or broker's financial interests rather than the beneficiary's 
health care needs. These rules provided that, after a beneficiary is 
enrolled in an MA plan or PDP by an agent or broker, a renewal 
compensation would be paid for five years after the initial 
compensation, and that if any agent or broker enrolls the beneficiary 
in a different plan of a ``like plan type'' during this five-year 
period, renewal compensation would be paid. A ``like plan type'' refers 
to PDP, MA or MA-PD, or cost plan (as defined in 422.2274(a)(3)(i) and 
423.2274(a)(3)(i)). This renewal compensation will apply whether or not 
the new enrollment is in the same or a new (receiving) organization. 
The renewal compensation will be paid by the organization offering the 
plan into which the enrollment occurs, and the amount of the renewal 
compensation will be based on that organization's compensation 
structure. That organization will pay renewal compensation for the 
remainder of the cycle provided that the enrollment remains with that 
organization. Thus, the agent or broker will receive compensation at 
the renewal rate, as described above, whether the enrollee stays in the 
same plan, or moves to a different plan of a like type, regardless of 
whether the move is within the existing organization or to a different 
organization. However, if an enrollee moves to a plan of a different 
plan type (as defined in 422.2274(a)(3)(ii) and 423.2274(a)(3)(ii)) 
within the existing organization, the agent or broker may receive 
compensation at the initial rate. This is designed to ensure that 
recommendations will be based on the best interests of the beneficiary 
as MIPPA required.
    Under the September 18th regulations, compensation in the initial 
year in this six-year cycle could not exceed 200 percent of the amount 
paid for renewal years. We released additional guidance on October 8 
and 17, 2008 to further clarify the marketing requirements contained in 
these new rules. On October 24, 2008, we rescinded the October 8, 2008 
guidance memorandum in light of concerns about how the compensation 
guidance was being interpreted. Based on comments and complaints about 
how the September 18, 2008 regulations were being implemented, we 
became concerned that MA and Part D plans were misinterpreting our 
intent in the compensation structure requirements in Sec.  422.2274(a) 
and Sec.  423.2274(a) by proposing structures under which compensation 
in the initial year in the cycle was less than the renewal years and 
renewal compensation varied from year to year.
    First, in limiting the amount by which the initial year 
compensation can exceed the compensation paid for the five renewal 
years in the six-year cycle, the regulations clearly contemplated that 
the initial year compensation would be higher than the renewal 
compensation level. The very purpose of the regulatory scheme, ensuring 
that an entity does not get the benefit of a initial year level of 
compensation for moving a member to another plan after the first year, 
is clearly premised on this assumption.
    In addition, we believed that the words of the regulation text made 
clear that, once a plan chooses an appropriate renewal amount, this 
fixed renewal amount would be paid for all five renewal years of the 
six-year cycle in question. Sections 422.2274(a)(1) and 423.2274(a)(1) 
refer to the ``first year compensation'' amount being ``no more than 
200 percent of the compensation paid for selling or servicing the 
enrollee in each individual subsequent renewal year * * *.'' (Emphasis 
added). Thus, we believed that the current regulations made clear that 
the renewal ``compensation paid'' for a renewal year, whatever that 
amount is, be paid for ``each'' of the five ``individual'' renewal 
years of the six-year cycle.
    Because, as noted, we have received reports of compensation 
structures that are inconsistent with the intent of the September 18 
interim final rule with comment period, we are revising the regulations 
to expressly specify in Sec. Sec.  422.2274(a)(1) and 423.2274(a)(1) 
that the aggregate (commissions, bonuses, etc.) of the compensation 
amount paid for selling or servicing an enrollee during each of the 5 
individual renewal years of a six-year cycle must be fair-market value 
for the work performed and no more, and no less, than 50 percent of the 
aggregate (commissions, bonuses, etc.) of the compensation amount paid 
for that beneficiary in the initial year of the six-year cycle. These 
new regulations are necessary to achieve the original intent of the 
September 18, 2008 regulations. We recognize this is a significant 
change in approach to a compensation structure from September 18, 2008, 
interim final rule with comment period, where the first year in the 
six-year cycle could not exceed 200 percent of the amount paid for 
renewal years, which was modeled after the National Association of 
Insurance Commissioner's compensation requirements for Medicare 
supplemental policies. We are making this change, however, to modify 
the difference between initial year compensation rates and renewal 
rates to better ensure that agents and brokers enroll beneficiaries in 
a plan that is intended to best meet the beneficiaries' health care 
needs.
    We do not currently have the administrative capability to 
communicate to plans as part of our enrollment acceptance process 
whether an individual enrolling in a plan in 2009 is a new enrollee to 
Part C or Part D, or an individual who, under the compensation 
structure provided for in this interim final rule, is subject to the 
renewal compensation level rather than the initial compensation level. 
Thus, we are in this interim final rule, for 2009 only, initially 
deeming all individuals enrolling in a plan to be in the first year of 
the five renewal years in the six-year cycle provided for under these 
regulations.
    This means that for enrollments with effective dates in 2009, the 
MA or PDP plan initially pays the renewal compensation amount to the 
broker or agent enrolling an individual. Several times in 2009, we will 
run a report identifying those beneficiaries enrolled in an MA plan or 
PDP who were newly entitled or enrolled from original Medicare. We will 
sort the report by plan and send each organization the list of 
enrollees in a plan offered by that organization, for which, if an 
agent or broker wrote the policy, that agent or broker would be 
entitled to an initial compensation amount. Organizations can use the 
report to identify the agents or brokers who are entitled to an initial 
compensation amount.
    Under this interim final rule, organizations will be required to 
adjust the compensation from renewal compensation in these cases only 
to the amount that would have been paid in compensation for an initial 
enrollment under the six year cycle in question. For the remainder of 
2009, this interim final rule requires that organizations pay agents 
and brokers an initial compensation when a beneficiary enrolls in an MA 
plan during the beneficiary's Initial Coverage Election Period (ICEP) 
or in a PDP during the Initial Enrollment Period (IEP). This approach 
enables organizations to compensate agents and brokers for the

[[Page 67409]]

additional work involved in explaining all of the attributes of an MA 
plan (and the Part C program generally) or a PDP (and the Part D 
program generally) to a beneficiary who has had no prior experience 
with Part C or Part D, while at the same time reducing the financial 
incentive for moving a beneficiary who is in a renewal cycle (and is 
thus already familiar with these types of products) to a new plan that 
may be contrary to his or her health care needs.
    In addition to the above changes to the September 18, 2008 
regulations, we are also in this interim final rule addressing the 
amount paid in agent and broker compensation for 2009 and beyond. We 
have received information that some organizations are proposing to 
offer extremely generous compensation in 2009 far in excess of amounts 
paid for the previous three years by the organization in question, or 
substantially in excess of the amounts paid generally in the area for 
the plan type involved. We are concerned about the financial incentive 
to enroll beneficiaries in a new plan that is created by the potential 
for an agent or broker to receive such a substantial increase in 
compensation relative to the amount he or she would be paid for a 
renewal in the beneficiary's current plan. We also believe that these 
excessive compensation structures are detrimental to sustaining an 
enrollee's long term relationship with the plan in which he or she is 
enrolled.
    In order to protect against the incentive that such a substantially 
higher compensation level may create to enroll beneficiaries in a 
different plan even when doing so might not be in their best interest, 
and to ensure that beneficiaries' long term relationships with their 
plans are preserved for as long as they are in the beneficiary's 
interest, we are also in this interim final rule establishing a 
requirement that compensation levels under the new regulatory scheme 
must satisfy one of two regulatory standards. For an organization that 
offered plans in 2006, and used agents and brokers to sell its Medicare 
products, the MA organization or PDP sponsor offering the plan can 
comply with our new rules if the ``initial year'' compensation under 
the six-year cycle provided for under this rule is the same, adjusted 
for inflation, that was paid for the same plan type in the same area by 
the MA or PDP organization, as applicable, in 2006, and the MA or PDP 
organization certifies to that effect. The inflation adjustment will be 
based on the average change in MA plan growth rates for MA 
organizations and Part D growth rates for Part D organizations, as 
published in the MA and Part D rate announcements published on the 
first Monday in April. Because 2009 is initially deemed to be the first 
renewal year in the six-year cycle, this means that the organization 
will initially pay 50 percent of the inflation adjusted amount of the 
initial enrollment compensation it paid in 2006 for the plan type in 
question. Unless the 2009 compensation amount is adjusted to be changed 
to an initial enrollment compensation amount as discussed above, this 
renewal amount will also be paid by the current organization for the 
remainder of the renewal years in the six-year cycle (for example, 2010 
through 2013), assuming that the enrollee remained enrolled in the 
current organization in the same plan type. If an agent or broker moves 
the enrollee to a like-plan type in a different organization, the new 
organization will pay renewal compensation for the remainder of the 
cycle at the new (receiving) organization's renewal compensation 
amount.
    Organizations that offered plans in an area in 2006 will also have 
another option, which will be the only option for organizations that 
did not offer a plan of the type in question in the area involved in 
2006 or did offer a plan of the type in question in 2006, but did not 
use agents and brokers to sell that product. Under this alternate test, 
renewal compensation initially paid in 2009 must be 50 percent of an 
initial rate that was determined, based on market analysis to be 
commensurate with the ``market'' rates paid by all organizations in the 
geographic area for an initial enrollment in the plan type in question 
during 2006 and 2007, also adjusted for inflation based on changes in 
MA and Part D growth rates. Essentially, any rates in excess of what 
was paid by organizations in the area must be justified. We will 
reserve the right to determine, based on data we receive from MA and 
Part D contractors, whether the compensation amount proposed meets this 
test. See the chart below for a reference regarding the required six-
year compensation cycle. We note that for purposes of both of the 
foregoing tests, the ``area'' in which the plan is offered corresponds 
to the area the organization uses to determine any geographic 
adjustments to the amount of compensation paid. If the organization 
pays the same amount in each county, or MSA, or Statewide, that would 
be the area in question.
    For 2010 and subsequent years, the compensation amount paid to an 
agent or broker for an initial enrollment of a Medicare beneficiary 
into an MA or PDP plan is the prior year's compensation adjusted by the 
change in MA rates for MA plans as published in the MA rate 
announcement and the change in the Part D rates for PDP plans as 
published in the Part D rate announcement. CMS releases annually the 
rate announcements for MA and Part D to publish on the first Monday in 
April.
    We have removed and reserved Sec.  422.2274(a)(2) and Sec.  
423.2274(a)(2) as it is redundant to Sec.  422.2274(a)(1)(iii) and 
Sec.  423.2274(a)(1)(iii) in this rule.
    We invite comment on the extent to which the compensation 
structure, or some alternative compensation structure, will promote 
long-term relationships (that are based on the beneficiaries' 
interests) between beneficiaries and the plans in which they are 
enrolled. We are particularly interested in comments on whether this 
goal would be served (1) by providing for higher levels of compensation 
for an initial enrollment in Part C or Part D (given the added costs of 
explaining how the programs work) than for a change in enrollment from 
one Part C plan or Part D plan to another, (2) by establishing a flat 
fee schedule, or (3) by providing for lower payments in early years and 
higher payments in the renewal years, or in later renewal years, to 
incentivize agents or brokers to keep enrollees in the same plan rather 
than giving them an incentive to move enrollees.
    We note that, to the extent that the high levels of agent or broker 
compensation that have been reported are already in place for 2008, and 
were not included in bids for 2008, we intend to ensure in our review 
of bids for 2010 that these additional uncovered costs are not included 
in 2010 bid amounts. Similarly, if the compensation paid for 2009, even 
under this new interim final rule, exceeds the amount assumed in the 
bids submitted this spring for 2009, we will similarly ensure in our 
bid review that these 2009 costs are not built into bids for 2010.
    These new requirements will apply to the compensation paid to the 
agent or broker who actually enrolls the beneficiary, whether that 
agent or broker is paid directly by the MA organization or PDP sponsor, 
or by an intermediate entity, such as a ``Field Marketing 
Organization'' (FMO) or similar type entity that has been retained to 
sell a plan's Medicare products on its behalf.
    We are also concerned about amounts paid to FMOs or other similar 
type entities for their services that do not necessarily flow down to 
the agent or broker who deals with the beneficiary. Examples of such 
services are training, material development, customer service, direct 
mail, and agent recruitment.

[[Page 67410]]

Specifically, we are concerned that these FMOs or other similar 
entities could engage in a ``bidding war'' with respect to payments 
they retain, agree to contract to recruit agents, or perform other 
services only for MA and PDP organizations that are the ``highest 
bidders'' for their services. Thus, in this interim final rule, in 
addition to limiting the compensation that is ultimately paid to agents 
or brokers as set forth above, we are requiring that, for organizations 
that contract with FMOs or pay other similar type entities, any amount 
paid to such a third party must be fair-market value and may not exceed 
an amount that is commensurate with the amount that organization paid 
to a third party for similar services in each of the prior two years.
    Finally, we have learned that some organizations did not post their 
compensation structures by October 15, 2008, but instead posted them 
after they had the opportunity to review competitors' compensation 
structure postings. In fact, it appears that some organizations have 
yet to post their compensation levels. In light of the new requirements 
set forth in this interim final rule with comment period, MA and PDP 
organizations must submit compensation structures paid for the 3 
previous years, and the compensation structures for the upcoming plan 
year in accordance with our instructions. This information must be 
submitted to the following mailbox: MA_
PDPSalesCompensation@cms.hhs.gov (there is an underscore between ``MA--
PDP'') no later than the date we specify. For MA and PDP organizations 
that did not sell products through agents and brokers in any of these 
years, they would not be required to provide information for those 
years. Nevertheless, all MA and PDP organizations must respond to the 
data requests in accordance with our instructions. In addition, if the 
MA and PDP organization contracts with an FMO or other third party, the 
compensation structure paid to each third party in each of the past 
three years, and the compensation structure for 2009, should be 
reported.
    We will consider an organization that does not submit compensation 
structure information for the appropriate years to us by the date 
indicated to be out of compliance with our marketing requirements and 
the organization will face potential sanctions and/or other penalties. 
An organization's submission must include a signed certification from 
its CEO or CFO (or other authorized senior official). MA and PDP 
organizations must distribute their rates by November 15, 2008 to 
agents, brokers, and other third parties under contract to sell 
Medicare Advantage and Part D plans. Once plans distribute their 2009 
compensation rates and submit that information to CMS, they cannot 
change the rate without prior CMS approval.
    Based on public comments and discussions with the industry, we 
realize that while our current compensation regulations are relevant to 
the way independent agents and brokers are compensated, the 
relationship and compensation arrangements between MA and Part D 
organizations and employed agents is very different. As a result, the 
new compensation requirements in this interim final rule will not apply 
to employed agents. CMS considers agents employed if the employed agent 
sells exclusively for one organization and receives a set salary in 
addition to any compensation tied to volume of sales. We are interested 
in receiving public comments on what, if any, compensation requirements 
should apply to employed agents.
    In accordance with the above new requirements, we will investigate 
outliers whose current compensation is not reasonable in light of the 
compensation paid during the previous three years and compensation paid 
in that geographic area by similar plan types to ensure that 
organizations are in compliance with our requirements and take 
enforcement action as appropriate, including requiring organizations to 
be prepared to adjust the compensation rates submitted to CMS, or to 
take other steps to ensure that beneficiaries' interests are not harmed 
by the excessive compensation paid. In addition, as noted in the 
preamble to the September 18, 2008 interim final rule (73 FR 54239), 
all parties should be mindful that their compensation arrangements 
including arrangements with FMOs and other similar type entities must 
comply with the fraud and abuse laws, including the anti-kickback 
statute.

                                                          Required Six-Year Compensation Cycle
--------------------------------------------------------------------------------------------------------------------------------------------------------
       Year 1--``Initial year           Year 2--``Renewal       Year 3--``Renewal      Year 4--``Renewal      Year 5--``Renewal      Year 6--``Renewal
           compensation''             compensation'' (2009)      compensation ''        compensation ''        compensation ''        compensation ''
--------------------------------------------------------------------------------------------------------------------------------------------------------
While not initially applicable for   This amount must be no  Same amount as year 2.  Same amount as year 2  Same amount as year 2  Same amount as year
 2009, the first year compensation    more and no less than                                                                         2.
 assumed as part of the six-year      half the assumed
 cycle will either be the amount      initial amount under
 paid by the MA organization or PDP   the six-year cycle.
 sponsor for the plan type in
 question in the area for 2006, or
 an amount commensurate with the
 market rate in the area for the
 plan type in 2006 and 2007,
 adjusted for inflation. This rate
 will apply in 2009 if an
 adjustment is required in the case
 of a beneficiary new to Part C or
 Part D.
--------------------------------------------------------------------------------------------------------------------------------------------------------

III. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

IV. Waiver of Proposed Rulemaking, Full 60-Day Comment Period, and 
Delay in Effective Date

A. Waiver of Proposed Rulemaking and Full 60-Day Comment Period

    We ordinarily publish a notice of proposed rulemaking in the 
Federal

[[Page 67411]]

Register and allow a 60-day public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed, and the terms and 
substances of the proposed rule or a description of the subjects and 
issues involved. This procedure can be waived, however, if an agency 
finds good cause that a notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued. In 
addition, under section 1871(b)(1)(B) of the Act, prior notice and 
comment are not required when ``a statute establishes a specific 
deadline for the implementation of a provision and the deadline is less 
than 150 days after the date of the enactment'' of the statute in which 
the deadline is contained. The MIPPA was enacted on July 15, 2008. The 
deadline for issuing the compensation rules included in this interim 
final rule with comment period are required by MIPPA to be in effect on 
a date specified by the Secretary, but no later than November 15, 2008, 
which is less than 150 days after enactment of MIPPA. For this reason, 
we find good cause to waive the proposed rulemaking requirement and to 
shorten the customary 60-day comment period to 30 days.

B. Waiver of Delay of Effective Date

    In addition, since the provision discussed above which is required 
by statute to be in effect by a date specified by the Secretary, but in 
no case later than November 15, 2008, we find good cause to waive the 
30-day delay in effective date that would otherwise apply under section 
1871(e)(1)(B)(i) of the Act and section 553(d) of the Administrative 
Procedure Act (APA).
    Section 553(d) of the APA and section 1871(e)(1)(B)(i) of the Act 
ordinarily require that a regulation be effective no earlier than 30 
days after publication. Under section 553(d)(3) this requirement can be 
waived for good cause, and under section 1871(e)(1)(B)(ii) this 
requirement can be waived if necessary to comply with statutory 
requirements, or if a delay is contrary to the public interest.
    As noted above, Congress enacted MIPPA on July 15, 2008 and 
directed that many of the marketing provisions including the provision 
related to agent/broker compensation in this rule be effective on a 
date specified by the Secretary, but in no event later than November 
15, 2008, so that they could be implemented in time for this fall's 
marketing for the 2009 plan year. As a result, we find good cause to 
waive the APA delay of effective date, and find that a delay under 
section 1871 is contrary to the public interest.
    In addition, 5 U.S.C. section 801 generally requires that agencies 
submit major rules to the Congress 60 days before the rules are 
scheduled to become effective. This delay does not apply, however, when 
there has been a finding of good cause for waiver of prior notice and 
comment as set forth above.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs).

A. ICRs Regarding Broker and Agent Compensation and Training of Sales 
Agents (Sec.  422.2274)

    Section 422.2274(d) states that upon CMS' request, the organization 
must provide to CMS the information necessary for it to conduct 
oversight of marketing activities. Specifically, we are requiring all 
Medicare Advantage plans to post revised compensation structures to 
brokers or agents that conform precisely to our regulations and 
guidance (for 2009, these rates must be posted by November 15, 2008). 
We are further requiring organizations to submit their compensation 
structures for the previous years plus the current year to CMS (for 
example, 2009 plans must submit 2006 through 2009). In addition to the 
compensation structures, every complete submission must include a 
signed certification from the organization's CEO or CFO (or other 
authorized senior official). The burden associated with this 
requirement is the time and effort put forth by the organization to 
post the compensation structures and to provide the structures and 
certification to CMS.
    We anticipate it would take 1 organization 56 hours to fulfill this 
requirement. We estimate 670 MA organizations would be affected 
annually by this requirement. Therefore, the total annual burden 
associated with this requirement is 37,520 hours.
    In this interim final rule with comment period, we are collecting 
additional information to implement Sec.  422.2274(d). We submitted a 
revision of the currently approved information collection request 
assigned to OMB control number 0938-0753. The information collection 
requirements contained in Sec.  422.2274(d) will be included in the 
revised information collection request.

B. ICRs Regarding Broker and Agent Compensation and Training of Sales 
Agents (Sec.  423.2274)

    Section 423.2274(d) states that the Part D sponsor provide 
information for it to conduct oversight of marketing activities upon 
CMS' request. Specifically, we are requiring all Medicare Prescription 
Drug Plans to post revised compensation structures to brokers or agents 
that conform precisely to our regulations and guidance (for 2009, these 
rates must be posted by November 15, 2008). We are further requiring 
organizations to submit their compensation structures for the 3 
previous years plus the current year to CMS (for example, 2009 plans 
must submit 2006 through 2009). In addition to the compensation 
structures, every complete submission must include a signed 
certification from the organization's CEO or CFO (or other authorized 
senior official). The burden associated with this requirement is the 
time and effort put forth by the organization to post the compensation 
structures and to provide the structures and certification to CMS.
    We anticipate it would take 1 Part D sponsor 49 hours to fulfill 
this requirement. We estimate 87 Part D sponsors would be affected 
annually by this requirement. Therefore, the total annual burden 
associated with this requirement is 4,263 hours.
    The information collection requirements contained in Sec.  423.2274 
were submitted to OMB for approval as part of an emergency revision of 
the currently approved information collection request assigned to OMB 
Control Number 0938-0964.
    As reflected in the table that follows, the aggregate annual burden 
associated

[[Page 67412]]

with the collection of information section for this rule totals 41,783 
hours.

                                        Table 2--Aggregate Annual Burden
----------------------------------------------------------------------------------------------------------------
                                                                                    Burden per     Total annual
                 OMB control No.                   Requirements      Number of       response         burden
                                                                    respondents       (hours)         (hours)
----------------------------------------------------------------------------------------------------------------
0938-0753.......................................     422.2274(d)             670              56          37,520
0938-0964.......................................     423.2274(d)              87              49           4,263
                                                 ---------------------------------------------------------------
    Total.......................................  ..............  ..............  ..............          41,783
----------------------------------------------------------------------------------------------------------------

    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this rule; or
    2. Mail copies to the address specified in the ADDRESSES section of 
this rule and to the Office of Information and Regulatory Affairs, 
Office of Management and Budget, Room 10235, New Executive Office 
Building, Washington, DC 20503, Attn: CMS Desk Officer, CMS-4138-IFC2, 
Fax (202) 395-6974.

VI. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993, as 
further amended), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4), Executive Order 13132 on Federalism (August 4, 1999), and the 
Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866 (as amended by Executive Order 13258) directs 
agencies to assess all costs and benefits of available regulatory 
alternatives and, if regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health and safety effects, distributive impacts, 
and equity). A regulatory impact analysis (RIA) must be prepared for 
major rules with economically significant effects ($100 million or more 
in any 1 year). As a result of our analysis, this interim final rule 
does not meet the threshold of being economically significant and is 
consequently not a major rule.

B. Regulatory Flexibility Analysis

    The RFA requires agencies to analyze options for regulatory relief 
of small businesses, if a rule has significant impact on a substantial 
number of small entities. Under the RFA, we are not required to conduct 
an initial regulatory flexibility analysis for interim final rules. 
However, it is our longstanding policy to provide an analysis when we 
believe it would aid understanding of the effects of the interim final 
rule. We are providing a summary of the minimal costs associated with 
this interim final rule. Costs for preparing and reporting compensation 
structures to CMS are as follows: MA program $54.98 x 37,520 hours = 
$2,062,849. Costs for the PDP program are $54.98 x 4,263 hours = 
$234,379. The aggregate new burden costs are estimated to be 
$2,297,228.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits and take 
certain other actions before issuing a final rule that includes any 
Federal mandate that may result in expenditure in any one year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $110 million. That threshold level is currently 
approximately $130 million. We anticipate that this interim final rule 
would not impose costs above the $130 million UMRA threshold on State, 
local, tribal governments, in the aggregate or by the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a final rule that imposes substantial 
direct requirement costs on State and local governments, preempts State 
law, or otherwise has Federalism implications. The changes and 
additions contained in this interim final rule do not impose new costs 
on states or local governments. Thus, there are no anticipated 
Federalism implications.

C. Conclusion

    Given that we expect the cost of implementing this provision to be 
minimal and under the $100 million threshold; we did not conduct a full 
economic impact analysis with regard to those entities potentially 
impacted by these provisions, as outlined by the regulatory flexibility 
analysis or Section 1102(b) of the Act.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 422

    Administrative practice and procedure, Health facilities, Health 
maintenance organizations (HMO), Medicare, Penalties, Privacy, 
Reporting and recordkeeping requirements.

42 CFR Part 423

    Administrative practice and procedure, Emergency medical services, 
Health facilities, Health maintenance organizations (HMO), Medicare, 
Penalties, Privacy, Reporting and recordkeeping.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 422--MEDICARE ADVANTAGE PROGRAM

0
1. The authority citation for part 422 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart V--Medicare Advantage Marketing Requirements

0
2. Section 422.2274 is amended by--
0
A. Revising the introductory paragraph.
0
B. Revising paragraph (a)(1).
0
C. Removing and reserving paragraph (a)(2).
    The revisions read as follows:


Sec.  422.2274  Broker and agent requirements.

    For purposes of this section ``compensation'' includes pecuniary or 
non-pecuniary remuneration of any kind relating to the sale or renewal 
of a policy including, but not limited to, commissions, bonuses, gifts, 
prizes,

[[Page 67413]]

awards and finders fees. ``Compensation'' does not include the payment 
of fees to comply with State appointment laws, training, certification, 
and testing costs; reimbursement for mileage to, and from, appointments 
with beneficiaries; or reimbursement for actual costs associated with 
beneficiary sales appointments such as venue rent, snacks, and 
materials. If a Medicare Advantage organization markets through 
independent (i.e., non-employee) brokers or agents, the following 
requirements must be met:
    (a) * * *
    (1) An MA organization (or other entity on its behalf) may provide 
compensation to a broker or agent for the sale of an MA product if the 
following requirements are met:
    (i) The compensation amount paid to the broker or agent for an 
initial enrollment of a Medicare beneficiary into an MA plan in 2009 is 
one of the following:
    (A) The compensation paid by the MA organization in the geographic 
area for initial enrollment for the plan type in question in 2006, 
adjusted by the average change in MA rates as published by CMS in the 
MA rate announcement; or
    (B) A compensation amount commensurate with the market rate for 
initial enrollments paid by (or on behalf of) MA organizations offering 
plans in the geographic area for the plan type in question during 2006 
and 2007, adjusted by the average change in MA rates as published by 
CMS in the MA rate announcement.
    (ii) For 2010 and subsequent years, the compensation amount paid to 
an agent or broker for enrollment of a Medicare beneficiary into an MA 
plan is:
    (A) For an initial enrollment, the prior year's initial 
compensation adjusted by the change in MA rates that CMS announces each 
year.
    (B) For renewals, an amount equal to 50 percent of the initial 
compensation in (A) above.
    (iii) The broker or agent is paid a renewal compensation for each 
of the next 5 years the enrollee remains in the plan in an amount equal 
to 50 percent of the initial year compensation amount (creating a 6-
year compensation cycle). For purposes of paragraph (a)(1)(i), 
individuals enrolling in an MA plan in 2009 are initially deemed to be 
in the first renewal year (the second year) in the 6-year cycle. With 
respect to an individual identified by the MA organization as in an 
Initial Coverage Election Period (ICEP) or subsequently identified by 
CMS as in an ICEP or new to the MA program, the individual is 
considered to be in the initial year of the 6-year cycle. The MA 
organization must adjust the compensation paid for these new enrollees 
from renewal compensation to the amount that would have been paid for 
an initial enrollment under the 6-year compensation structure initiated 
in the year the enrollment occurred.
    (iv) If the MA organization contracts with a third party entity 
such as a Field Marketing Organization or similar type entity to sell 
its insurance products, or perform services (for example, training, 
customer service, or agent recruitment), the amount paid to the third 
party must be fair-market value and must not exceed an amount that is 
commensurate with the amounts paid by the MA organization to a third 
party for similar services during each of the previous 2 years.
    (2) Reserved
* * * * *

PART 423--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT

0
3. The authority citation for part 423 continues to read as follows:

    Authority: Secs. 1102, 1860D-1 through 1860D-42, and 1871 of the 
Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-152, 
and 1395hh).

Subpart V--Part D Marketing Requirements

0
4. Section 423.2274 is amended by--
0
A. Revising the introductory paragraph.
0
B. Revising paragraph (a)(1).
0
C. Removing and reserving (a)(2).
    The revisions read as follows:


Sec.  423.2274  Broker and agent requirements.

    For purposes of this section ``compensation'' includes pecuniary or 
non-pecuniary remuneration of any kind relating to the sale or renewal 
of a policy including, but not limited to, commissions, bonuses, gifts, 
prizes, awards and finders fees. ``Compensation'' does not include the 
payment of fees to comply with State appointment laws, training, 
certification, and testing costs; reimbursement for mileage to, and 
from, appointments with beneficiaries; or reimbursement for actual 
costs associated with beneficiary sales appointments such as venue 
rent, snacks, and materials. If a Part D sponsor markets through 
independent (i.e., non-employee) brokers or agents, the following 
requirements must be met:
    (a) * * *
    (1) A Part D sponsor (or other entity on its behalf) may provide 
compensation to a broker or agent for the sale of a Part D plan only if 
the following requirements are met:
    (i) The compensation amount paid to the broker or agent for an 
initial enrollment of a Medicare beneficiary into a PDP in 2009 is 
either one of the following:
    (A) The compensation paid by the Part D sponsor in the area for an 
initial enrollment for the plan type in question in 2006, adjusted by 
the average change in Part D rates as published by CMS in the Part D 
rate announcement; or
    (B) A compensation amount commensurate with the market rate for 
initial enrollments paid by (or on behalf of) Part D sponsors offering 
plans in the geographic area for the plan type in question during 2006 
and 2007, adjusted by the average change in Part D rates as published 
in the Part D rate announcement by CMS.
    (ii) For 2010 and subsequent years, the compensation amount paid to 
an agent or broker for enrollment of a Medicare beneficiary into PDP 
is:
    (A) For an initial enrollment, the prior year's initial 
compensation adjusted by the change in Part D rates that CMS announces 
each year.
    (B) For renewals, an amount equal to 50 percent of the initial 
compensation in (A) above.
    (iii) The broker or agent is paid a renewal compensation for each 
of the next 5 years the enrollee remains in the plan in an amount equal 
to 50 percent of the initial year compensation paid (creating a 6-year 
compensation cycle). For purposes of paragraph (a)(1)(i), individuals 
enrolling in a PDP in 2009 are initially deemed to be in the first 
renewal year (the second year) in the 6-year cycle. With respect to an 
individual identified by the PDP sponsor as in an Initial Enrollment 
Period (IEP) or subsequently identified by CMS as in an IEP or new to 
the Part D program, the individual is considered to be in the initial 
year of the 6-year cycle. The PDP Sponsor must adjust the compensation 
paid for these new enrollees from renewal compensation to the amount 
that would have been paid for an initial enrollment under the 6-year 
compensation structure initiated in the year the enrollment occurred.
    (iv) If the Part D sponsor contracts with a third party entity such 
as a Field Management Organization or similar type entity to sell its 
insurance products or perform services (for example, training, customer 
service, or agent recruitment), the amount paid to the third party must 
be fair-market value and must not exceed an amount that is commensurate 
with the amounts paid by the PDP organization to a third party

[[Page 67414]]

for similar services during each of the previous 2 years.
    (2) Reserved.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: October 31, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: November 7, 2008.
Michael O. Leavitt,
Secretary.
[FR Doc. E8-27041 Filed 11-10-08; 12:55 pm]
BILLING CODE 4120-01-P