New Investigation from Senator Warren Uncovers Insurance Companies’ Widespread Abusive Marketing Practices in the Medigap Market, Harming Seniors
More than 6 Million Seniors are Enrolled in Medigap Plans Sold by Insurers Offering Agents Secret Perks like Luxury Vacations and Cash Bonuses for Steering Seniors into More Expensive Plans
In Letter, Warren Calls on Centers for Medicare and Medicaid Services and National Association of Insurance Commissioners to Take Action
Washington, D.C. – United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Finance Committee, released a new 17-page investigative report: Sales Before Seniors: How Medigap Insurers’ Sales Rewards Hurt Seniors on Medicare. The report uncovered the pervasive, secret rewards of lavish vacations, cash bonuses, and other incentives that giant insurance companies participating in the Medicare Supplement Insurance (Medigap) market offer health insurance agents and brokers – creating perverse incentives to steer unsuspecting seniors into products that could cost them hundreds or thousands of dollars more each year. The report found that in 2021, over 6 million seniors purchased Medigap plans from companies that offered agents special, secretive rewards for enrolling seniors into targeted plans. These companies are offering agents “a Sunny San Diego trip,” “the sales reward trip of a lifetime” to St. Thomas, and trips to the Bahamas, Maui, Los Cabos, Aruba, and more
Senator Warren sent her report and a letter to the Centers for Medicare and Medicaid Services (CMS) and the National Association of Insurance Commissioners (NAIC), highlighting key findings of the report and calling on the organizations to take immediate action to end these secretive perks and stop these perverse incentives in the Medigap market.
“Giant insurance companies have free rein to scam millions of seniors in Medigap, offering agents lavish vacations to steer unknowing beneficiaries into more expensive plans,” said Senator Warren. “Regulators must act to make sure seniors aren’t getting fleeced.”
The investigation revealed that:
- Secret offers of luxury vacations and other perks to agents are pervasive in the Medigap market: As of the 2022 Medicare open enrollment period, there are at least 32 companies providing, directly or through third parties, vacations and cash bonuses as incentives for selling certain Medigap products. These companies collectively signed up over six million seniors for Medigap insurance and collected more than $16 billion in premiums from beneficiaries in 2021. Insurers – in exchange for steering business to their preferred plans – are offering agents “a Sunny San Diego trip,” “the sales reward trip of a lifetime” to St. Thomas, and trips to the Bahamas, Maui, Los Cabos, Aruba, and more.
- Bonuses and perks can create incentives for agents and brokers to enroll seniors in the wrong products: Prices in Medigap plans vary widely across insurers. The widespread use of secret perks raise questions about whether agents and brokers are recommending certain Medigap policies because they are the right fit for seniors, or because they yield credit toward the fanciest vacations or most generous bonuses.
- Bonus perks for agents and brokers are legal and minimally regulated: Federal and state regulation of Medigap sales has significant gaps, making it legal for health insurers to hand out perks to agents and brokers who sell seniors favored Medigap products—even if those insurance products do not meet the enrollees’ needs. Medigap plans are not subject to the same regulations that govern Medicare Advantage plans, and few states have adequate consumer protections in place.
Senator Warren has led oversight efforts to fight waste, fraud, and abuse in Medicare and Medicaid:
- In December 2022, Senator Warren and Representative Pramila Jayapal (D-Wash.) led a group of colleagues in a letter to CMS, raising concerns that the Medicare Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) program could provide an opportunity for health care insurers and providers with a history of defrauding and abusing Medicare and ripping off taxpayers to further encroach on the Medicare system.
- In April 2022, Senator Warren sent a letter to CMS, highlighting concerns about overpayments to Medicare Advantage plans that line the pockets of big insurance companies and urging CMS to mitigate the announced payment increases so they are on par with payments to Traditional Medicare.
- In February 2022, during a hearing of the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth, Senator Warren called for expanding and improving Medicare by cracking down on corporate profiteering in the pharmaceutical, insurance, and financial industries that could contribute excessive costs to Medicare.
- In 2015, an investigation by Senator Warren revealed the widespread use of similar illicit marketing practices involving secret vacation giveaways and other perks by the annuity industry.
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