On April 4, 2024, the Centers for Medicare & Medicaid Services (“CMS”) issued the contract year 2025 (CY2025) Medicare Advantage and Part D final rule (the “Final Rule”). In addition to finalizing its CY2025 proposed rule, CMS also addressed several key provisions that remained from the CY2024 proposed rule. According to CMS’ Fact Sheet, the Final Rule builds on existing Biden-Harris Administration policies to strengthen protections and guardrails, promote healthy competition, and ensure Medicare Advantage and Part D plans best meet the needs of enrollees. The Final Rule also promotes access to behavioral health care providers, promote equity in coverage, and improve supplemental benefits.

Summarized below are key provisions of the Final Rule, which will be published in the Federal Register on April 23^rd.

Medicare Advantage/Part C and Part D Prescription Drug Plan Marketing

One area of the Final Rule that is receiving significant attention in the press is CMS’ changes to its marketing rules. The Final Rule changes in this area impact the sharing of beneficiary leads by third party marketing organization and the agent and broker compensation, including the terms of Medicare Advantage organizations’ (“MAOs”) and Part D sponsors’ contracts with agents, brokers, and third party marketing organizations (“TPMOs), including field marketing organizations (“FMOs”).

1. Distribution of Personal Beneficiary Data by TPMOs

In the CY2024 proposed rule, CMS proposed to a blanket prohibition on TPMOs distributing personal beneficiary data to other TPMOs. CMS did not finalize its proposed rule, but finalized a modified version that permits TPMOs to share personal beneficiary data with other TPMOs for marketing or enrollment purposes only if they first obtain express written consent from the relevant beneficiary. Moreover, the prior express written consent from the beneficiary to share the data and be contacted for marketing or enrollment purposes must be obtained separately for each TPMO that receives the data through a “clear and conspicuous” disclosure.

Prior express written consent will not be required in order for a TPMO to “warm transfer” a beneficiary to another TPMO as long as the beneficiary has verbally agreed or consented to be transferred during the live phone call. However, if the TPMO would need to share a beneficiary’s personal data with anyone that the beneficiary will not immediately be speaking with, the TPMO would need to receive prior express written consent from the beneficiary to share their personal data. 

The prior express written consent requirement applies to affiliated TPMOs as well as independent agents affiliated with the same FMO.

2. Agent and Broker Compensation

In recent years, CMS issued regulations and subregulatory guidance to address abusive marketing practices by TPMOs that sell MA and Part D plans. Please refer to our January 5, 2023, November 4, 2022 and May 16, 2022 blog posts for more information. However, these changes did not address how MA organizations and Part D sponsors compensate agents, brokers and other TPMOs, which CMS first regulated in 2008. Since then, CMS has seen the FMO landscape change from mostly smaller, regionally based companies to a largely consolidated group of large national private equity backed or publicly-traded companies.

Current regulations allow plans to pay initial and renewal commissions up to the fair market value (“FMV”) amounts annually established by CMS, referred to as “capped compensation”. Second, plans may pay “add-on” administrative payments for services other than the enrollment of beneficiaries so long as such payments do not exceed the value of those services in the marketplace. Third, plans may reimburse TPMOs for expenses incurred for marketing activities.

CMS suspects that agents and brokers are influenced by the amount and type of administrative payments they expect to receive, directly or on their employer’s behalf, to engage in high pressure tactics that may confuse beneficiaries and contribute to increasing MA marketing complaints. In addition, CMS expressed concern about payments made from MAOs to FMOs for services that do not relate directly to enrollments. These services may include training, material development, customer service, direct mail, and agent recruitment. CMS is concerned that increased fees paid to larger, often national, FMOs have created a “bidding war” among MAOs with anti-competitive results.

To address these concerns, the Final Rule focuses on payment structures among MAOs[1] and agents, brokers, and TMPOs that may incentivize agents or brokers to prioritize one plan over another regardless of each beneficiary’s needs. Specifically, the Final Rule makes three key changes:

• First, the Final Rule prohibits anti-competitive provisions in an MAO’s contract with an agent, broker, or other TPMO with the direct or indirect effect of creating an incentive that would reasonably be expected to inhibit an agent’s or broker’s ability to objectively assess and recommend which plan best meets the healthcare needs of a beneficiary. For example, contract terms that make renewal or other terms of the contract contingent upon preferentially high rates of enrollment will be prohibited beginning with activities related to the 2025 contract year. CMS expects to review contracts as part of routine monitoring, as well as relying on complaints and other methods of investigation, and work conducted by the Office of the Inspector General, to enforce this regulation.
• Second, the Final Rule redefines “compensation” to include payments for activities previously excluded under that definition and will change the capped compensation payments to set fixed rates to be paid by all plans. As a result, CMS will remove the current compensation reporting requirement because all agents and brokers will be paid the same moving forward.
• Third, CMS has eliminated separate payments for administrative services and such payments will be included in the definition and calculation of enrollment-based compensation for agents and brokers. Following widely varying comments from stakeholders, the final national agent/broker fixed compensation amount for initial enrollments will be raised by $100, compared to only $31 as proposed. This means that the FMV will increase to account for administrative payments at a rate determined annually, beginning at $100 in 2025.

In response to comments, CMS clarified that the Final Rule’s provisions are limited to independent agents and brokers, and do not extend to TMPOs more generally. Therefore, the Final Rule limits payments in excess of those paid under “compensation” only for commissions paid for enrollments to independent agents and brokers. It does place limitations on payments from an MAO to a TPMO that is not an independent agent or broker for activities that are not undertaken as part of an enrollment by an independent agent or broker. However, CMS is continuing to consider future rulemaking in this area.

For an in-depth analysis of CMS’ new agent and broker compensation rule, please read our other blog post available here.

Improving Access to Behavioral Health Care Providers

The Final Rule adopts the proposals of the proposed rule, and also adds specific criteria for the inclusion of some nurse practitioners (“NPs”), physician assistants (“PAs”), and clinical nurse specialists (“CNSs”) in the new Outpatient Behavioral Health facility-specialty type to meet updated network adequacy requirements. The Final Rule expands MA network adequacy requirements to encompass outpatient behavioral health in order to improve access to behavioral health care providers. CMS adds a facility-specialty type called “Outpatient Behavioral Health” to (1) the list of facility-specialty types that are evaluated for network adequacy standards and (2) to the published time and distance standards.

The “Outpatient Behavioral Health” facility-specialty type can include Marriage and Family Therapists (“MFTs”), Mental Health Counselors (“MHCs”), Community Mental Health Centers (“CMHCs”), Opioid Treatment Programs (“OTPs”), and certain other practitioners who regularly furnish behavioral health counseling or therapy services. The inclusion of MFTs and MHCs was spurred by the Consolidated Appropriations Act, 2023, which authorized payment for services furnished by these providers, and the CY2024 Physician Fee Schedule final rule, which permitted MHCs to enroll in Medicare.

To address concerns from commenters that some NPs, PAs, and CNSs might lack the necessary skills, training, or expertise to effectively address the behavioral health needs of enrollees, the Final Rule establishes a standard to identify when an NP, PA, or CNS regularly furnishes, or will furnish, behavioral health counseling or therapy services, including psychotherapy or medication prescription for substance use disorders (“SUDs”). For an NP, PA, or CNS to satisfy the Outpatient Behavioral Health network adequacy standards, the NP, PA, and/or CNS must have furnished certain psychotherapy or SUD prescribing services to at least 20 patients within the previous 12-months. MAOs must independently verify that the provider has met that standard using reliable information about services furnished by the provider such as the MAO’s claims data, prescription drug claims data, electronic health records, or similar data.

Additionally, CMS finalized its proposal to add a “Outpatient Behavioral Health” to the list of specialty types that are eligible to receive a ten percent (10%) point credit towards the percentage of beneficiaries that reside within published time and distance standards for certain providers when the plan includes one or more telehealth providers of that specialty type that provide additional telehealth benefits in its contracted network.

Special Supplemental Benefits for the Chronically Ill (“SSBCI”)

Under the Final Rule, CMS established new requirements for MAOs plans to demonstrate that special supplemental benefits for the chronically ill or “SSBCI” that they offer meet the threshold of having a reasonable expectation of improving or maintaining the health or overall function of chronically ill enrollees. These requirements include the following and will apply during the CY2025 bid process and subsequent years.

• MAOs must establish and maintain a bibliography of relevant research studies or other data to demonstrate that an item or service offered as a SSBCI has a reasonable expectation of improving or maintaining the health or overall function of a chronically ill enrollee. The bibliography must be made available to CMS upon request. 
• MAOs must follow their written policies based on objective criteria for determining an enrollee’s eligibility for an SSBCI when making such eligibility determinations.
• MAOs are required to document both denials and approvals of SSBCI eligibility.

CMS also codified its authority to (1) review and deny approval of an MAO’s bid if the MAO has failed to demonstrate, through relevant acceptable evidence, that its proposed SSBCI has a reasonable expectation of improving or maintaining the health or overall function of a chronically ill enrollee; and (2) review SSBCI offerings annually for compliance purposes, considering the evidence available at the time. These revisions are aimed at ensuring that the benefits offered as SSBCI are reasonably expected to improve or maintain the health or overall function of the chronically ill enrollee while also guarding against the use of MA rebate dollars for SSBCI that are not supported by acceptable evidence.

Additionally, to promote transparency and protect beneficiaries from misleading or confusing marketing practices, the Final Rule modifies the SSBCI disclaimer requirements for MAOs by requiring that such disclaimers: (1) list the relevant chronic condition(s) the enrollee must have to be eligible for the SSBCI offered by the MA plan; (2) convey that, even if the enrollee has a listed chronic condition, the enrollee may not receive the benefit because other coverage criteria also apply; (3) establish specific font and reading pace parameters for the SSBCI disclaimer on various advertising platforms; and, (4) clarify that MAOs must include the SSBCI disclaimer in all marketing and communications materials that mention SSBCI.

Mid-Year Enrollee Notification of Available Supplemental Benefits

MAOs are permitted to offer mandatory supplemental benefits, optional supplemental benefits, and SSBCIs. Although the number of MA rebates quintupled from $12 billion in 2014 to $67 billion estimated for 2024, CMS has received reports that MAOs have observed low utilization of supplemental benefits by their enrollees. Currently, there is no specific requirement for MAOs to conduct outreach to enrollees to encourage utilization of supplemental benefits, beyond general care coordination requirements. However, to ensure enrollees are aware of the availability of supplemental benefits and ensure appropriate utilization, beginning January 1, 2026, CMS will require MAOs to issue mid-year notices to enrollees regarding unused benefits.

CMS has expressed concern that some MAOs are primarily using supplemental benefits as marketing tools to steer enrollment towards their plans but are not taking steps to ensure that enrollees are using their benefits or tracking if the supplemental benefits are improving health, or quality of care outcomes, or addressing social determinants of health. CMS believes that targeted communications specific to the utilization of supplemental benefits may help further inform beneficiaries of their covered benefits available during the plan year.

MAOs will be required to mail a personalized mid-year notice annually, but not sooner than June 30 and not later than July 31 of the plan year to each enrollee with information pertaining to each supplemental benefit available during that plan year that the enrollee has not accessed during the first six months of the year. In addition, the mid-year notice must include the scope of the supplemental benefit(s), applicable cost cost-sharing, instructions on how to access the benefit(s), list the benefits consistent with the format of the Evidence of Coverage (“EOC”), and a toll-free customer service number including, as required, a corresponding TTY number, to call if additional help is needed. 

The mid-year notice requirement is designed to help make consumers more aware of their plan benefits, facilitate better decision-making in the MA marketplace, and achieve policy goals that advance health equity by further ensuring more equitable utilization of supplemental benefits offered by MAOs.

Annual Health Equity Analysis of Utilization Management Policies and Procedures

In April 2023, CMS established a requirement for MAOs to create utilization management (“UM”) committees to address the barriers that prior authorization (“PA”) used as a UM practice can create for enrollees who need access to medically necessary care. In its CY2025 proposed rule, CMS proposed to change the composition and responsibilities of the required UM committees to ensure a health equity focus, based on research which shows that the use of PA may disproportionately impact individuals who have been historically underserved, marginalized, and adversely affected by persistent poverty and inequality. The composition and responsibility changes included: (1) the addition of at least one member with health equity expertise to each UM committee; (2) the production of an annual health equity analysis on the use of PA by each UM committee; and (3) the publication of the health equity analysis results on the websites of the MA plans. 

Based on the comments received, CMS finalized its proposal, but clarified the exclusion of drugs from the scope of the reporting and health equity analysis metrics to align the Final Rule with the 2024 Interoperability Final Rule and to ease the burden on the MAOs that will be gathering, validating, and formatting the data.

The deadline for the publication of MAOs’ first health equity analyses is July 1, 2025.

Increasing the Percentage of Dually Eligible Managed Care Enrollees Who Receive Medicare and Medicaid Services from the Same Organization

CMS finalized several significant changes designed to enhance patient experience and health outcomes by increasing the percentage of full-benefit dually eligible MA enrollees who are in plans that are also contracted to cover Medicaid benefits. These changes aim to strengthen and reflect care coordination strategies that have been deployed at both the state and federal level over the past decade.

To facilitate expanded care coordination, integration, and access for dually eligible beneficiaries, the final rule:

• replaces the current quarterly special enrollment period (“SEP”) with a continuous, one-time-per month SEP for dually eligible individuals and others enrolled in the Part D low-income subsidy (“LIS”) program to elect a standalone prescription drug plan (“PDP”);
• creates a new integrated care SEP to allow dually eligible individuals to elect an integrated dual eligible special needs plan (“D-SNP”) on a monthly basis;
• limits enrollment in certain D-SNPs to those individuals who are also enrolled in an affiliated Medicaid managed care organization (“MCO”); and
• limits the number of D-SNP plan benefit packages an MAO organization, its parent organization, or entity that shares a parent organization with the MAO, can offer in the same service area as an affiliated Medicaid MCO.

Many commenters expressed support for these changes, stating that such initiatives would simplify provider billing, mitigate choice overload, strengthen integrated care plans, and promote unified appeals and grievance processes. While a few commenters noted that the proposed changes may result in short-term disruptions to care, in the long term, the increase in the percentage of dually eligible individuals receiving integrated care would likely result in improved care coordination, access to services, health outcomes, and enrollee experience.

According to CMS, by limiting the number of plans that can enroll dually eligible individuals outside of the annual election period, the rule will also help reduce the volume of aggressive and confusing marketing tactics directed toward dually eligible individuals throughout the year. In addition, these policies advance the goals of President Biden’s Competition Council and Executive Order signed in July 2021 by prioritizing beneficiary choice and facilitating improved access to an array of Medicare coverage options for low-income individuals.

Amendments to Part C and Part D Reporting Requirements

CMS is solidifying its authority to collect information from MAOs and Part D sponsors. Under the Final Rule, CMS amends 42 C.F.R. §§ 422.516(a)(2) and 423.514(a)(2) so that the reporting requirements imposed upon MAOs and Part D Plan sponsors include procedures relating to coverage, utilization (in the aggregate and at the beneficiary level), and the actions required of beneficiaries to obtain covered services or items. This should provide greater insight into UM utilization management and prior authorization practices. Further, the revised regulations clarify that the MA and Part D reporting requirements are not limited to statistical or aggregated data under §§ 422.516(a)(2) and 423.514(a)(2). CMS emphasizes that this is in line with the Biden-Harris Administration’s effort to enhance transparency and data in Part C and Part D plans.

Further, in response to comments from stakeholders, CMS amended MAOs reporting requirements under 42 C.F.R. § 422.516(a)(2) to protect the confidentiality of patients’ relationships with a broader range of providers, rather than just doctors. Commenters had noted that a diverse range of health care professionals deliver care to patients, and CMS agreed and chose to revise the regulation increase confidentiality protections for patients.

Expansion of Enrollees’ Appeal Rights for Medicare Advantage Plan’s Decision to Terminate Coverage for Non-Hospital Provider Services

The Final Rule takes several key steps to align appeal rights afforded to MA enrollees with those historically available to traditional Medicare enrollees. Specifically, MA enrollees enjoy an appeal right which is normally triggered when an MAO delivers a Notice of Medicare Non-Coverage (“NOMNC”) relating to certain non-hospital provider services, including services in a home health agency, skilled nursing facility, or a comprehensive outpatient rehabilitation facility.^[2] A NOMNC ordinarily outlines the appeal process as well as a deadline by which an enrollee should submit his/her appeal.^[3]

Significantly, both traditional Medicare and MA enrollees have the right to a fast-track appeal by an Independent Review Entity (“IRE”).^[4] The Quality Improvement Organization (“QIO”) ordinarily fills the role of an IRE, but where an enrollee fails to submit an appeal by the deadline set forth in the NOMNC, MA Plan enrollees forfeit their right to a fast-track appeal with the QIO but may appeal to the MAO itself, whereas traditional Medicare enrollees do not forfeit the right to submit an untimely appeal to the QIO.^[5] Many in the industry complained that this distinction produced disparities in access, particularly with respect to post-acute care.

The Final Rule works to align QIO access rights by allowing MA enrollees to access the fast-track appeal process provided through the QIO even where the appeal is untimely, similarly to the path currently available to traditional Medicare enrollees. Not only will MA enrollees have access to the fast-track option, but the QIO would also assume responsibility for the review of those appeals by replacing the MAO’s current review role.

Separately, the Final Rule also eliminates the automatic forfeiture of an MA Plan enrollee’s right to appeal a termination of non-hospital provider services which is ordinarily triggered where the enrollee leaves a facility or otherwise ends the services at issue prior to the appeal deadline set forth in the NOMNC.^[6] Historically, traditional Medicare enrollees have retained the right to appeal to the QIO regardless of whether the services ended prior to a deadline set forth in an NOMNC.

Changes to an Approved Formulary— Including Substitutions of a Biosimilar Biological Products

CMS finalized many aspects of the proposed rule, which introduced changes that would permit more flexibility for enrollees in the cost and accessibility of drug products available under their Part D plans. Under the proposed changes, Part D plans would be able to expedite the process of substituting lower cost biosimilar biological products for their reference products providing enrollees with greater accessibility to biosimilar biological and generic drugs which are often less expensive while being equally effective as their reference product counterpoint.

In response to comments surrounding enrollee accessibility concerns, CMS reiterated that Part D sponsors have always had the ability to add Part D drugs or biosimilars to their formularies where the sponsors have determined the drugs were necessary for enrollees’ treatment. Currently, if a Part D sponsor seeks to make a formulary change that replaces a reference product with a biosimilar biological product, other than an interchangeable biological product, the sponsor must first obtain explicit approval from CMS and must provide 30 days advance notice to affected enrollees prior to removing or otherwise changing the tiered cost-sharing status of a Part D drug absent certain considerations that qualifies the formulary change for an immediate substitution. Further, even if the replacement is approved by CMS, enrollee access is still restricted as the Part D sponsor can only apply the approved change to enrollees who begin their treatment after the effective date of change, effectively preventing enrollees already on the reference product from changing to the replacement biosimilar biological product through the remainder of the plan year, absent an approved exception.

In the Final Rule, CMS took the extra step to establish and codify approval and notice requirements for different formulary changes, noting that these requirements “strike the appropriate balance” between protecting enrollees and allowing Part D sponsors the flexibility to establish formularies which reflect the latest market developments and clinical guidelines. Specifically, for drugs currently provided on a formulary CMS is permitting the following changes:

1. immediate substitutions of corresponding drugs, such as new generic drugs for brand name drugs and interchangeable biological products for reference products;
2. immediate removal of drugs withdrawn from sale by their manufacturer or that FDA determines to be withdrawn for safety or effectiveness reasons;
3. maintenance changes, which include substitutions of generic drugs for brand name drugs that are not being made on an immediate substitution basis; substitutions of interchangeable biological products for their reference products; and removals based on long term shortage and market availability;
4. non-maintenance changes, which can only be made if CMS provides explicit approval and which do not apply to enrollees currently taking the applicable drug; and
5. enhancements to the formulary (for instance, Part D sponsors can add a drug to the formulary or lower its cost-sharing), which can be made at any time.

The 30-day notice advance notice requirement set forth in the proposed rule still applies under this Final Rule. Further, CMS declined suggestions that sponsors should not be required to provide direct notice of immediate substitutions to affected employees. Instead, in the case of immediate changes to the formulary, Part D sponsors are required to provide advance general notice to beneficiaries describing the types of changes in place of advance direct notice which should include language that enrollees will receive direct notice of any specific changes to drugs that the enrollees are currently taking. Further, Part D sponsors will be required to provide retroactive direct notice to affected enrollees in addition to updating online formularies on a monthly basis. This similarly aims to strike a balance between providing enrollees with proper notice of changes to their drugs and treatment while providing sponsors some flexibility, especially in the case of providing notice for immediate substitutions.

With respect to formulary changes substituting biosimilar biological products, CMS confirms in the Final Rule that biosimilar biological products and interchangeable biological products remain separate categories and are not to be used similarly. CMS responded to commenters on this issue and reiterated that the substitution of biosimilar biological products, the broader category of substitute products which includes interchangeable biological products, remains a “maintenance change.” CMS notes that while it is the agency’s goal to promote greater use of biosimilar biological products, ultimately, they looked to state requirements with respect to pharmacy-level substitutions of biosimilar biological products. In doing so, CMS identified that states primarily require health care provider intervention in order to substitute a biosimilar biological product for a reference product, whereas interchangeable biological products can be substituted without consulting a provider. And since pharmacists cannot substitute a biosimilar product without the intervention of a health care provider, CMS relies on this to reassert that any substitutions of biosimilar biological products should constitute maintenance changes requiring 30-days advance notice. The 30-day advance notice is intended to provide patients with the time obtain new prescriptions for the biosimilar biological products or to obtain formulary exceptions for the reference products. As CMS emphasized in the proposed rule, the categorization of biosimilar biological products substitution as “maintenance changes” and the difference in treatment of biosimilar biological products as compared to interchangeable biological products is derived from FDA’s stringent approval standards and strict regulation of the manufacturing standards applicable to both biosimilar biological products and reference products, so healthcare providers and patients can take comfort in knowing that the safety and efficacy of biosimilar biological products are consistent with existing reference products.

Other Changes

Other changes made by the Final Rule include:

1. D-SNP PPO Cost-Sharing – CMS finalized limits on out-of-network cost sharing for D-SNP provider organizations (“PPOs”) for certain Part A and Part B benefits, on an individual service level beginning in 2026. The changes are intended to reduce cost-shifting to Medicaid, increase payments to safety net providers, expand dual eligible enrollees’ access to providers, and protect dual eligible enrollees from unaffordable costs.
2. D-SNP Look-Alike Plans – CMS lowered the D-SNP look-alike threshold from 80% to 70% in 2025 and to 60% in 2026. This change is intended to address the continued proliferation of MA plans that are serving high percentages of dual eligibles without meeting the requirements to be a D-SNP and promoting full implementation of requirements for D-SNPs, including minimum integration standards.
3. Risk Adjustment Data Validation (“RADV”) Appeals Process – CMS finalized changes to its RADV appeals process whereby MAOs will not request both a medical record review determination appeal and a payment error calculation appeal at the same time. MAOs that request a medical record review determination appeal may only request a payment error calculation appeal after the completion of the medical record review determination administrative RADV appeal process. The Final Rule also clarifies that CMS will not issue a revised audit report containing a recalculated payment error calculation at each level of appeal. Instead, CMS will issue a revised audit report when a medical record review determination appeal or a payment error calculation appeal is final, as applicable. Finally, the Final Rule includes a requirement that if the CMS Administrator does not decline to review or does not elect to review within 90 days of receipt of either the MAO’s or CMS’ timely request for review (whichever is later), the hearing officer’s decision becomes final.

FOOTNOTES

[1] The Final Rule changes also apply to sponsors of standalone Part D plans.

[2] 42 C.F.R. § 422.626.

[3] 42 C.F.R. § 422.624.

[4] 42 C.F.R. § 422.626; 42 C.F.R.§ 405.1200, et seq.

[5] 42 C.F.R. § 422.626; 42 C.F.R.§ 405.1202, et seq.

[6] 42 C.F.R. § 422.626(a)(3).

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