The May DOJ case filed in the U.S. District Court for the District of Massachusetts alleges insurers labeled payments as “marketing” or “sponsorship” fees to get around rules that set caps on broker commissions. These payments from insurers, according to the lawsuit, added incentives — often more than $200 per enrollee—for brokers to direct Medicare beneficiaries toward their coverage “regardless of the quality or suitability of the insurers’ plans.” The case joins the DOJ in a previously filed whistleblower lawsuit brought by a then-employee of eHealth.
“In order to influence the market, the Defendant Insurers understood that they needed to make greater, illicit payments in addition to the permitted (but capped) commissions,” the lawsuit alleges.
In one example cited, the lawsuit says insurer Anthem paid broker GoHealth “more than $230 million in kickbacks” from 2017 to at least 2021 in exchange for the brokerage to hit specified sales targets in payments often referred to as “marketing development funds.”
The DOJ lawsuit is likely to add to the debate over the role of the private sector in Medicare with vivid details often drawn from internal emails among key insurance and brokerage employees. The case alleges that brokers knew that Aetna, for example, saw the payments as a “shortcut” to increase sales, “instead of attracting beneficiaries through policy improvements or other legitimate avenues,” the lawsuit said.
One eHealth executive in a 2021 instant message exchange with a colleague that is cited in the lawsuit allegedly said incentives were needed because the plans themselves fell short: “More money will drive more sales [be]cause your product is dog sh[*]t.”
The DOJ case focuses on large insurance brokerages, which often rely on national marketing efforts to gain customers, rather than mom-and-pop insurance offices.
The filing, which alleges violations under the federal False Claims Act, outlines some of the problems consumers could face because of those payments, including being enrolled or switched into plans without their express permission, and getting coverage that didn’t meet their needs.
A cancer patient, for example, was switched from the original Medicare program into a private-sector managed-care plan by a large brokerage firm, according to the lawsuit, only to get hit with $17,000 in ongoing treatment costs that would have been covered without the change. Another person calling for free advice later discovered she had been enrolled without permission into a plan with a different insurer than she had previously chosen.
Meanwhile, people with disabilities looking to enroll in private-sector Medicare Advantage plans had their calls ignored or rerouted by systems designed to weed out disabled people, especially if they were under age 65, the lawsuit alleges. That’s because the insurers knew that disabled beneficiaries usually cost more to cover than those without medical problems, the case alleges. Medicare plans are not allowed to discriminate against people with disabilities.
Still, private insurers are allowed to offer commissions to brokers—or not.
Congress and regulators, however, concerned about insurers’ potential financial influence over beneficiaries’ choice of plans, set maximum commissions and limited payments for other things, such as administrative costs, to a vaguer standard: their fair market value. (Under the Biden-era rule that’s on hold, administrative fees would have been capped at $100 per enrollment.) On commissions, the national cap in 2021—the final year cited in the lawsuit—was $539 per enrollment for the initial year, with higher amounts in some states, including California and New Jersey, the lawsuit said.
Some policy experts say that pay structure alone—aside from any of the allegations in the lawsuit — creates an uneven playing field between the private-sector plans and the original program.
While encouraged that the Trump administration filed the case under investigations that began under the Biden administration, policy experts say Congress and insurers need to do more.
“What we see in this lawsuit highlights the terrible incentives that desperately need Congress to reform,” said Brian Connell, a vice president at the Leukemia & Lymphoma Society, an advocacy group.
Right now, however, Congress is embroiled in budget battles amid calls by the Trump administration to drastically cut federal spending.
The large amounts of money that the lawsuit alleges were involved, though, might add legislative momentum.
“This is money not being spent on care, money not going to providers of health care services,” Lipschutz said. “In my mind, it’s a lot of wasted payment. It’s pretty staggering.”
