A federal judge in Texas has vacated key provisions of a rule that would have limited payments to insurance agents selling Medicare Advantage (MA) plans and that would have eliminated certain contracts between MA plans and third-party marketing organizations.
A Centers for Medicare and Medicaid Services (CMS) rule issued in April 2024 would have limited administrative payments, standardized compensation payments and restricted plan agreements with third-party marketing organizations, such as Senior Market Sales® (SMS). SMS and other industry organizations argued that these changes to the compensation rules would limit consumer education and access to Medicare expertise, reduce market competition and increase overall costs for consumers.
After two industry organizations — Americans for Beneficiary Choice and the Council for Medicare Choice — filed lawsuits challenging the rule (which were promptly consolidated), U.S. District Judge Reed O’Connor on July 5, 2024, granted a stay on the implementation of the compensation- and contract-related portions of the rule until a final decision was issued. On Monday, Aug. 18, 2025, O’Connor issued that decision, vacating the fixed fee and the contract-terms restriction, concluding that:
- both provisions exceed CMS’s statutory rulemaking authority;
- both provisions are arbitrary and capricious, and
- vacatur is the appropriate remedy.
Because O’Connor went beyond his preliminary injunction order and ruled that CMS exceeded its statutory authority, the decision should go a long way to ensure that CMS cannot simply use a new rulemaking process to pass a similar rule.
The government now has until Oct. 17 to appeal. Given the change in administrations, it is very possible that the government will decide not to appeal. If an appeal is filed, the stay will remain in effect during the time the appeal is pending. SMS will continue to monitor the case for any developments.
The court’s decision comes ahead of what’s expected to be another disruptive Medicare Annual Election Period (AEP). SMS continues to provide the industry’s best support for independent insurance agents to navigate the challenges. To learn how SMS can help you this AEP, contact an SMS marketing consultant.
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