Judge Overturns Rule Limiting Insurance Agent Compensation on Medicare Advantage Plans

Important Update: Court Overturns CMS Rule on Agent Compensation

A federal judge in Texas recently struck down critical components of a rule that would have capped compensation for agents selling Medicare Advantage (MA) plans, and banned certain contracts between MA plans and third-party marketing organizations.

A Centers for Medicare & Medicaid Services (CMS) rule, issued in April 2024, sought to:

• Limit administrative and standardized compensation payments, and
• Restrict plan agreements with third-party marketing organizations.

Industry advocates argued these changes would hinder consumer education, reduce access to Medicare expertise, shrink market competition, and raise costs for consumers.

Two industry groups—Americans for Beneficiary Choice and the Council for Medicare Choice—filed lawsuits, which were quickly consolidated. On July 5, 2024, U.S. District Judge Reed O’Connor issued a stay on implementing the compensation and contract portions of the rule. Then, on August 18, 2025, he issued a final decision vacating both provisions. He ruled that:

1. The provisions exceeded CMS’s statutory rulemaking authority.
2. The provisions were arbitrary and capricious.
3. Vacatur was the appropriate remedy.

By going beyond a preliminary injunction and ruling outright that CMS lacked authority for the rule, the decision significantly weakens CMS’s ability to enact similar proposals in the future.

The government now has until October 17, 2025, to file an appeal. Given the shift in administration, it's possible the government may decide not to pursue one. If an appeal is filed, the stay remains effective throughout the appeal process.

As the Medicare Annual Election Period (AEP) approaches, CareValue stands ready to support independent insurance agents through these turbulent times. To learn how CareValue can help you navigate this AEP, reach out to CareValue today.

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