A federal judge in Texas has struck down key parts of a federal rule that would have restricted how insurance agents are compensated for selling Medicare Advantage (MA) plans and limited contracts between MA plans and third-party marketing organizations.
The Centers for Medicare and Medicaid Services (CMS) issued the rule in April 2024, which sought to cap administrative payments, standardize compensation, and restrict agreements with third-party marketers. Industry groups argued the changes would limit consumer education, reduce access to Medicare expertise, shrink competition, and ultimately raise costs for beneficiaries.
Two industry organizations — Americans for Beneficiary Choice and the Council for Medicare Choice — challenged the rule in court. Their lawsuits were consolidated, and in July 2024 U.S. District Judge Reed O’Connor issued a temporary stay on the compensation and contract provisions. On Aug. 18, 2025, Judge O’Connor issued his final ruling, vacating both provisions and concluding that:
- CMS exceeded its statutory rulemaking authority,
- the provisions were arbitrary and capricious, and
- vacatur was the proper remedy.
By going beyond his preliminary injunction and finding CMS acted outside its statutory authority, the ruling makes it unlikely that CMS can simply reissue a similar rule through a new rulemaking process.
The government has until Oct. 17 to appeal. Given the change in administrations, it is possible an appeal may not be filed. If one is, the stay will remain in place while the case is pending.
The court’s decision comes ahead of what’s expected to be another disruptive Medicare Annual Election Period (AEP). EMG will continue to provide support for independent insurance agents to navigate the 2026 Medicare AEP challenges. To learn how EMG can help you this AEP, contact EMG today!
