CMS Proposes Reporting Penalty Rule

The Centers for Medicare & Medicaid Services ("CMS") has proposed methods to calculate and impose civil penalties when a group health plan ("GHP") or a non-group health plan fails to comply with the Medicare as Secondary Payer ("MSP") reporting requirements.

Background. In general terms, the MSP rules say that Medicare pays secondary to an employer's group health plan for: 1) working-aged individuals and aged spouses of working individuals; 2) disabled individuals covered through a spouse who is actively employed; and 3) individuals with end stage renal disease during the 30-month "coordination period."

To comply with MSP's reporting requirements, group health plans must report certain information to CMS, on a quarterly basis, about people enrolled in Medicare who also have additional coverage provided by that plan.

According to CMS "[T]his reporting requirement assists CMS in identifying situations where another party should make payment primary to Medicare. When Medicare is able to identify these situations prior to payment, mistakes in the payment process can be avoided. In situations after healthcare claim payments have been made, Medicare has the right to recover those payments from the primary payer."

Responsible Reporting Entity. However, it is important to note that under the MSP reporting requirement, only a Responsible Reporting Entity ("RRE") is obligated to make the MSP reports to CMS. For group health plans, an RRE is: the insurer; a plan's third party administrator ("TPA") if it pays or adjudicates claims for the plan; or, the plan administrator in the case of a plan that is self-insured and self-administered.

Therefore, an employer would not be an RRE, or have direct reporting obligations for its own group health plan (under MSP's reporting requirements), except when it self-insures and self-administers. And, even if an employer does self-insure and self-administer, it may hire an agent to fulfill its RRE obligations.

However, an employer is expected to provide certain information to the insurer or a TPA that is an RRE, so that the RRE may submit accurate MSP reports to CMS about the employer's group health plan.

Penalties for Noncompliance. The noncompliance penalty for an RRE is up to $1,000 (as indexed) for each day of noncompliance, for each individual for whom information should have been submitted. Therefore, it is unlikely that either an insurer or TPA will maintain its relationship with an employer, if that employer does not provide the RRE with the necessary information.

CMS has proposed to assess penalties for the following reporting issues:  

  • Failure to Report: Should an RRE fail to perform the required reporting within one year of the coverage effective date, it would be subject to a penalty of $1,000 for each day of noncompliance for each individual whose coverage information should have been reported. A maximum penalty of $365,000 per individual per year would apply.
  • Inaccurate information reported and/or maintained: RREs that have performed reporting as required, but subsequently provide information that contradicts reported information in response to MSP recovery efforts, would be subject to a penalty based on the number of days that the entity failed to appropriately report updates to beneficiary records.
  • Poor quality of reported data: CMS has proposed "an error tolerance that could not exceed a 20% threshold." Reported information that exceeds any established error tolerance threshold, and exceeds those tolerances for any four out of eight consecutive reporting periods, would be subject to a penalty with the fourth occurrence above the tolerance level.

CMS's proposed rule is available at: https://www.govinfo.gov/content/pkg/FR-2020-02-18/pdf/2020-03069.pdf