What the Medicare Section 111 civil monetary penalties final rule means to payers

By Michelle A. Allan and Ciara Koba

Ten years after legislation first softened the consequences, the long-awaited final rule regarding civil monetary penalties for Section 111 Medicare Mandatory Insurer Reporting was published on Oct. 11. The implications of this new rule are monumental and underscore the possibility an entity could be fined as much as $365,000 (plus inflationary adjustment) per beneficiary, which means this regulation is arguably the most influential in the history of Medicare secondary payer practice.

What does this rule mean?

In many ways, the new final rule simplifies and clarifies the draft rule that was first issued in February 2020. Industry stakeholders now have more guidance on when civil money penalties might be levied, which, according to the rule, is no sooner than the applicable date of Oct. 10, 2024, plus one year.

The rule also sets forth an auditing methodology which will be employed to review 1,000 records per year. As opposed to multiple ways an insurance company or self-insured entity could be penalized, Medicare threw out error codes and contradictory information, focusing solely on the timeliness of reporting an ongoing responsibility for medicals or a total payment obligation to claimant.

What comes next in the final rule?

Payers can do three key things now to protect themselves against penalties and risk.

Become familiar with the final rule and how penalties could be levied.
Ensure that policies are documented and records are retained.
Be certain company contact information is current.

Although becoming familiar with all 37 pages of the final rule may warrant a deeper dive and a few nights of studying, it’s important for those who work in workers’ compensation, general liability, no-fault, automobile and self-insurance to know what constitutes timeliness, what safe harbors exist and what remedies are available should a payer be put on notice of forthcoming penalties. Simply put, devoting a bit of time to reading through all aspects of the final rule can help avoid numerous headaches later.

How the final rule defines timeliness

The rule states that noncompliance is defined as any time the Centers for Medicare & Medicaid Services identifies a new beneficiary record that was not reported to CMS in a timely fashion. It further states that CMPs will only be levied in instances of noncompliance based on timely reporting of TPOCs and the assumption of ORM. Regarding ORM reporting, the definition of noncompliance will solely cover situations where a responsible reporting entity has failed to provide its initial report of primary payment responsibility in a timely manner. As such, untimely termination of ORM will not result in CMPs.

Understanding safe harbors

Here’s how the final rule defines safe harbors:

Time delays caused by CMS or its contractors in the reporting process.
RRE compliance with any settlement reporting thresholds or any other reporting exclusions published in CMS’s MMSEA Section 111 User Guides or otherwise established by CMS.
Untimely reporting due to a failure to acquire all necessary reporting information due to lack of cooperation by the beneficiary. This will not lead to a CMP if the RRE has made and maintained records of its good faith effort to obtain the information by taking all the steps outlined in the final rule to preserve this safe harbor. Non-group health plans must also maintain records of good faith efforts for a period of five years.

Breaking down appeals

The appeals process set forth by the final rule notes CMS will provide “pre-notice” to the RREs prior to formal enforcement of CMPs. The RRE will then have 30 days to respond to the pre-notice and to present mitigating evidence for CMS to review prior to imposition of a CMP. CMPs imposed will be subject to the formal appeals process as prescribed Title 42 of the Code of Federal Regulations, specifically sections 402.19 and 1005. RREs will receive written notice at the time a CMP is proposed and will have a right to request a hearing with an administrative law judge within 60 calendar days. The final rule states any party may appeal the initial decision of the administrative law judge to the Departmental Appeals Board within 30 days and DAB’s decision will be binding 60 calendar days following service of the DAB’s decision, absent a petition for judicial review.

What happens if I receive a pre-notice?

Should a company receive a pre-notice prior to the imposition of a CMP, any mitigating information could at that time be furnished in an effort to trigger a safe harbor provision or to attempt to scale down possible penalties. The final rule deliberately does not specify what evidence can be used to clarify, mitigate or explain any errors so that no strict limits are placed on what is considered acceptable. As such, payers can now work to compile protocols, handbooks, processes, program audits or evaluations, legal provisions or other materials that exhibit good faith efforts toward compliance.

Finally, the final rule suggests that pre-notice of CMPs would be provided to the entity in writing in accord with federal regulations, which state the notice would be delivered by certified mail, return receipt requested. As such, payers should not assume that their Section 111 solution providers, recovery agents or third-party administrators will receive this correspondence. Any documentation with CMS that identifies an entity’s mailing address, such as a Tax Identification Number Reference File, should be double checked for accuracy. Otherwise, important pre notice documentation could be misrouted, putting a company at risk of losing its opportunity to provide mitigating documentation, as well as missing appellate deadlines.

Michelle A. Allan, Esq., CMSP, is principal, Allan Koba Compliance Solutions. Contact her at [email protected].

Ciara Koba is principal, Allan Koba Compliance Solutions. Contact her at [email protected].