International Underwriting Association, Lloyd's Market Association Issue Public Comment on Centers for Medicare & Medicaid Services Proposed Rule

WASHINGTON, May 12 -- Thomas Hughes, market services executive at the International Underwriting Association of London, United Kingdom, and Shanaz Ferreira-Cooper, technical executive for claims at the Lloyd's Market Association, London, United Kingdom, have issued a public comment on the Centers for Medicare and Medicaid Services proposed rule entitled "Medicare Program: Medicare Secondary Payer and Certain Civil Money Penalties". The comment was written on April 20, 2020, and posted on May 11, 2020:

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Introduction

The London Insurance Market is comprised of both the London 'Company Market', represented by the International Underwriting Association of London (IUA), and Lloyd's of London, represented by the Lloyd's Market Association (LMA).

The IUA represents international and wholesale insurance and reinsurance companies operating in or through London. It exists to promote and enhance the business environment for its members. The IUA's London Company Market Statistics Report outlines that overall premium income for the company market in 2018 was pound sterling28.437bn. Gross premium written in London totalled pound sterling19.559bn while a further pound sterling8.877bn was identified as written in other locations but overseen by London operations.

Lloyd's is a major insurance market based in London, United Kingdom, where 55 insurance carriers write insurance business worldwide. In 2019, Gross Written Premium was pound sterling35.9bn with 52% from US business. The Lloyd's Market Association is the representative body of the insurance carriers operating in Lloyd's.

Reason for Submission

We are contacting you in order to outline the disproportionately onerous procedure for subscription market insurers, and consequently The Centers for Medicare and Medicaid Services (CMS), in the requirement for individual declarations to be made to CMS in respect of Medicare. The IUA outlined similar views in a communication to CMS dated 3 February 2014, submitted by Condon & Forsyth LLP on our behalf. This response is included below for ease of reference. The IUA and LMA also fully endorse and join in the comments to the Section 111 NPRM submitted by Condon & Forsyth LLP on behalf of various U.S. insurers, as many of them are the affiliated companies of our members. The IUA and LMA believe that with full understanding of the operation of a subscription market (as discussed below); the CMS will see the need to allow lead only reporting for all subscribing insurers on any given policy. Importantly, doing so will reduce the administrative burden on both the CMS, in receiving multiple submissions in respect of the same individual, and market representatives in submitting those duplicate entries.

In respect of the Notice of Proposed Rulemaking (NPRM) issued, we can confirm that we have not received any specific concerns with the content from our members other than the implications for fines; therefore, the following text pertains specifically to the process of Medicare reporting.

London Market and Subscription Market Placements

A subscription insurance policy is one that is shared by two or more (but in many circumstances in excess of 20) insurers, who each assume a portion of the risk. The reason for this approach is to share amongst many insurers often large and complex commercial risks in, for example, Aerospace, Energy and Casualty, which a single insurer may not have the capacity to assume alone. At a strategic level, this approach allows insurers to write a diverse portfolio of risks, thus facilitating the management of their accumulative exposures.

A subscription placement when taken to the market is initially 'led off'. This means the broker will secure a market expert to undertake the initial analysis of the risk and to agree to write a proportion of that risk, within their underwriting parameters. The insurer taking on this initial analysis and first proportion of the risk will become the Lead for the subscription placement. Other insurers will then be presented with the risk on the basis that the expert Lead has agreed to take a share. This enables following insurers to look at the risk with an additional degree of confidence and to decide whether to take on a share of the policy, often on the terms agreed by the Lead.

Once the placement of the risk has been completed, there are many duties that a Lead will undertake on behalf of the following insurers; this creates an efficiency whereby some tasks are not duplicated by all insurers party to the policy. Some examples of these tasks include, depending on the specific terms of the policy, agreeing small claims on behalf of following insurers, agreeing changes to the terms of the policy and, within Lloyd's of London, reporting to CMS to meet the requirements of the reporting laws under Section 111 of the Medicare Secondary Payer Act.

We would emphasise at this point that there are no pertinent differences between the subscription market processes used in the London Company and Lloyd's of London markets. It is worth noting that many insurance policies placed in London will have participants from both the Lloyd's of London and Company Market subscribing, these are termed 'Cross-Market Placements'. This inevitably has led to our previous requests that Lead only reporting is made allowable for all subscribing insurers on any given policy.

Discussion of Lead Only Reporting

We believe CMS should consider Lead only reporting as a more effective and less costly solution for assessing penalties against the members of a subscription market. Under the current User Guide Policy Guidance, any insurer regardless of its claims handling responsibility, is a Responsible Reporting Entity for a payment made to a claimant, even if that payment is a portion of the total payment obligation to the beneficiary. Further, an insurer cannot shift its reporting obligation to any other entity.

In the context of the subscription market, such regulations are onerous and not cost effective for CMS, as precious resources are required to reconcile many duplicative Section 111 reports for the same claim to determine whether they are distinctive or duplicative. Such regulations are also unduly burdensome to the market; a burden that is not outweighed by any meaningful benefit to CMS, as multitudes of duplicative reports will not assist CMS in obtaining reimbursement for any one claim. Additionally, under the current User Guide, it appears that each following insurer may be responsible for civil money penalties for the same claim, unjustly enriching CMS.

Fines levied pursuant to Section 111 should be reasonably related to a specified harm incurred by CMS; in this context, CMS would have incurred no harm as it would have obtained the information necessary, albeit not from all insurers on the same claim, to ensure reimbursement of conditional payments. Furthermore, a provision that takes into consideration that many insurers underwrite a single subscription policy would assist in addressing the limitation that, as a practical matter, CMS is unable to identify the various following insurers on a single policy, some of whom do very little, if any, business in the U.S. Again, CMS should avoid wasting precious resources into discovery of the identities of following insurers on a subscription policy, when this could be easily done by a single insurer with the resultant benefit to CMS.

Conclusion

It is our understanding that CMS acknowledges the inefficiencies and practical limitations of the current User Guide Policy Guidance when applied to subscription policies in the context of Section 111 reporting by Lloyd's of London Underwriters. As CMS permits the Lloyd's Lead Underwriter of a subscription policy to report on behalf of the following Lloyd's insurers on the policy, CMS should extend this precedent to all subscription policies in the Final Rule pertaining to Section 111 civil money penalties.

Based upon the foregoing, the IUA and LMA respectfully submits that CMS should include in any regulation a provision such that a single Section 111 report per subscription policy is submitted per claim with the Responsible Reporting Entity to be designated as the insurer with claims handling responsibility, namely the Lead insurer. Consequent to this, civil money penalties, if any, for noncompliance with Section 111 should be assessed solely against the Lead Underwriter with zero liability for penalties on the part of subscription policy following insurers.

The IUA and LMA would be pleased to engage further with CMS on the above response following the closure of the consultation period in respect of the NPRM. We hope that with further dialogue a solution could be developed that would increase the ease and efficiency of handling Medicare by both the CMS and insurers required to make notifications to the CMS.

Thomas Hughes, Market Services Executive, International Underwriting Association of London, [email protected]

Shanaz Ferreira-Cooper, Technical Executive, Claims, Lloyd's Market Association, [email protected]

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The proposed rule can be viewed at: https://www.regulations.gov/document?D=CMS-2013-0266-0037

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