The Medicare, Medicaid and SCHIP Extension Act of 2007 (“MMSEA”) implements new mandatory reporting requirements (referred to as “Section 111 Reporting”) to allow Medicare to identify medical claims where another entity, not Medicare, is responsible for payment pursuant to the Medicare Secondary Payor rules. Most employers, administrators and insurers are aware of how these reporting requirements apply to group health plans, which began July 1, 2009 (except for health reimbursement arrangements which are delayed until 2010). The Section 111 Reporting requirements also apply to workers’ compensation claims and to liability insurance (referred to as “Non-GHP Arrangements”). Registration for Non-GHP Arrangements must be completed by September 30, 2009 and reporting begins in 2010. However, the Section 111 Reporting requirements are structured to incorporate arrangements and situations which employers do not typically view as implicating Medicare. The focus of this Legal Alert is to highlight the impact of the Section 111 Reporting on these arrangements.
Employers are the RREs for Self-Insured Claims and Awards
As noted above, the Section 111 Reporting requirements apply to Non-GHP Arrangements (e.g., workers’ compensation and liability insurance). The entity responsible for reporting to CMS is referred to as the “Responsible Reporting Entity” or “RRE.” If the Non-GHP Arrangements are insured, the insurer will be the RRE. However, if the Non-GHP Arrangements are self-insured, even if the claims are processed by a third party administrator, the employer will be the RRE (this is a different rule than the one that applies to group health plans). For example, if an employer settles a claim for a product liability or personal injury claim and does not have insurance for that claim, that employer is the RRE. The employer is also the RRE if it has liability insurance but it – and not the insurer - pays the claimant the deductible amount for that claim or if it fails to report the amount to its insurer (such as to preserve its experience rating). If such a claim involves a claim for medical liability for an individual covered by Medicare, this claim would be subject to Section 111 Reporting. This is true even if the business disputes the validity of the medical claim or even if the settlement or award is specifically designated as not for medical expenses. Thus, in order to be reportable, it is only necessary that the initial claim relate to a personal injury or product liability claim.
Registration and Reporting
Although these types of claims do not need to be reported until a settlement or payment occurs, self-insured arrangements must pre-register with CMS by September 30, 2009. Although a third party may assist with the reporting of these claims, the RRE (not an agent) must register itself. An entity may (but is not required) to register as an RRE for any subsidiary in its corporate structure. (Separate registration for a subsidiary is required if a separate data file will be sent to CMS for the subsidiary.) However, CMS has indicated that an entity may not register as an RRE for a sibling in its corporate structure and has requested comments on a proposed revision that will make this clear. After registration, RREs (or their agents) must undergo a testing process with respect to the submission of claims under the timetable prescribed by CMS.
If an entity does not have a reasonable expectation that it may have a claim subject to Section 111 Reporting, registration is not required. However, if it does become subject to reporting in the future, the entity must register one quarter prior to the required reporting to allow sufficient time for the testing process. Due to this testing process, this later registration would only work for those claims where the employer has sufficient advance notice that a payment will be made.
The Section 111 Reporting requirements have penalties that are designed to get anyone’s attention. CMS may assess a penalty of up to $1,000 per day, per claim, for failure to comply, so it is important to understand these reporting obligations.
There are few exceptions that apply to the Section 111 Reporting process for Non-GHP Arrangements. Section 111 Reporting does not apply to claims, settlements or awards that only relate to property damage. (However, a mixed claim of both property damage and personal injury/medical is covered.) Further, Section 111 Reporting includes a de minimus threshold for reporting lump sum settlements and awards (no exception exists for liability settlements and awards that are structured as periodic payments). With respect to lump sum awards, these awards do not have to be reported if the total payment obligation to the claimant is $5,000 or less in 2010, $2,000 or less in 2011, and $600 or less after 2011. The exceptions relate to the full amount of the award, not just the portion that relates to medical claims. Further, in cases where the business pays a deductible and the remaining portion is paid by an insurer, the exceptions also relate to the full amount of the award. Due to the low dollar amount of the exceptions, as a practical matter, the exceptions will not apply to most situations.
However, the most helpful exception provides that reporting must only be performed if the claimant is a Medicare beneficiary. The RRE must determine if the claimant is a Medicare beneficiary, and CMS is establishing a system to assist in the identification of Medicare beneficiaries.
The following is a summary of various action steps employers should review:
- Employers should determine if they self-insure and pay any portion of a workers compensation, personal injury or product liability claim.
- Potentially any employer could be subject to the Non-GHP Arrangement reporting rules.
- RREs must register with CMS prior to September 30, 2009.
- The RRE itself must register, even if it will be using an agent to perform the required reporting.
- Due to the time frames for registering later, employers should register now even if they think they may not have any reportable claims.
- Claim input files are tested between January 1, 2010 and March 31, 2010.
- Between April 1, 2010 and June 30, 2010,
- RREs must submit their first production files based on a predetermined schedule. RREs must submit quarterly reports during the 7-day timeframe that is assigned to them by CMS (even if there are no claims to report).
Finally, CMS is considering a simplified reporting process for entities that have very few claims subject to this reporting, but it has not yet announced whether such a process will be available and, if so, the requirements for taking advantage of the simplified process.