Stricter enforcement of the Medicare Secondary Payor (“MSP”) laws will soon impact many who in the past would not have thought twice about Medicare reporting obligations. For example, many liability insurers and business defendants will be required to comply with the MSP laws if making a lump-sum payment for a settlement, judgment or award related to medical claims alleged by a Medicare beneficiary. Such payments that meet the monetary thresholds ($5,000 in 2010) for claims on or after January 1, 2010 are subject to new MSP reporting requirements that will place significant responsibility on liability insurers, business defendants and their attorneys to confirm whether claimants are Medicare beneficiaries and, if so, to file proper reports with the Centers for Medicare and Medicare Services (“CMS”). Failure to comply with the reporting requirements can result in a civil penalty of $1,000 for each day of noncompliance per claimant.
Despite many lingering questions regarding these reporting requirements, deadlines are quickly approaching. Liability insurers and business defendants that expect to make lump-sum payments on or after January 1, 2010 must register with CMS by September 30, 2009. Once registered, systems must be tested and internal reporting policies and procedures should be adopted. Official reporting begins the second calendar quarter (April - June) of 2010.
Under the MSP laws, the Medicare program has secondary liability for the medical claims paid for its beneficiaries when the beneficiary has group health plan coverage due to active employment and when medical liability is due to a claim made under a business’ liability insurance (including self-insurance), no-fault insurance or workers’ compensation coverage. Medicare typically will wait to provide benefits when other primary coverage is known, allowing that coverage to pay first. When Medicare makes a payment for health care services related to a beneficiary’s injury or care and then a primary payor pays, or is responsible for paying for the same medical expenses, Medicare can recover its conditional payment.
Despite these statutory rights, Medicare has not consistently enforced MSP requirements, particularly with regard to non-group health plan coverage, primarily due to difficulty in identifying primary payors and the amount potentially payable. Consequently, a provision included in the Medicare, Medicaid and SCHIP Extension Act of 2007 (Section 111) added mandatory reporting requirements to the MSP laws with respect to Medicare beneficiaries who have coverage under group health plan (“GHP”) arrangements, as well as for Medicare beneficiaries who receive settlements, judgments, awards or other payment from liability insurance (including self-insurance), no-fault insurance or Workers’ Compensation. As a result, businesses or insurers that pay settlements or judgments to a claimant must first determine whether the claimant is a Medicare beneficiary and, if so, file reports with CMS detailing information about such payments.
The implications of Section 111 reporting requirements are broad, particularly for non-group health plan or liability coverage. While these provisions clearly include any payments for medical expenses that an insurer makes directly to a claimant through an insurance policy, payments made to plaintiffs, such as those who file personal injury claims for accidents or exposures and claim medical damages, are also subject to reporting requirements.
This Alert provides information regarding registering and reporting lump-sum payments made pursuant to liability settlements and judgments, including Workers’ Compensation and self-insurance. It is important to note that other payments—such as those involving ongoing liability payments for medical expenses or payments by group health plans—have slightly different reporting requirements, some of which are already in effect, and are not discussed here in any detail. CMS continues to explore issues relating to Section 111 reporting through bimonthly teleconferences that are scheduled through the end of the year. There are many outstanding issues regarding the intricacies of reporting and include questions regarding reporting mass tort settlements involving multiple claimants and collecting data on plaintiffs related to a settlement or judgment.
Who must register and report under Section 111?
Entities responsible for complying with Section 111 are referred to as “Responsible Reporting Entities” or “RREs.” RREs include the administrators of group health plans, liability insurance (including self insurance), no fault insurance and Workers’ Compensation plans. Third party administrators and other agents acting solely on behalf of liability insurers (including self-insureds), no-fault insurance, or Workers’ Compensation plans are not considered RREs. Deductibles are considered to be self-insurance under the law. Furthermore, any entity that engages in a business, trade or profession is deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance or by using a high deductible), in whole or in part. Thus, reporting requirements extend beyond liability insurers that pay settlements and judgments to plaintiffs claiming medical damages, and capture business defendants in lawsuits who are paying claims, settlements and judgments out-of-pocket. Changes are still being made by CMS to clarify who is an RRE under the law.
What is the registration process?
RREs must register with CMS through a secure website by September 30, 2009, and pass a data testing process prior to submitting claim information. RREs for purposes of the Section 111 liability insurance (including selfinsurance), no-fault insurance or Workers’ Compensation are not required to register if they have nothing to report. However, those who do not register initially because they have no expectation of having claims to report must register in time to allow a full calendar quarter for testing if they have future situations where they have a reasonable expectation of having to report.
To assist with the reporting process, an RRE may contract with an entity to act as an agent for reporting purposes. Agents may include data service companies, third party administrators, consulting companies or similar entities that can create and submit Section 111 reporting files on behalf of the RRE. The RRE can designate this agent during the initial registration process. However, the RRE remains solely responsible and accountable for complying with CMS instructions and for the accuracy of the data.
How does an RRE report payment under Section 111?
After registration, there are two steps to the reporting process. For non-group health plan coverages, only claims involving Medicare beneficiaries are required to be reported. Once it is determined that a claimant is a Medicare beneficiary, a settlement, judgment, award or other payment involving medical benefit liability must be reported electronically.
- Step 1—Medicare Beneficiary Inquiry: In order to identify which claimants are Medicare beneficiaries, a query record can be submitted to the electronic database that contains the Social Security number or Medicare health insurance claim number (HICN), name, date of birth and gender of the injured party. The RRE will then receive information on whether the individual is a Medicare beneficiary and, if so, will receive the HICN and other updated information for the individual found on the Medicare Beneficiary Database. This process is optional but, otherwise, the RRE must implement a procedure in its claims resolution process to determine whether an injured party is a Medicare beneficiary. The query process involves obtaining the Social Security number of the claimant. CMS has provided some model language for RREs to use in gathering that information.
- Step 2—Claim Input File: Once an RRE identifies which claimants are indeed Medicare beneficiaries, it must transmit an electronic “Claim Input File” to CMS. The claim submission process includes a large list of electronic data fields that focus on the identity of the Medicare beneficiary, the identity of his or her representative, the plan of insurance responsible for paying the beneficiary and the type of payment being made. A one-time payment to a Medicare beneficiary that terminates a claim for medical benefits is called a “total payment obligation to a claimant” (TPOC). When a TPOC is made, the date of the TPOC and the dollar value applicable to the Medicare beneficiary will be reported in a Claim Input File. As discussed below, when medicals are claimed and/or released, the full amount of the settlement, judgment, award or other payment must be reported.
What information must be reported?
Among other data, Section 111 requires an RRE to report “settlements, judgments, and awards or other payments” that involve the termination of all liability through a one-time payment. A RRE must submit payment information when an injured party is a Medicare beneficiary and medicals are claimed and/or released or the settlement, judgment, award, or other payment has the effect of releasing medicals. RREs must report settlements, judgments, awards or other payments regardless of whether there is an admission or determination of liability. The full amount must be reported, and CMS is not bound by any allocation made by the parties, even where a court has approved an allocation between the parties.
RREs are not required to report liability insurance settlements, judgments, awards or other payments for “property damage only” claims that did not claim and/or release medicals or that do not have the effect of releasing medicals. However, a mixed claim of property damage and personal injury/medical must be reported. In addition, lump-sum awards do not have to be reported if the total payment obligation to the claimant is $5000 or less in 2010, $2000 or less in 2011 and $600 or less after 2011. This exception applies to the full amount of the award, not just the medical claims.
When should a report be filed?
Reports regarding claims should be made once a settlement or payment occurs. Under current CMS procedures, only TPOC payments made on or after January 1, 2010 need to be reported. Any settlement that was established before January 1, 2010 does not need to be reported, unless the RRE has a continuing or ongoing responsibility for medical benefits. A final settlement that is related to an incident that took place prior to December 5, 1980 does not need to be reported.
Reports will be filed on a quarterly basis. Non-group health insurance RREs must submit their initial Section 111 Claim Input File, which begins with claims paid as of January 1, 2010, during the second calendar quarter (April - June) of 2010. When registering for Section 111 reporting, the RRE will be assigned a standard seven-day window for its quarterly file submission.
Penalties for Noncompliance
CMS may assess a penalty of up to $1000 per day, per claim, for failure to comply with Section 111 reporting requirements.
Planning and Preparation
As noted, Section 111 reporting is a developing area. Reporting procedures are still being tested and many practical questions surround how to identify RREs and how to report settlements, judgments, awards and other payments when an RRE does not already have the claimant’s identifying information. Registration of RREs is expected by September 30, 2009. In terms of payments made to plaintiffs in lawsuits, insurers, “selfinsured” businesses and their attorneys should consider Section 111 reporting requirements when requesting information from plaintiffs’ counsel and when finalizing and negotiating settlements.