Effective January 1, 2009, the Medicare, Medicaid, and SCHIP Extension Act of 2007 (the “Act”) will require both self-insured and fully-insured group health plans to collect certain participant data on a quarterly basis and to report such data on an ongoing basis to the Centers for Medicare and Medicaid Services (CMS). The purpose of the new reporting requirements is to help CMS, the federal agency responsible for overseeing Medicare, to enforce the Medicare secondary payer (MSP) rules. The MSP rules dictate the coordination of benefits between a group health plan and Medicare: with respect to certain individuals who are covered by both types of insurance, the MSP rules require the group health plan to be the primary payer and Medicare to be the secondary payer, meaning that Medicare is obligated to pay only if the primary payer has not paid or cannot reasonably be expected to pay. The penalty for noncompliance with the new MSP reporting requirements is US$1,000 per day for each individual with respect to whom information should have been submitted.

Background

The Social Security Act, as amended in 1965 and 1972, established Medicare as the primary payer of covered health services for qualifying individuals who are age 65 or older, disabled, or have End Stage Renal Disease (ESRD). To alleviate the financial burden on Medicare, Congress passed subsequent laws, or the MSP rules, that require group health plans to be the primary payer, and Medicare to be the secondary payer, with respect to the following individuals:

  • Those who are age 65 or older and are covered under an employer-sponsored and/or contributed to group health plan as a result of (i) their own current employment status with an employer that has 20 or more employees (or if it is a multiemployer plan, where at least one of the employers has 20 or more full- or part-time employees), or (ii) the current employment status of a spouse of any age with such an employer
  • Those who are disabled and are covered under an employer-sponsored and/or contributed to group health plan as a result of (i) their own current employment status with an employer that has 100 or more full- or part-time employees (or if it is a multiemployer plan, where at least one of the employers has 100 or more full- or part-time employees), or (ii) the current employment status of a family member with such an employer
  • Those who have ESRD and are covered by a group health plan on any basis (for these individuals, Medicare is the secondary payer during the first 30 months of eligibility).

On December 29, 2007, the Act was signed into law for the purpose of, among other things, identifying individuals with respect to whom Medicare is a secondary payer under the MSP rules. Section 111 of the Act requires an entity serving as an insurer or third party administrator for a group health plan, or a plan administrator or fiduciary in the case of a self-insured and self-administered group health plan, to (i) collect from the plan sponsor and plan participants such information as specified by the US Department of Health and Human Services (HHS) and (ii) to submit such information in the form and manner (including frequency) specified by HHS. On August 1, 2008, CMS, a division of HHS, issued a supporting statement for Section 111 of the Act (the “Statement”). The Statement specifies what information must be collected from plan sponsors and plan participants, and the form and manner in which such information must be reported to CMS.

What Information Must Be Collected and Reported

The Statement sets forth the following list of data elements that must be collected and reported with respect to individuals who are both participants of the reporting group health plan and beneficiaries of Medicare: (1) HIC number (HICN; Medicare ID Number), (2) beneficiary Social Security number (required if HICN not available), (3) beneficiary surname (first five letters required), (4) beneficiary first initial, (5) beneficiary date of birth, (6) beneficiary sex code, (7) document control number (assigned by the insurer), (8) transaction type (add, delete, or update), (9) type of insurance coverage, (10) effective date of current coverage, (11) termination date of current coverage, (12) relationship to policy holder, (13) policy holder’s first name, (14) policy holder’s last name, (15) policy holder’s Social Security number, (16) employer size, (17) small employer MSP exception, (18) group policy number, (19) individual policy number, (20) employee coverage election (who the policy covers), (21) employee status (reason why the group health plan is primary), (22) employer EIN and business address and (23) insurer EIN and business address.

The Statement also includes the following list of optional data elements, the first four of which are needed for reporting prescription drug coverage: (1) Rx insured ID number, (2) Rx group number, (3) Rx PCN, (4) Rx BIN number, (5) Rx toll free number (to call with questions regarding Rx coverage) and (6) person code (assigned by insurer).

Form and Manner (Including Frequency) of Reporting

According to the Statement, the mandatory reporting will be a completely electronic process. The applicable reporting entity must first register online by logging on to a secure website, which is currently under development. Once an application is submitted, CMS will begin working with the entity to set up the data reporting and response process.

The Statement provides that the mandatory reporting shall be done on an ongoing, quarterly basis.

Non-Group Health Plans

Under the MSP rules, Medicare is also a secondary payer to liability insurance plans (including selfinsurance plans), no-fault insurance plans and workers’ compensation plans. The Act and the Statement set forth similar reporting requirements for these plans and a separate effective date of July 1, 2009.

As always, White & Case would be pleased to discuss any questions or concerns you may have regarding the new MSP reporting requirements.