Later this week, January 1, 2010 to be exact, a failure to comply with a new requirement for reporting to Medicare payments to Medicare-eligible individuals for resolution of claims involving medical expenses could cost the payor $1,000 per day in penalties for noncompliance.
Medicare is a government-funded health insurance program primarily for individuals age 65 or older. However, Medicare is not intended to be the primary insurance coverage for such individuals where there are other funds available to pay for the medical treatment (i.e., Medicare is a “secondary payer”).
In response to increasing costs and funding concerns for Medicare, Congress passed the “Medicare, Medicaid and SCHIP Extension Act of 2007” (MMSEA) which President George W. Bush signed into law on December 29, 2007. See 42 U.S.C. § 1395y(b). The purpose of the Act is to enable Medicare to determine when its beneficiaries have received payment or reimbursement for medical expenses which Medicare could recoup.
What Is Required?
Section 1395y(b)(7) of the Act requires a “Responsible Reporting Entity” (RRE) to register with the Centers for Medicare and Medicaid Services (CMS) Coordination of Benefits Contractor (COBC) and electronically file certain information on third-party claims that involve payments to Medicare-eligible claimants. This information includes identifying information about the individual (including his or her social security number) and the amount paid to the individual to resolve all or part of a claim for medical expenses. The payment is referred to as the Total Payment Obligation to Claimant (TPOC).
An RRE can be any entity that is self-insured for all or part of a particular claim involving medical expenses. Where the claimant is a Medicare beneficiary and either (i) the claimant has made a claim for medical expenses or (ii) the claim results in a settlement, judgment, award or other payment to the Medicare beneficiary that resolves claims for medical expenses, the RRE must make a report on the payment to the COBC.
Why Is This Important for Employers?
The problem is this: any employer that is self-insured for all or part of any claim for medical expenses (i.e., personal injury claims, which can include claims for discrimination or harassment) can be an RRE and thus subject to the reporting requirement. Why is this important? Effective January 1, 2010, an RRE that fails to properly report to the COBC a covered payment to a Medicare-eligible claimant will be subject to a civil penalty of $1,000 for each day it fails to report the payment.
Group health plan insurers and third-party administrators of self-funded group health plans were required to begin providing information to CMS on certain individuals entitled to Medicare benefits in 2008. However, there are situations in which employers may also qualify as RREs. On and after January 1, 2010, where an employer is fully or partially (e.g., a deductible) self-insured for tort or employment claims potentially involving personal injuries to a Medicare-eligible claimant, payments by the employer to such a claimant must be reported to the COBC.
What Should Employers Do?
1. Employers should consult with their insurance carriers and the attorneys handling their insured liability claims to ensure that preparations have been made to report information on TPOC payments made on or after January 1, 2010.
2. Employers should examine their claims history and determine if any claims or demands could be made against their company for personal injury, including claims for harassment or discrimination, for which the company would be self-insured for all or part of a claim. This includes deductibles on Employment Practices Liability Insurance (EPLI) policies.
a. If “yes,” the employer should register with the COBC to begin the process of filing claim information.
b. If “no,” the employer should stay on alert for such claims, and consider registering with the COBC in case it is obligated to report a covered payment in the future.
3. For claims pending against a company for which the company may be required to make a payment to the claimant, the company should determine if the individual making a claim is a Medicare beneficiary. (Note: as an individual’s Medicare status can change during the course of litigation, such an inquiry should be made at the beginning of the litigation and at the time of a final payment to the claimant, at a minimum. Inquiries about a claimant’s Medicare status can be made (i) to the claimant, and (ii) through the COBC by entities registered to report TPOC payments.
4. When a Medicare-eligible claimant has made a claim for personal injury/medical expenses at any time during a dispute, or when a payment is made to such a claimant settling a claim for medicals or any personal injury, the payment should be reported promptly to the COBC.