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Unknown “Final Rule” submitted by CMS likely pertains to Section 111 reporting penalties

March 8, 2022 · Medicare Insights Team

On March 1, 2022, Centers for Medicare and Medicaid Services (CMS) submitted the following two Rules to the White House Office of Regulatory Information and Affairs (OIRA) for review and approval.

A “Final Rule” for Medicare Secondary Payer (MSP) and Certain Civil Money Penalties – anticipated to be the long-awaited final rule regarding Section 111 reporting penalties

A “Proposed Rule” regarding MSP and Future Medicals – with the expectation this could involve Liability Medicare Set-Asides

If the OIRA has no reason to delay, the Rules would be published in the Federal Register, typically within four to six weeks. The “Final Rule” could take effect 60 days after publication. The “Proposed Rule” would still be in the early stages.

What the Final Rule could mean for Insurers/Responsible Reporting Entities (RREs)
While still unknown, the Final Rule likely means that RREs will be subject to civil money penalties for failing to meet MSP reporting obligations. The civil money penalty exposure could be $1,000 per day of noncompliance for each individual for Section 111 reporting noncompliance, up to a maximum penalty of $365,000 per individual, per year.

Hints and guidance from 2020 Proposed Rule
While we don’t know what is in the Final Rule, we do have some guidance from what CMS submitted on February 8, 2020, in its Proposed Rule. Under the 2020 proposed rule, there are three areas that would assess Civil Money Penalties (CMP) amounts:

  • When RREs fail to register and report
  • When RREs report but their errors exceed set tolerances
  • When RREs report data that is inconsistent with information that already has been communicated to CMS

The 2020 proposed regulations:

  • Addressed specific criteria as to when CMPs will be imposed and specific criteria for when the CMPs will not be imposed
  • Discussed a sliding scale for penalties from $500-$1,000 per day when claims are reported with errors and factored in how long the reported claim was out of compliance. Failure to report the claim entirely or provide inconsistent information could result in $1,000 in CMP per day.
  • Proposed some examples of when no CMP would be imposed as well.

Optum previously analyzed the proposed 2020 rules in more detail, which is linked here.

Review and correct your Section 111 claims now
Optum recommends reviewing all Section 111 claims to make sure they are a) reported, b) have corrected the errors on reported claims, and c) verify the Ongoing Responsibility for Medical (ORM) and Total Payment Obligation to Claimant (TPOC) information is correct.

It should be noted that depending on how long the claims have been out of compliance, there could be some downstream effects. Making corrections could potentially lead to conditional payments being identified and requested from the RRE or beneficiary. Medicare Advantage Plans (MAPs) or Part D plans (PDPs) could also identify conditional payments. In more extreme examples, there could be cause for a private cause of action or bad faith claim depending on the significance and duration of non-compliance. That said, Optum recommends making necessary corrections with Section 111 reporting now as those risks would all still exist in addition to the potential CMPs with no corrections to Section 111 reporting.

Additional next steps:

  • Register and report new liability, no-fault insurance and workers’ compensation laws or plans that are defined as RREs and self-insured entities, if not already done
  • NGHPs and RREs must have a process for showing proof of “good faith” efforts to report
  • NGHP RREs need to scrub data errors received in their Section 111 reporting and make immediate corrections. Pay close attention to:
    • When ORM is accepted
    • When ORM terminates rather than turning ORM to “No=N”
    • Inadvertent ORM reporting on liability claims
    • Denied or erroneous injuries/illness reported as ICD codes when TPOC reported
    • Reporting TPOC promptly upon settlement, judgment, arbitration award
  • Precede conditional payment disputes and appeals with a review of what has been communicated to CMS whether by Medicare Set Aside (MSA) submission, Section 111 reporting, or Benefits Coordination & Recovery Center (BCRC) verifications to be sure the claim data is consistent with the RRE claim and legal files.

Optum can help mitigate your CMP risk
Optum provides an independent risk assessment at a claim file level to assist our clients with identifying and correcting Section 111 reporting errors to avoid Civil Monetary Penalties. Plus, our full suite of MSP Compliance services:

  • Ensures consistency in the Section 111 reporting data
  • Manages the resolution of conditional payments with Medicare, Medicare Advantage Plans, Part D Plans
  • Handles Medicare Set-Aside needs

For more information on these Optum solutions, contact Michael Flower at Michael.flower@optum.com (p) 813-627-2406 and stay tuned to Medicare Insights for when the CMS Final Rule is formally published.


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