“Section 111 Civil Monetary Penalty Rulemaking is Delayed”

Last Updated: 21 Feb 2023

Author: Ciara F. Koba

Non-Group Health Plan reporting entities have been waiting for over a decade for clarification on when and how civil monetary penalties (CMPs) for non-compliance with the Section 111 reporting guidelines will be assessed.  The proposed rule that will specify how and when CMS must calculate and impose CMPs was published on February 18, 2020 and can be reviewed here.  On February 17, 2023, CMS announced that they will be extending the time for publication of the final rule.  In sum, it was noted that additional data analysis and predictive modeling need to be done to better understand the economic impact of the rule on different insurer types.  The official announcement for the delay will be published in the Federal Registrar on February 22, 2023. 

This undoubtedly allowed RREs to take a breath and focus on continuing to improve and streamline processes to ensure they are compliant.  It is a relief that there has been an acknowledgement of how grave the potential economic impact could be if the max penalties were to be imposed. For illustrative purposes, imagine if an RRE failed to report 100 claims for a period of 90 days.  The proposed penalty could reach a staggering $9,000,000 without even accounting for the inflationary daily penalty which would be closer to $1,200 per day per claim.  As we pointed out when we commented on the proposed rule, the penalty does not fit the “crime”.  A more logical and balanced approach to penalties needs to be considered.  Possibly something that takes in to account the amount of conditional payments Medicare made during the period of non-compliance, the amount CMS will need to spend to investigate and recover for non-compliance, the overall good faith effort to comply the RRE has exhibited despite the failure to comply on certain cases, etc. It should be noted that an additional comment period is not on the table; however, it is encouraging that CMS is delaying the promulgation of a final rule to consider more thoroughly how this will impact all carriers in light of the original comments submitted last year. 

With this new timeframe in mind, it is important for responsible reporting entities to pay close attention to any guidance that CMS distributes and take this extra year to implement any necessary improvements to Section 111 reporting systems and processes.  On December 6, 2022, CMS presented a webinar on Section 111 reminders and best practice, additional resources and allowed for an open question and answer session.   CMS stressed that accurate Section 111 reporting of TPOCs and ORM assists CMS and their contractors with accurate recovery. 

CMS discussed how to calculate the TPOC and what is included with specific focus on the fact that indemnity only settlements do not get reported. Logically, this makes sense because the injured Medicare beneficiary is not being compensated for medical damages, and as such, the indemnity only settlement is not reportable because CMS cannot assert a recovery claim for conditional payments against an indemnity only settlement. 

CMS also discussed the Event Table contained in Section 6.6.4 of Chapter 4 of the NGHP User Guide for Section 111 reporting.  This Event Table can be useful to reporting entities when trying to determine when, what and how to report a particular beneficiary and their claim data.  It covers a wide array of event scenarios and CMS reviewed two common issues and reviewed the appropriate action per the User Guide.  The second scenario CMS reviewed is as follows:

ORM ends for one body part due to TPOC, but ORM continues for another body part for the same claim.  The recommended action for this scenario is to send an update record for the open ORM report (Action Type 2) and remove the diagnoses codes for the body parts that have settled.  Then the reporting entity should send an Add record to report the TPOC for the body part that settled. 

The solution proposed by CMS is logical if you are working in a system where this is something that is possible.  For example, what if the RRE has their TPA reporting their claims for them and the only way to submit an “Add” record in this scenario is to open a new claim for which the RRE will be charged a fee by the TPA.  There are a lot of RREs that are unable to open multiple claims in their systems when all of the action for the claim is really under one claim/policy number in their system.  As such, The Medicare Secondary Payer Network (MSPN) has been discussing possible solutions to this issue that will allow CMS to obtain the information that they need for recovery efforts and that will allow the RREs to do the reporting accurately without having to open additional claims to report multiple TPOCs and/or ORM timeframes for different body parts/injuries. 

CMS also released the top 10 error codes that they have received from July 1, 2022 through October 7, 2022.  This data was very interesting, and RREs should pay particularly close attention to this data. 

The current proposed regulations for Section 111 Civil Monetary Penalties provide that one of the ways that an RRE can be penalized is for exceeding an error tolerance threshold.  Specifically, if an RRE exceeds error tolerance thresholds established by the Secretary in any 4 out of 8 consecutive reporting periods they may be penalized. The proposed rules provide that the initial and maximum error tolerance threshold would be 20 percent (representing errors that prevent 20 percent or more of the beneficiary records from being processed), with any reduction in that tolerance to be published for notice and comment in advance of implementation.  This undoubtedly will be the easiest way for CMS to find and assess penalties as it does not require the government to analyze or investigate if time frames have been missed, if claims haven’t been reported, or if conflicting information has been provided. 

As such, if you are analyzing where to start for purposes of cleaning up your data, this is the logical first step.  If you would like to analyze your data but don’t know where to start, please reach out to info@allankoba.com



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