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Liability Insurer And Self Insured Entity Reporting Requirements Under The Medicare, Medicaid and SCHIP Extension Act Of 2007 Near Implementation

Beginning May 2009, liability (including self-insurers), no-fault and workers’ compensation insurers will be required to begin the registration process with the Centers for Medicare & Medicaid Services (“CMS”) pursuant to the mandate issued in the Medicare, Medicaid and SCHIP Extension Act of 2007 (hereinafter the “Act”).  See, 110 P.L. 173 at Sec. 111, amending Section 1862(b) of the Social Security Act, 42 U.S.C. 1395y(b) (2007).  The Act provides a mechanism for the enforcement of insurers and self-insurers’ existing obligations under the Medicare Secondary Payer statute (hereinafter the “MSP”).  42 U.S.C. 1395y(b).

The MSP establishes Medicare as the secondary payer to Group Health Plans and three types of non-Group Health Plans: (1) liability insurers and self-insured entities; (2) no-fault insurers; and (3) workers’ compensation insurers.  Under the MSP statute Medicare has the statutory right to recover medical payments it makes on behalf of a Medicare beneficiary from any of these primary payers whose insurance policies provide coverage for the beneficiaries’ medical claims.  Medicare’s rights as a secondary payer constitute a super lien having priority over all other lien holders.  Further, Medicare’s status as a secondary payer has also been found to preempt state laws.  Cox v. Shalala,1995 US Dist LEXIS 10817 (M.D. N.C. 1995), aff’d 112 F3d 151(4th Cir. 1997); In Re: Dow Corning Corp.,250 BR 298 (E.D. Mich. 2000)(criticizing Cox v. Shalala).
 
The Act requires non-Group Health Plan insurers to electronically transmit data to CMS on all claims involving an injury to a Medicare beneficiary that are “resolved” beginning July 1, 2009.  The critical date triggering the insurer’s reporting requirements to CMS is the date of any settlement, award or judgment and not the actual date of payment.  The claims data that is required to be reported by insurers includes more than 50 data points including:
 
1.     Social Security Number or Medicare ID Number;
2.     Claimant if not the injured beneficiary (e.g., an estate);
3.     The primary insurance plan;
4.     The policy holder;
5.     A description of the incident;
6.     Information concerning the insurers’ resolution of the claim.
 
Procedures Under the Act
 
Beginning in May and June of 2009, non-Group Health Plan insurers will need to register with CMS as responsible reporting entities.  Responsible reporting entities also will need to enroll any agents that will submit data on their behalf. 
 
By July 1, 2009, non-Group Health Plan insurers must install system software provided by CMS for data transmission.  Also beginning on July, 1, 2009, responsible reporting entities and their agents will begin submitting test transmissions. 
 
CMS will assign each responsible reporting entity a date during the fourth quarter of 2009 by which the non-Group Health Plan insurer must begin quarterly claim reporting.
 
Penalties for Noncompliance
 
Under the Act, insurers (including self-insurers) that fail to comply with the reporting requirements outlined by CMS will be subject to civil penalties of $1,000 per each day of noncompliance, for each separate Medicare beneficiary.  These penalties could be quite steep.  For example, if an insurer fails to report a claimant early in the prior reporting quarter, daily penalties could amass for nearly a full quarter before the information is properly reported.
 
CMS has stated that it is primarily interested in facilitating insurer compliance with the Act’s reporting requirements. Based on this stated interest, it is likely that CMS will consider mitigating factors in deciding whether to seek civil penalties against non-compliant insurers.  Such mitigating factors might include:
 
  • Whether the insurer was diligent in its efforts to come into regulatory compliance;
  • Whether the insurer failed to register as a responsible reporting entity;
  • Whether the insurer has registered its reporting agents;
  • Whether the insurer has been diligent in transmitting data at other times.
 
Ultimately, we expect that CMS will not vigorously seek penalties from insurers who can demonstrate a good faith attempt to comply with the regulatory reporting requirements of the Act.  Nonetheless, insurers should be cognizant of the harsh civil penalties which CMS can and likely will assess against noncompliant insurers.  Given this, insurers would be best served by documenting their efforts to come into compliance with the reporting regulations.
 
Document Retention Issues
 
CMS has recommended in its guidance documents that insurers maintain “MSP related information” for ten (10) years.  While the MSP statute only allows CMS to recoup payments from primary insurers for a three (3) year period beginning on the date that the medical service is rendered to the Medicare beneficiary, CMS has noted that the ten year record retention recommendation is needed because certain administrative and legal actions outside of the MSP statute could be brought against a responsible reporting entity for ten years.
 
Other Issues That May Arise
 
The Act’s reporting requirements, aside from raising issues related to regulatory compliance with the Act, also raise a number of questions that insurers have been asking since the enactment of the MSP statute.  What is clear is that the reporting requirements of the Act will lead to more robust efforts on the part of CMS to recoup payments from primarily responsible insurers.  Questions may arise involving:
 
  • Can CMS seek to recover the full amount of a settlement even where claims for non-medical payments are contemplated by the agreement;
  • Can CMS require an insurer to pay in excess of the negotiated settlement amount;
  • Can CMS require an insurer to pay in excess of its policy limits;
  • Can an insurer structure its settlements in a manner to limit or control any risk of MSP liability in the future;
  • What regulatory impact would a claimant’s refusal to provide information such as Social Security numbers or Medicare ID;
  • Does CMS intend to share with other governmental plans (Medicare Advantage or Part D).
 
Conclusions
 
Enforcement of the MSP statute in 2010 appears imminent.  CMS estimates that approximately 400 insurers will be required to comply with the reporting provisions of the Act and that as many as 2.9 million claims may be at issue.  Given the steep civil penalties available to CMS against noncompliant insurers, insurers need to act quickly to ensure compliance with the reporting regulations.  Proper and consistent documentation of compliance efforts will be necessary to attempt to avoid any claims for noncompliance asserted by CMS.
© 2020 Clark HIll PLCNational Law Review, Volume , Number 256
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About this Author

Ben Blume, Clark Hill Law Firm, Insurance Attorney

Benjamin A. Blume is a member in Clark Hill’s Chicago office. He is co-chair in Clark Hill’s new Insurance and Reinsurance Practice Group, which will focus on representing client’s in all aspects of the insurance and reinsurance business, including claims counseling, litigation and arbitration, business transactions and tax matters, regulatory issues and government relations, and formation of captive insurers and risk retention groups. His practice includes the handling of issues involving commercials, primary, umbrella, excess and surplus lines, and reinsurance. Benjamin...

312-985-5937
John D. LaBarbera, Insurance Attorney, Clark Hill Law Firm

John D. LaBarbera is a member in Clark Hill’s Chicago office. He is co-chair in Clark Hill’s new Insurance and Reinsurance Practice Group, which will focus on representing client’s in all aspects of the insurance and reinsurance business, including claims counseling, litigation and arbitration, business transactions and tax matters, regulatory issues and government relations, and formation of captive insurers and risk retention groups. He represents insurers in all aspects of their business, including claims counseling, litigation, and dispute resolution. His practice...

312-985-5936
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