CMS Issues Liability Insurance Settlement Reporting and Recovery Threshold Pursuant to SMART Act

On February 18, 2014, CMS issued an alert notifying the industry of a threshold in which liability settlements would no longer need to be reported to CMS under MMSEA Section 111 and also would not require conditional payment reimbursement under the MSP.  A copy of the alert can be found here.   In the alert, CMS has noted that liability settlements would not need to be reported under MMSEA Section 111 and would not require conditional payment reimbursement if they are $1,000 or less.  It would appear, although it is not explicitly stated, that this threshold is in effect as of the date of the alert, February 18, 2014.

The alert discusses the background of the provision of the SMART Act which required CMS to calculate and issue a liability insurance settlement reporting and recovery threshold by November 15 of each year. CMS should have issued its first threshold amount by November 15th of last year. However, just a few months late, we have our first threshold in place.  The threshold system now in action is an exciting outcome of the SMART Act.

This threshold requirement of the SMART Act came about due to CMS being under scrutiny since June 22, 2011 when they were questioned regarding the MSP program during a congressional oversight hearing. Deborah Taylor, the Chief Financial Officer of CMS, faced very difficult questioning during the hearing regarding financial controls that CMS had in place to ensure the MSP regime was operating efficiently.

Some may see the $1,000 settlement threshold amount as too low. However, this threshold is likely to increase in the future as CMS is required to re-calculate and re-issue a threshold amount by November 15th of each year. It is a great step for CMS to more wisely use their resources and provide liability payers the opportunity to forgo compliance with the MSP on nominal settlements.

The liability industry should take note of this alert and implement this $1,000 threshold into their settlement practices. For questions, please
contact Heather.Sanderson@pmsisettlement.com.

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