Is this the Year? Is 2016 the Year CMS Will Start Mandatory Insurer Reporting Civil Money Penalties?

Rafael Gonzalez, Esq.
Vice President, Strategic Solution, Helios Settlement Solutions

A. Introduction

122815_1601_2015HeliosS1.jpgApplicable plans that fail to comply with the Medicare Secondary Payer Act’s mandatory insurer reporting requirements “may be subject to a civil money penalty of up to $1,000 for each day of noncompliance with respect to each claimant.” On December 11, 2013, the Center for Medicare and Medicaid Services (CMS) published CMS-6061-ANPRM, an Advanced Notice of Proposed Rulemaking on Civil Money Penalties Under the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MIR ANPRM). Before embarking on actual rule making, this advance notice of proposed rulemaking solicited public comment on specific practices for which civil money penalties (CMPs) may or may not be imposed for failure to comply with Medicare Secondary Payer (MSP) reporting requirements for certain group health and non-group health plans arrangements. 34 comments were received by CMS by the deadline date of February 10, 2014. As we approach two years since such comments were filed, is this the year? Is 2016 the year CMS starts MSP mandatory insurer reporting civil money penalties? If so, are you prepared? Is your responsible reporting entity (RRE) ready? Does your self-insured employer or carrier, or corporate defendant or insurer have an MIR program that accurately reports to CMS ongoing responsibility for medical (ORM), reports the appropriate ICD-9 or ICD-10 codes to CMS, and timely and deliberately reports to CMS total payment obligation to claimant (TPOC) information?

B. Permissible Civil Money Penalties within the Social Security Act

As the MIR ANPRM indicated:

In 1981, Congress added section 1128A to the Social Security Act (the Act) to authorize the Secretary of Health and Human Services (Secretary) to impose CMPs and assessments on certain health care facilities, health care practitioners, and other suppliers for noncompliance with rules of the Medicare and Medicaid programs. CMPs and assessments provide an enforcement tool for agencies to ensure compliance with statutory and regulatory requirements and are in addition to potential criminal or civil penalties. Since 1981, Congress has significantly increased both the number and the types of circumstances under which the Secretary may impose CMPs.

C. The Medicare, Medicaid, and SCHIP Extension Act of 2007

As the MIR ANPRM also indicated:

Under Medicare law enacted in 1965, Medicare was the primary payer for certain designated health care services except those covered by workers’ compensation. In 1980, Congress added section 1862(b) of the Act which defined when Medicare is the secondary payer to certain primary plans. These provisions are known as the MSP provisions. Section 1862(b) of the Act prohibits Medicare from making payment if payment has been made or can reasonably be expected to be made by the following primary plans when certain conditions are satisfied: group health plans; workers’ compensation plans; liability insurance (including self-insurance); or no-fault insurance. For workers’ compensation, liability insurance (including self-insurance), or no-fault insurance for which payment has not been made or cannot be expected to be made promptly, Medicare may make a conditional payment subject to Medicare payment rules. Any conditional payments made by Medicare are subject to repayment once the primary plan makes payment.

After several failed experiments on getting primary payers to consistently and accurately report cases in which they were responsible for reimbursing Medicare, Congress passed the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA). Section 111 of MMSEA added paragraphs (7) and (8) to section 1862(b) of the Act which established new mandatory reporting requirements for certain group health plan (GHP) arrangements and for liability insurance (including self-insurance), no-fault insurance, and workers’ compensation, collectively referred to as non-group health plan (NGHP) arrangements.

Section 1862(b)(7) of the Act (42 USC Section 1395y(b)(7)) added new reporting rules for GHP. Section 1862(b)(7) of the Act also included authority for Medicare to impose CMPs against GHPs responsible reporting entities which are determined to be noncompliant. An entity serving as an insurer or third party administrator for a GHP, or a GHP that is self-insured and self-administered, must report under these requirements. Section 1862(b)(8) of the Act (42 USC Section 1395y(b)(8)) added new reporting rules for NGHP arrangements. Section 1862(b)(8) of the Act also included authority for CMS to impose CMPs against NGHPs which are determined to be noncompliant.

As the MIR ANPRM provides:

Section 1862(b)(8) of the Act defines the term “applicable plan” to mean the following laws, plans, or other arrangements, including the fiduciary or administrator for such law, plan, or arrangement: (1) Liability insurance (including self-insurance); (2) no fault-insurance; and (3) workers’ compensation laws or plans. Section 1862(b)(8) of the Act also requires applicable plans to notify CMS when they pay liability insurance (including self-insurance), no-fault insurance, and/or workers’ compensation claims on behalf of Medicare beneficiaries. Information shall be submitted within a time specified by the Secretary after the claim is addressed or resolved (or partially addressed or resolved) through a settlement, judgment, award, or other payment, regardless of whether or not there is a determination or admission of liability.

D. The Medicare IVIG (Intravenous Immunoglobulin) Access and Strengthening Medicare and Repaying Taxpayers Act (SMART) of 2012

Perhaps because a mandatory $1,000 per day, per file penalty was seen as too harsh, or perhaps because there was a seemingly lack of due process in the manner in which such penalties were going to be levied, on January 10, 2013, the Medicare IVIG (Intravenous Immunoglobulin) Access and Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act) was enacted. The SMART Act, among several other provisions, amended section 1862(b)(8)(E) of the Act to state that applicable plans that fail to comply with the reporting requirements “may be subject to a civil money penalty of up to $1,000 for each day of noncompliance with respect to each claimant,” revising the prior mandatory nature of this provision.

E. The Advanced Notice of Proposed Rulemaking on Civil Money Penalties

As a result of Congress’ amendment to the MSP, and before embarking on full rule making mode, CMS issued the MIR ANPRM to “solicit public comments and proposals for the specification of practices for which CMPs would or would not be imposed in accordance with sections 1862(b)(7)(B) and (b)(8)(E) of the Act (42 USC Section 1395y(b)(7)(B) and (8)(E)).” The MIR ANPRM made it clear that CMS was interested in comments and proposals “to specifically define “noncompliance” in the context of the phrase, “for each day of noncompliance with respect to each claimant” in sections 1862(b)(7) or (b)(8) of the Act.” Therefore, CMS was seeking public comment and proposals “on mechanisms and criteria that it could employ to evaluate whether and when the agency would impose CMPs.”

In addition, the MIR ANPRM established that CMS was soliciting comments and proposals “for methods to determine the dollar amount of a CMP that would be levied for each day that NGHP is a responsible reporting entity noncompliance under section 1862(b)(8) of the Act.” The MIR ANPRM also indicated CMS was soliciting comments on how it “might devise a method(s) and criteria to determine which actions would constitute “good faith effort(s)” taken by an entity to identify a Medicare beneficiary for the purposes of reporting under section 1862(b)(8) of the Act.” https://www.federalregister.gov/articles/2013/12/11/2013-29473/medicare-program-medicare-secondary-payer-and-certain-civil-money-penalties#page-75304

F. MIR ANPRM Comments Filed by Stakeholders

The MIR ANPRM specifically indicated CMS was “soliciting comments and proposals from insurers, third party administrators for GHPs, other applicable plans, and the public.” 34 comments were received by CMS. Some were from insurers, some from third party administrators, some from organizations representing insurers and healthcare providers, some from MSP vendors serving Medicare beneficiaries, some from vendors serving primary payers, and some from members of the public at large.

The American Insurance Association’s Medicare & Medicaid Task Force (AIA’s Task Force), which is made up of 34 domestic and foreign insurance groups, trade associations, and other stakeholders representing over 300 major insurance companies that provide all lines of property-casualty insurance and write more than $159 billion annually in premiums, submitted comments in response to the MIR ANPRM. The AIA Task Force suggested that “when a RRE is notified by CMS of an alleged failure to properly report, the RRE must be given an opportunity to respond to the allegation of a failure to properly report and access to a process to determine if a failure occurred.” If a failure to properly report has taken place, “the RRE must also be given a reasonable amount of time (negotiated between the parties taking into consideration the complexity of the failure) to correct the issue and file a corrected report or, if necessary, a plan to ensure that the issue will not reoccur.”

The AIA Task Force proposed that “under no circumstance should CMP be imposed if CMS cannot establish that the RRE has acted in bad faith in failing to properly report.” In other words, “for a RRE to be found to have acted in bad faith effort to report, CMS must establish (1) the RRE had actual knowledge of the failure to report properly, (2) acted in a deliberate manner not to report, and (3) acted with reckless disregard of the reporting requirements.”

In addition, the AIA Task Force proposed that “before assessing a CMP to a RRE, due process should provide an opportunity to request an administrative hearing. Upon the assessment of a CMP the RRE should be permitted to appeal within CMS or seek judicial review.” And if a CMP is assessed, that “CMS must also prove that the CMP is reasonable given the totality of the circumstances surrounding the failure to report including reason, size, duration and other mitigating factors.”

State Farm Mutual Automobile Insurance Company (State Farm) also responded. State Farm, the largest underwriter of private passenger automobile and homeowner insurance in the United States, with 81 million policies in the United States and Canada, recommended that “compliance would be established through documentation supporting attempts to obtain entitlement information from the claimant, written request to complete a CMS Model Language form, query of the BCRC database once the Secretary creates a process that does not require a social security number or HICN to query, or other evidence of reasonable attempts to determine the claimant’s entitlement.”

State Farm also indicated that “good faith efforts may be demonstrated through registration as an RRE, initial data exchange testing, regular file submissions, voluntary and timely correction of errors, notice to and cooperation with CMS in the reporting process.”

Gallagher Bassett Services, Inc. (GB) also responded. GB is a wholly-owned subsidiary of Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, headquartered in Itasca, Illinois. GB recommended that “no penalty should be assessed until an RRE has received sufficiently-detailed notice of a potential violation and has been given an appropriate 90-day opportunity to cure
the alleged deficiency. To the extent that the RRE has a good faith belief that it has met one of the safe harbors to be established, there must be sufficient time for the RRE to present its views as to why reporting is not needed or why it is otherwise exempt.”

GB also indicated “CMS should permit RREs to assert affirmative defenses, such as allowing an RRE to establish that it did not have knowledge of the violation and by exercising reasonable diligence, would not have known that the violation occurred; or that the violation is due to circumstances that would make it unreasonable for the RRE, despite the exercise of ordinary business care and prudence, to comply with the reporting requirements violated and is not due to willful neglect, and was corrected within a reasonable period of time based on the nature and extent of the cause of the failure to comply. Likewise, the RRE should be permitted to present evidence that CMS was duly notified of the claim at issue through alternative means, as a way to mitigate any CMP.”

The State Compensation Insurance Fund (SCIF) also responded. SCIF is the largest provider of workers’ compensation insurance in California, and one of the largest state funds in the United States. SCIF suggested that “the assessment of the penalty be determined based on the following factors: recurrence of late reporting, failure to correct claim input file submissions and failure to produce regular file submissions. The Secretary may wish to impose penalties within a range of amounts less than $1,000 per day depending on the nature of the non-compliance. The NGHP should also be allowed to mitigate the imposition and amount of the CMP with evidence of attempts at compliance or remediation.”

SCIF also suggested that “a mechanism to appeal the imposition of the CMP be created that at a minimum includes the opportunity to present evidence and argument in defense of the imposition of the CMP to CMS, and an appeal to a hearing officer.”

As one of the oldest and largest vendors serving the MSP industry, and consistently the leading and most accurate provider of MIR information to CMS, Helios also responded. Helios indicated “that a differentiation should be made between RREs that have made a good faith attempt to comply with the spirit and congressional intent of Section 111 reporting and those who have not with regard to application of CMPs.” As such, it suggested a number of items that would define what activities would be included in a good faith attempt to be compliant. Helios therefore recommended that “RREs that consistently meet the criteria of the items it listed should be deemed to have made a good faith effort to report claims to CMS and therefore should not be subject to CMPs.”

Helios also recommended that “CMS postpone penalty enforcement when changes are being made to the overall NGHP process until at least six months beyond the completion of changes.” And for significant changes, such as the implementation of ICD-10, Helios suggested a “longer period of a year or more might be appropriate.” Helios also recommended that “CMS should consider providing the RREs with web-based capability to audit their own data within the CMS systems and that such access also include the ability to add new claims and amend previous submissions. Allowing an RRE to view the detail of a claim submission provides the RRE with the capability of internally auditing Section 111 data to ensure their processes are working correctly or those of their claim administrator or reporting agent.”

G. Conversion to ICD-10 and CMS’ Reliance on Same

Since receiving these 34 comments in 2014, in addition to having received MIR information on millions of claims, and beginning to use such data to identify conditional payments Medicare may be entitled to reimbursement on, the use of ICD-10s have become mandatory, as CMS will rely on them to make important decisions on each claim. On October 1, 2015, physicians, clinics, hospitals, diagnostic facilities, and all other providers started using ICD-10 codes for services provided on or after October 1, 2015. A major difference between ICD-9 and ICD-10 codes include the fact that ICD-9-CM diagnosis codes use 3 to 5 digits, while ICD-10-CM codes use 5 to 7 digits. This change alone will allow for greater detail and significantly more codes that were badly needed to truly explain today’s medical care and treatment. ICD-9-CM procedure codes used 3 to 4 numeric digits, while ICD-10-PCS codes use 7 alphanumeric digits. As a result, unlike ICD-9, which had essentially run out of room for new codes and no longer had the ability to provide necessary detail, ICD-10 significantly expands the number of codes and details of each code for all conditions.

It is also clear that ICD–10 will provide greater specificity of diagnosis-related groups, will improve quality measurement and reporting capabilities, will improve tracking of illnesses, and reflect greater accuracy of reimbursement for medical services. It is believed that ICD–10’s granularity will also improve data capture and analytics of public health surveillance and reporting, national quality reporting, research and data analysis, and provide detailed data to inform health care delivery and health policy decisions. It is universally accepted that the specificity of ICD-10 will improve the quality of healthcare we will all receive as ICD–10 includes significant improvements over ICD–9 in coding primary care encounters, external causes of injury, mental disorders, and preventive health, just to name a few.

ICD-10 also affects MSP. For mandatory insurer reporting submissions prior to October 1, 2015, use of ICD-9-CM diagnosis codes is mandatory. For submissions beginning October 1, 2015, ICD-10-CM diagnosis codes will be required on all production Claim Input Files (CIP) and Direct Data Entry (DDE) add and update records with a CMS DOI on or after October 1, 2015. For submissions beginning October 1, 2015, either ICD-9-CM or ICD-10-CM diagnosis codes will be accepted on all add and update records with a CMS DOI prior to October 1, 2015. However, each record can only contain either all ICD-9-CM or all ICD-10-CM codes. RREs may not submit a combination of ICD-9-CM and ICD-10-CM diagnosis codes on one single record. RREs will not be required to convert or crosswalk ICD-9-CM codes submitted on previously accepted records to ICD-10-CM codes when submitting subsequent updates to those records.

The effects of these changes don’t stop at MIR. Effective January 1, 2016, CMS has added an additional limitation to Medicare claims payments where insurers or workers’ compensation entities have reported to CMS that they have Ongoing Responsibility for Medicals (ORM). In situations where an insurer or workers’ compensation entity has reported to CMS that it has ongoing responsibility for medicals for specific care (using ICD-9 or ICD-10), CMS’ claims processing contractors will use the information provided by the insurer or workers’ compensation entity to determine whether Medicare should or should not make payment for those claims. CMS has made it clear that insurers and workers’ compensation entities that notify Medicare that they have ORM are strongly encouraged to report accurate ICD-9 or ICD-10 codes as Medicare’s claims processing contractors will use this information to pay or deny claims accordingly. In other words, reported ICD-10 codes will be key as CMS decides to pay or deny each bill it receives, will be paramount to challenging any conditional payment Medicare may be requesting reimbursement on, and will be central to the determination of what items should or should not be included in a Medicare set aside.

H. Conclusion

As we approach two years since comments were filed to the MIR ANPRM, is this the year? Is 2016 the year CMS sets MSP mandatory insurer reporting civil money penalties? Based on the 34 comments received in response to CMS’ request for comments and proposals for the specification of practices for which CMPs would or would not be imposed, all stakeholders responsible for reporting, including self-insureds, insurance carriers, third party administrators, and agents reporting on their behalf agree that rules guiding this process must specifically define noncompliance, and must provide for an appeals process before CMS would be authorized to impose CMPs. If CMS were to finalize such rules in 2016, are you prepared? Is your responsible reporting entity (RRE) ready? Does your self-insured employer or carrier, or corporate defendant or insurer have an MIR program that accurately reports to CMS ongoing responsibility for medical (ORM), reports the appropriate ICD-9 or ICD-10 codes to CMS, and timely and deliberately reports to CMS total payment obligation to claimant (TPOC) information?

This entry was posted in Mandatory Insurer Reporting (MIR), Medicare Secondary Payer (MSP) on by .

About Rafael Gonzalez

As vice president of strategic solutions, Rafael Gonzalez serves as a thought leader on all aspects of Medicare and Medicaid compliance issues, including mandatory insurer reporting, conditional payments resolution, Medicare set aside allocations, CMS approval, and professional administration of Medicare set asides and special needs trusts. Prior to joining Helios, over the last 30 years, Rafael served as director of Medicare & Medicaid compliance and post settlement administration for Gould & Lamb in Bradenton, Florida. Before that, he served as chief executive officer for the Center for Lien Resolution, the Center for Medicare Set Aside Administration and the Center for Special Trusts Administration in Clearwater, Florida. Prior to that, he served as corporate counsel for FCCI Insurance, a workers’ compensation/property casualty insurance company in Sarasota, Florida. And before that, he practiced social security disability, workers’ compensation, longshore and personal injury law in Tampa, Florida. Rafael Gonzalez received his Bachelor of Science degree from the University of Florida and his Jurisprudence Doctorate degree from the Florida State University.

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