Over the last couple of weeks, a study prepared for The Casualty Actuarial Society, which was the source of a presentation at the CAS Centennial Celebration and Annual Meeting, in New York, NY, delivered on November 12, 2014, has been getting a lot of attention. The study, titled “Medicare Secondary Payer Status – The Impact of Section 111 Reporting Requirements“, is written by Guy A. Avagliano, FCAS, MAAA, Philip S. Borba, Ph.D., Christine M. Fleming, J.D., ACAS, MAAA, and Craig P. Taylor, ACAS, MAAA of Milliman, Inc. What follows is a verbatim summary of the information, research, findings, and conclusions of the authors as published on July 6, 2015.
Purpose of Study
The study examines Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Section 111 or MMSEA), which introduced formalized reporting requirements of medical services received by Medicare beneficiaries in various lines of insurance coverage, including liability, self-insured, no-fault, and workers compensation. The study was “undertaken to investigate the potential impacts of the Section 111 reporting requirements on property-casualty losses, and in particular to assist practicing casualty actuaries with the potential impacts of the reporting requirements.”
Section 111 requires mandatory reporting for ORM and TPOC. The study indicates “ongoing responsibility for medicals (ORM) refers to the ongoing responsibility for payment of the injured party’s medical treatment, including medical-only claims with more than $750 in payments and all indemnity claims.” The study also indicates “total payment obligation to the claimant (TPOC) refers to the settlement, judgment, award, or other payment in addition to the ORM. A TPOC is generally a one-time or lump sum settlement, judgment, or award. Structured settlements are considered TPOCs.”
The study points out “there is no threshold for TPOC claims for no-fault insurance, as all TPOC payments made under a no-fault coverage must be reported to CMS.” The study also points out “thresholds for reporting TPOC payments for workers compensation became effective for payments made on or after October 1, 2010, and thresholds for liability became effective for payments made on or after October 1, 2011.” The study indicates that “as of January 1, 2014, an insurer or self-insured is required to report TPOC payments made on or after October 1, 2013, that were over $2,000. As of January 1, 2015, the threshold for workers’ compensation and liability claims is $300 for payments made on or after October 1, 2014.”
The study indicates that “under Section 111, insurers and self-insureds are required to report to CMS certain information on incidents where a Medicare beneficiary has received medical treatment or where a one-time payment (such as a lump sum, settlement, or judgment) includes provisions for medical treatments. This information includes identifiers for the claimant and the insurer (or self-insured) and diagnostic information for the medical treatments (such as the International Classification of Diseases 9th (or 10th) Revision (ICD-9 or ICD-10) diagnosis codes).” Therefore, when a Medicare beneficiary receives medical treatment in the future for which payment is sought under Medicare, “CMS will use this information to determine whether the medical treatment was related to a previous injury that was covered by an insurer or self-insured. If CMS determines the medical service was related to the prior injury, CMS will seek reimbursement for payment for the medical service from the insurer or self-insured.”
Because there is little information with which to estimate the financial impact of the new reporting requirements, for this study, the authors show “through case illustrations how losses may increase for insurers and self-insureds.” Using very generalized assumptions, the authors present “possible aggregate estimates for a hypothetical insurer for workers’ compensation and private passenger automobile coverages.” The study therefore provides “the practicing actuary with an approach for evaluating the impact of Section 111 claims where Medicare has been making payments and has not been reimbursed by the property-casualty insurer or self-insured.”
The authors found that the “Section 111 reporting requirements may cause modest increases in losses for injured workers and individuals 65 and over for cases where Medicare has been making payments without being reimbursed by the property-casualty insurer or self-insured.” The study illustrates the potential impact on losses in 10 cases (workers’ compensation, private passenger automobile, and homeowners cases).
For the hypothetical insurer with the conditions or types of workplace injuries described in the report, the authors estimate “the impact to be an increase in total losses (medical and indemnity) between 0.9% and 5.7% for workers 65 and over.” Using a set of generalized assumptions, the authors estimate “the aggregate impact on medical losses for injured workers 65 and over to be between 11% and 25%, which when spread across all workers the estimated increase is from 0.5% to 1.3% depending on the condition or type of injury.” For private passenger automobile injuries (and again, using a set of generalized assumptions), the authors’ estimated impact is “a 0.4% to 0.8% increase in total losses for individuals 65 and over, and an estimated increase of 0.07% to 0.13% in total losses for all ages.” Although the authors included a homeowners claim in their case illustrations, they “did not estimate an aggregate impact due to the lack of information on medical payments for homeowners claims.”
Medicare Set-Aside Arrangements
The study distinguishes between the Section 111 reporting requirements and a Medicare Set-Aside Arrangement (MSA). While Section 111 requires insurers and self-insureds to report to CMS personal identifier and diagnostic information for Medicare beneficiaries receiving medical treatments for an incident subject to a property-casualty insurance coverage (including incidents covered by self-insurance), “a Medicare Set-Aside Arrangement is a voluntary financial agreement that allocates a portion of a settlement to pay for future medical services related to a claim. Section 111 reporting is required by statute; Medicare Set-Aside Arrangements are voluntary.” The authors also point out that, as a practical matter “Section 111 concerns all claims with medical payments over $750, including claims with ongoing medical treatment. By contrast, MSAs only concern large settlements. CMS will only review MSA submissions where the claimant is a Medicare beneficiary and the total settlement is greater than $25,000 or the claimant has a reasonable expectation of enrolling for Medicare within the next 30 months and the total settlement is greater than $250,000.”
10 Cases that Illustrate Situations
To highlight the effect of Section 111, the authors developed 10 cases to illustrate situations that may arise under the Section 111 reporting requirements. Six cases concern work-related injuries covered by workers’ compensation, three cases were injuries subject to automobile coverage, and one case was for a homeowners coverage incident. The cases were developed to show a variety of situations across different liability coverages. “For the conditions associated with the case illustrations, the estimated financial impact to the insurer or self-insured was the difference between the current case reserve estimates and the potential losses.”
Study Findings and Estimates
Aggregating across the three claim groups, the study estimates “medical losses for workers 65 and over could increase by 17%, which converts to an increase of 0.9% across all workers.” Across the three assumed levels of impact, the study estimates “medical losses for injured workers 65 and over could increase by 11% to 25%, which when spread across all workers the estimated increases are from 0.5% to 1.3%.”
For private passenger automobile, the authors used estimates for injuries under five separate coverages and for injuries under all coverages, using information on the percentage of payments for medical care and the average medical payments. The study indicates that “the Section 111 reporting requirements may increase the average medical payments for individuals 65 and over by $842 to $1,685 (based on 2012 loss experience), or by 1.3% to 2.6% for this age group. The 1.3% to 2.6% estimated impact on medical payments for individuals 65 and over translates to an estimated increase of 0.2% to 0.4% in medical payments for all ages.” For total losses, the study estimates an “impact of 0.4% to 0.8% increase in total losses across injured individuals 65 and over, and an estimated increase of 0.07% to 0.13% for all ages.”
It is undeniable that Medicare Section 111 Mandatory Reporting has added significant administrative burdens for claim payers and handlers. Burdens that include collection of such data, and communicating same to Medicare on a consistent and accurate format. It is also undeniable that Mandatory Reporting has provided Medicare with information that allows it to track and monitor liability, self-insured, no-fault, and workers compensation claims. Information that includes the name of the primary payer, its insurer, date and description of the accident, injuries associated with said claim, medical professionals providing care for such injuries, as well as representatives involved in the claim.
The combined effect of this is Medicare’s consistent ability to seek reimbursement of conditional payments made by Medicare in liability, self-insured, no-fault, and workers compensation primary payers. As Medicare is better able to identify conditional payments that are the responsibility of primary payers, it is also undeniable that primary payers (liability, self-insured, no-fault, and workers compensation entities) will continue to see an increase in their costs or losses.
As the industry waits for the Mandatory Reporting process to mature, and therefore better data to become available, with hopefully a more accurate description of such losses and the specific effect of this new process requirements on all liability, self-insured, no-fault, and workers compensation claims, Helios Settlement Solutions has been and continues to be a national leader in this arena. Our MedicareConnect mandatory reporting platform is the industry’s most accurate reporting service available, with a 99.98% acceptance rate. As a result of such reliable data, Helios Settlement Solutions is the only national compliance vendor currently able to offer its clients custom crafted services and reports aimed at early identification of Medicare beneficiary status, early identification of unreimbursed conditional payments, and early identification of future allocation needs. All of these are offered with an eye toward mitigation of the potential costs and losses mentioned in the study reviewed here. To speak with us about such products and services, contact us at 888.672.7674, or firstname.lastname@example.org.