Tag Archives: workers’ compensation

CMS Issues Notice of Proposed Rulemaking Regarding an Appeals Process to be utilized by Applicable Plans for Conditional Payment Disputes

On December 27, 2013, CMS issued a NPRM relating to circumstances where “applicable plans” (liability insurance, no-fault insurance, and workers’ compensation law or plans) can appeal recoveries which are sought by Medicare under the MSP directly against applicable plans. Organizations or individuals seeking to have commentary considered should provide their recommendations via one of the approved delivery methods as specified in the NPRM no later than 5 pm on February 25, 2014.

The appeals process proposed within this NPRM will strictly be for “applicable plans” as Medicare beneficiaries currently have existing appeal rights where the beneficiary is listed as the debtor. Because there is currently no appeals process for applicable plans in a similar situation, and the SMART Act called upon CMS to create an appeals process for applicable plans, this NPRM has been issued in the efforts to give applicable plans the same rights to appeal as a beneficiary currently has available.

As it relates to the SMART Act, Section 201 specifically requires Medicare to promulgate regulations establishing a right of appeal and appeals process under which the applicable plan involved, or an attorney, agent, or third party administrator on behalf of such plan, may appeal a statement of reimbursement amount. Therefore, this NPRM has been issued to comply with the aforementioned requirement of the SMART Act.

While CMS has noted that the industry has expressed interest in an appeal process for determinations regarding WCMSAs, this NPRM does not address this issue (CMS noted that it will be addressed separately). PMSI is hopeful that CMS will address this issue separately in the near future as an appeals process for WCMSAs would bring additional clarity and consistency toward the WCMSA and CMS approval process.

Noteworthy portions of the NPRM on the Appeals Process proposed:

  • The applicable plan must be the identified debtor in the initial demand.
  • Additionally, if the applicable plan is the identified debtor in the initial demand, the beneficiary cannot dispute the recovery amount/conditional payment amount.
  • The applicable plan cannot appeal unless and until an initial demand has been issued and Medicare is pursuing recovery directly from the applicable plan.
  • Because Medicare has the right to recover conditional payments from the beneficiary, the primary payer, or any other entity that has the proceeds from payment by the primary plan, Medicare’s decision regarding who/what entity it is pursuing recovery from is not subject
    to appeal.
  • Notice of intent to appeal- where the applicable plan is the identified debtor, the beneficiary would receive notice of the applicable plan’s intent to appeal. On the other hand however, if the applicable plan is not the identified debtor, it would not receive notice of a
    beneficiary’s intent to appeal.

PMSI will be submitting commentary for the NPRM and recommends that all interested parties do so as well as the comments received will greatly impact the appeals process for applicable plans.

The NPRM can be found in the Federal Register here: http://www.gpo.gov/fdsys/pkg/FR-2013-12-27/pdf/2013-30661.pdf

CMS Issues ANPRM on Penalties for Noncompliance with MMSEA Section 111 Reporting

On December 10, 2013, CMS issued an ANPRM relating to circumstances where civil monetary penalties (CMPs) may be imposed for failure to comply with requirements set forth in Section 111 of the MMSEA. This notice will appear in the December 11, 2013 Federal Register, volume 78, number 238. Organizations or individuals seeking to have commentary considered should provide their recommendations via one of the approved delivery methods as specified in the ANPRM no later than 5 pm on February 10, 2014.

This ANPRM is soliciting commentary from insurers, third party administrators and the public and relates to both group health plans (GHP) and non-group health plans (NGHP). Commentary should identify which provision they are addressing specifically by referring to section 1862(b)(7) for GHP plans or section 1862(b)(8) for NGHP plans.

The areas of focus in the requested commentary are identified in the ANPRM are as follows:

  • Practices for which CMPs would or would not be imposed on
    GHPs and NGHPs who are responsible for reporting information to CMS. This
    includes criteria and/or mechanisms CMS may use to evaluate whether and when it would impose CMPs.
  • Methods to determine the dollar amounts for CMPs to be levied against a NGHP responsible reporting entity for non-compliance.
  • Definitions and criteria that constitute “good faith effort(s)” by NGHPs to identify a Medicare beneficiary for the purposes of reporting.

PMSI will be submitting commentary for the ANPRM and recommends that all interested parties do so as well as the comments received will greatly impact how and when CMPs are imposed in the future.

Resource links related to the ANPRM can be found here:

Federal Register:


Mandatory Insurer Reporting for NGHP: http://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Mandatory-Insurer-Reporting-For-Non-Group-Health-Plans/Overview.html

Workers’ Compensation Carrier Required to Pay Seed Money of an Annuitized MSA Despite Claimant’s Death

An MSA is intended to pay for future medical items which would otherwise be covered by Medicare. The intent behind establishing an MSA is to prevent the cost shifting of these future items to Medicare. It therefore logically follows that if a claimant passes away prior to disbursement of the MSA and/or finalization of the settlement agreement, that an MSA is no longer required to be paid due to the fact that there will be no future medical expenses incurred. The claimant has passed away and therefore there will be no shifting of the burden for future care to Medicare. A deceased person cannot incur medical expenses into the future.

In a recent case out of North Carolina, Holmes v. Solon Automated Services, 2013 N.C. App LEXIS 1238 (December 3, 2013), the North Carolina Industrial Commission agreed with this notion completely and found that the defendants did not have to pay for any portion of the MSA due to the fact that the claimant passed away prior to full finalization of the settlement. However, when the case was appealed to the Court of Appeals of North Carolina, the appellate court took a different direction from this logic when analyzing the parties mediated settlement agreement. The appellate court found that the defendant insurance carrier was still required to pay the seed money of the annuitized MSA, but was not required to pay for the annual payments of the MSA. Let’s take a deeper dive into the case to understand why.

As a background of the case, Mr. Holmes was an employee of defendant Solon Automated Services. Mr. Holmes sustained a compensable injury on May 16, 1990 for which he received workers’ compensation benefits. On August 26, 2010, Mr. Holmes and defendants (Solon Automated Services, employer and Specialty Risk Services, carrier) engaged in a voluntary mediation, and they “entered into an agreement to settle” Mr. Holmes’ claim. This “agreement was memorialized in an Industrial Commission Form MSC8 Mediated Settlement Agreement (“Agreement”) which was signed by all parties.”

In the Agreement, in consideration of the payments to be made by defendants, Mr. Holmes “waived the right to any further benefits under the Act” arising from his May 16, 1990 injury. Defendants agreed to pay the following: a. $250,000.00; b. Mediator’s fees; c. All authorized medical expenses to the date of the mediation; d. Funding of an MSA in the amount of $186,032.51, with ‘$19,582.37 seed money for the Medicare Set Aside for the benefit of Washington Holmes’ and payments of ‘9,247.23 annually beginning on September 15, 2011, payable 18 years only if Washington Holmes is living.'”

The defendants were to purchase an annuity to make the annual payments. The Agreement provided that “[t]he Employee understands and agrees that the monies in the Medicare Set-Aside Account will be used for the sole purpose of paying future medical expenses related to his injury which would otherwise be paid for by Medicare.'”

After the mediation, counsel for the parties began drafting a settlement agreement, but Mr. Holmes died unexpectedly of pneumonia on October 24, 2010, before the settlement agreement was completed.  Plaintiff, Mr. Holmes’ widow, was substituted as plaintiff in the action. When the defendants refused to fund any portion of the MSA, the Plaintiff requested that the Commission enforce the provisions of the Mediated Settlement Agreement which would require the defendants to fund the MSA account into Mr. Holmes’ estate. The Commission ruled in favor of the defendants, finding that an implied condition of the mediated settlement agreement was that Mr. Holmes be alive for the defendants to be required to fund the MSA. The Plaintiff appealed the Commission’s decision to the North Carolina Court of Appeals. The appellate court took a different method of analysis to determine the outcome of the case than the Commission did. Whereas the Commission looked to the intent behind of the MSA and found that the purpose was “frustrated” since the claimant had passed away, the appellate court looked more to the strict contractual language of the mediated settlement agreement rather than the intent behind the MSA.

The mediated settlement agreement stated, “$9,247.23 annually beginning on September 15, 2011, payable 18 years only if Washington Holmes is living[.]” As Mr. Holmes did not survive a single year, the appellate court concluded that Mr. Holmes had failed to meet an explicit condition precedent in the contract, survival.

However, as for the seed money, the mediated settlement agreement did provide for a guaranteed benefit in a specific sum, $19,582.37. Additionally, it did not have any specific language requiring Mr. Holmes to survive. The appellate court noted that this may have simply been “inartful wording of the Agreement,” but the parties agreed that the seed money would be for Mr. Holmes’ benefit, and that a benefit to Mr. Holmes’ estate is still a benefit to him. As a result, the appellate court required the defendants to pay the seed money of the MSA but not the annual payments portion of the annuitized MSA.

While the Commission’s logic that the purpose behind establishing the MSA had now been defeated due to Mr. Holmes’death was a correct analysis, the appellate court’s logic in taking strict construction of the settlement agreement is justified from a purely legal perspective. Unfortunately at times, analysis of the strict construction of a contract defeats logic.

The industry should be sure to take note of this case and take adequate precautions when drafting settlement agreements to ensure that the parties’ intent is clear. Payers would be wise to ensure that a condition precedent to paying any portion of the MSA would be the claimant’s survival prior to the payer having to pay for the MSA, and that would include both the seed money and annual payments if the MSA is annuitized.

CMS to Host a MMSEA Section 111 Teleconference on December 17th

CMS has announced that they will be hosting a MMSEA Section 111 teleconference for NGHPs on December 17, 2013 from 1:00-2:00 EST. The notice states the following:

The CMS will be hosting a NGHP Policy and Technical Support related teleconference event. For this call the format will be opening remarks and a presentation by CMS, followed by a question and answer session with the audience.

This call will introduce the Benefits Coordination & Recovery Center (BCRC). Following this introduction, the call will address both policy and technical questions regarding Section 111 reporting. CMS staff and representatives of both the BCRC and the COBC EDI Department will be available throughout the call.

Date: December 17, 2013

Call-in time: 1:00 PM – 2:00 PM Eastern time. Participation is by telephone only. Call-in line: (800) 837-1935

Pass Code: Section 111

Please begin dialing in approximately 20 minutes before the call start time, due to the large number of participants.