United States: New Medicare Secondary Payer Reporting Obligations For Workers´ Compensation Plans

Beginning July 1, 2009, many employers and insurance companies will be required to report claims for workers' compensation claimants that are also Medicare beneficiaries to the Centers for Medicare and Medicaid Services (CMS) and become subject to a $1,000 per day per claimant penalty for failure to comply with this mandatory reporting requirement.

At a time where Medicare is massively under-funded, a new reporting requirement set to take effect on July 1, 2009, will significantly increase Medicare's ability to identify situations in which Medicare is paying for medical expenses that should be borne by so-called "primary payers," including workers' compensation plans.1 By statute, Medicare is a "secondary payer" with respect to medical expenses associated with workplace injuries. As such, if Medicare pays medical expenses on behalf of a Medicare beneficiary who is injured in a work-related accident, Medicare is entitled to reimbursement from the responsible party or insurance carrier for that expenditure. When Medicare makes such payments, the payments are considered to be conditionally paid expenses subject to recovery.

In order to both reduce the amount of medical expenses paid on behalf of Medicare beneficiaries who are properly payable by an employer or insurance carrier and to more completely recapture conditionally paid expenses via the statutory subrogation claim process, Congress amended the Medicare laws to impose a mandatory reporting obligation on workers' compensation plans. The amendments leave the procedure for pursuing subrogation claims unchanged.

Coordination of Benefits (COB) Process

The Coordination of Benefits (COB) process is administered by the Coordination of Benefits Contractor (COBC). The COBC is a division of the Centers for Medicare and Medicaid Services (CMS), which is an agency housed within the Cabinet for Health and Human Services (HHS). The COB process exists to identify any available insurance or self-insurance fund with respect to a Medicare beneficiary that may be responsible for paying for medical expenses before Medicare becomes involved. In short, the COBC is tasked with identifying and stacking as much available insurance coverage as possible between the Medicare beneficiary and the Treasury. The purpose of the new reporting requirements is to aid CMS in improving the COB process.

To illustrate, assume that a Medicare beneficiary is involved in an automobile accident in her own vehicle, caused by an underinsured third party who also happened to be operating a defectively repaired car and the accident occurred during the course and scope of employment. In that instance, Medicare could be called upon to pay medical expenses on behalf of the injured worker without or before becoming aware of the circumstances of the accident. In this example, many potential primary payers are involved, such as the employer, if self-insured for workers' compensation purposes, or its workers' compensation and general liability insurance carriers, the employee's auto insurance carrier, the other driver's auto insurance carrier and the vehicle repair facility's general liability carrier. The new reporting requirements are designed to identify as many of these primary payers as possible in order to relieve Medicare's burden as a secondary payer of the injured individual's medical benefits.

Medicare, Medicaid, and SCHIP Extension Act of 2007

When Congress enacted the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), it set a timetable that requires workers' compensation plan compliance beginning July 1, 2009. The new reporting obligations, contained in section 111(8)(a) of the Medicare Secondary Payer Statute (MSP)2 are as follows.

(A) This section requires that an applicable plan (i.e. workers' compensation carrier or self-insured employer) to determine whether a claimant (including an individual whose claim is unresolved) is entitled to benefits under the program under this subchapter on any basis and if the claimant is determined to be so entitled, submit the information described in subparagraph (B) with respect to the claimant to the Secretary in a form and manner (including frequency) specified by the Secretary.

(B) The information described in this subparagraph is the identity of the claimant for which the determination under subparagraph (A) was made and such other information as the Secretary shall specify in order to enable the Secretary to make an appropriate determination concerning coordination of benefits, including any applicable recovery claim.

The statute itself simply delegates to HHS the responsibility for developing the reporting requirements, with respect to timing, contents and form. The most striking feature of the amendment is the rather punitive penalty provision.

(E) An applicable plan that fails to comply with the requirements under subparagraph (A) with respect to any claimant shall be subject to a civil money penalty of $1,000 for each day of noncompliance with respect to each claimant. . . . A civil money penalty under this clause shall be in addition to any other penalties prescribed by law and in addition to any Medicare secondary payer claim under this subchapter with respect to an individual.

The cost of failing to report one Medicare beneficiary according to this statute is approximately $365,000 on an annualized basis. Failure to report just three Medicare beneficiaries for an entire calendar year has a price tag of more than $1,000,000. As drafted, the fines are imposed on a strict liability basis and do not presently require any willfulness in the failure to report as a basis for imposition of the same.

Moreover, it seems that the fine amount is incredibly disproportionate to the per claim cost of medical expenses. As employers and insurers well know, it is not unusual for accidents resulting in soft-tissue injuries, for example, to linger as open cases accruing only modest medical expenses without any indemnity (i.e. wage loss) claim for permanent injury. It is inevitable that there will be many cases in which Medicare is never called upon to pay any medical expenses, but a company will nonetheless be subjected to huge fines for failing to report a Medicare beneficiary. In such cases, the disproportionate nature of the fine is all the more pronounced. For employers that are self-insured for workers' compensation purposes, beginning July 1, 2009, this will become a significant source of organizational financial risk. The punitive nature of these fines for noncompliance demonstrates rather convincingly that Congress is highly motivated to bring down the cost of administering Medicare benefits.

Who is a Responsible Reporting Entity or "RRE"?

Self-insured employers, insurance carriers and other entities meeting the definition of Responsible Reporting Entity ("RRE") are required to submit, on a quarterly basis, information of work-related injury claims involving Medicare beneficiaries. Only RRE's are required to comply with the new reporting requirements, and CMS has issued some guidance on how to determine whether an entity is an RRE.3

Insured Employer

According to CMS, where the applicable workers' compensation law or plan authorizes an employer to purchase insurance from an insurance carrier and the employer does so, the insurance carrier is the RRE.

Self-Insured Employer

Where the applicable law or plan authorizes an employer to self-insure and the employer does so independently of other employers, the self-insuring employer is the RRE.

Deductible Employer

Where an entity is self-insured for a high deductible, but payment is ultimately made through the insurer, then the insurer is the RRE for reporting purposes.

Third-Party Administrators

Third-Party Administrators (TPA) are never an RRE for reporting purposes.

TPA – Deductible Combination

An interesting scenario arises where an employer carrying a high deductible uses a TPA to administer and pay claims. In such a situation, instead of the insurance carrier, a TPA not subject to RRE reporting may be administering the claims. Based upon current guidance, in this instance, the employer is the RRE for reporting purposes. This result may catch many employers off guard and may prove to be a trap for employers who unknowingly fail to comply with the new rules.

Self-Insurance Trusts or Pools

According to CMS, where the applicable law or plan authorizes employers to join with other employers in self-insurance pools (e.g., joint powers authorities) and the self-insurance pool is a separate legal entity with full responsibility to resolve and pay claims using pool funds without involvement of the participating employer, the self-insurance pool is the RRE. Moreover, where the applicable law or plan authorizes employers to join with other employers in self-insurance pools but any of the above delineated requirements are not satisfied, the participating employer is the RRE.

State Agency/Funds

Where the applicable law or plan establishes a state/federal agency with sole responsibility to resolve and pay claims, the established agency is the RRE. Where the applicable law or plan authorizes employers to self-insure or to purchase insurance from an insurance carrier and also establishes a state/federal agency to assume responsibility for situations where the employer fails to obtain insurance or to properly self-insure, if the state/federal agency itself resolves and pays the claims using state/federal funds or funds obtained from others for this purpose, the established agency is the RRE. In the event that the established state/federal agency designates an authorized insurance carrier to resolve and pay the claim using state/federal-provided funds without state/federal agency review and/or approval, then the designated carrier is the RRE. Finally, if such state/federal agency designates an authorized insurance carrier to resolve and pay the claim using state/federal-provided funds but state/federal agency retains review or approval authority, the state/federal agency is the RRE.

Use of Agents

According to CMS, RRE's are permitted to use agents for the reporting process. However, it is clear that the ultimate responsibility for section 111 mandatory reporting remains always with the RRE. Agents do not register with COBC and cannot be designated as Authorized Representatives of the RRE. Additionally, COBC does not communicate with the agent, but rather with the RRE regarding Medicare recovery.

What Claims Must be Reported?

RRE's must report all claims that involve a Medicare beneficiary where, on or after July 1, 2009, there is a settlement, judgment, award or other payment that constitutes payment or reimbursement for medical costs. By implication, not every workplace injury involving a Medicare beneficiary needs to be reported. Indeed there are many reportable workplace accidents that involve very minor injuries that do not require medical treatment beyond first aid and, therefore, do not result in the payment of medical benefits. Furthermore, all claims involving ongoing responsibility for medicals (ORM) where that responsibility will extend beyond July 1, 2009, must be reported without regard to the date that obligation was assumed. However, recognizing that RRE's will need additional time to compile data relative to such claims, CMS has provided an extension of time to report ORM situations until the third quarter (July to October), of calendar year 2010. Moreover, RRE's are required to submit a subsequent report indicating ORM termination.

Registration and Testing

From May 1, 2009, through June 30, 2009, the RRE registration window will be open. RRE's must register before testing begins and the registration process involves the identification and assignment of certain responsibilities. First, the RRE must select an Authorized Representative with the legal authority to bind the organization to both contracts and the terms and conditions of MMSEA section 111 reporting requirements. This individual has the ultimate accountability on behalf of the RRE, and is required to be an RRE employee but cannot also act as an Authorized Representative. Second, the RRE must select and assign an Account Manager, separate from the Authorized Representative, whose responsibility it is to control the administrative process and manage the overall reporting process. This individual need not be an RRE employee, as the reporting process may be outsourced to an agent. Finally, the Account Manager may invite Account Designees to upload, monitor and transfer files.

Beginning July 1, 2009, and continuing through December 31, 2009, the testing phase will take place. All reporting will be accomplished electronically, and during this time RRE's will have the opportunity to test data collection, uploading and transmission as well as Query Input Files (discussed below). Production of live data is not required during the testing phase, and no penalties will be imposed for noncompliance.

Finally, beginning January 1, 2010, the first quarter of live reporting will commence. Thereafter, reporting will be completed on a quarterly basis. COBC will assign each RRE a seven day file submission timeframe for each quarter. It is recommended that the file submission be made on the first day of the submission window, as the timeliness of the submission will be measured based upon COBC batch processing. For example, a quarterly report submitted just minutes before the end of the seven-day window may not be processed before the window closes, resulting in an untimely report.

How Do You Know If an Injured Employee Is a Medicare Beneficiary?

As part of the new section 111 reporting process, CMS has included a component known as the Query Process whereby RRE's can assess whether or not a claimant is also a Medicare beneficiary. This process acts as an important tool for both the RRE and CMS, the latter seeking to avoid a situation where RRE's simply submit information for every claim in order to avoid any penalties. Query Input Files may be submitted as often as once per month per RRE ID once live production begins. By submitting such a file, which includes limited information about the claimant, COBC will determine whether the submitted information matches any records for a Medicare beneficiary. If so, then the RRE will report the required information for that claimant. If the response from COBC indicates the claimant is not a Medicare beneficiary, then no report is required regarding that individual. It remains to be seen whether or not the use of this tool will act as a safe harbor from any fines in the case of mistakes.

Practical Steps

The greatest risk faced by RRE's now, only one month from the opening of the registration window and just three months from testing, is failing to recognize that it is an RRE. The first and most important step every entity should take that has not otherwise confirmed its status as an RRE, is to make that assessment. This is particularly important for those employers carrying co-pays and deductibles administered through a TPA as well as for self-insured employers. These entities are particularly vulnerable to compliance failures. If the employer determines that it is not an RRE, it should immediately consult with its workers' compensation carrier, self-insurance trust or pool or appropriate state agency to confirm that such other entities understand their reporting obligations. In the case of any question or disagreement about which entity is the RRE, counsel should be sought immediately.

Second, once an entity identifies itself as an RRE, there is still time to develop a plan, prepare for registration and select an agent if the reporting requirement will be outsourced. Any agreement with an agent should have an enforceable and robust indemnity clause since the RRE maintains the ultimate responsibility for compliance. If the reporting is outsourced, the employer/RRE should develop a compliance program for oversight of the agent's practices. The potential liabilities are so significant that regular review of the reporting process must be planned.

Third, RRE's should develop clear procedures for checking whether a claimant is a Medicare beneficiary and for determining when the RRE must check for such status, such as when any medical expenses are paid or when there is a settlement that arguably could be, even in part, construed as payment for medical expenses.

Footnotes

1 Liability Insurance and no-fault insurance is also included.

2 42 U.S.C. §1395y.

3 User Guide, MMSEA Section 111 Medicare Secondary Payer mandatory Reporting – Liability Insurance (Including Self-Insurance), No-Fault Insurance, and Workers' Compensation; Version 1.0 (Mar. 16, 2009).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions