Reminder: Section 111 Penalties Now Applicable
On October 11, 2024, the provisions of the Final Rule on Section 111 penalties became applicable. The Final Rule provides for potential penalties for reporting claims more than one year late. For TPOC reporting, the Final Rule applies to claims with a TPOC Date or a Funding Delayed Beyond TPOC Start Date on or after October 11, 2024. For ORM reporting, the Final Rule applies to claims with ORM assumption on or after October 11, 2024.
The Final Rule is prospective only. CMS has confirmed that penalties will not be imposed for late reporting of prior claims if the TPOC Date and Funding Delayed Beyond TPOC Start Date is prior to October 11, 2024, and if ORM assumption is prior to October 11, 2024.
Claims will be identified for a potential penalty through a limited audit process of 250 MSP records per quarter for all RREs. Beginning January 2026, CMS will audit 250 MSP records on a quarterly basis, selected randomly from all records that have been reported to CMS for all GHP and NGHP RREs. The 250 records audited are supposed to be divided proportionately between GHP and NGHP RREs based on the number of GHP and NGHP records reported to CMS for the previous quarter. Importantly, while the Final Rule references an audit of “RRE submissions,” CMS has confirmed that they will extend the audit process to include not just Section 111 records but also “records Medicare received from non-Section 111 sources such as providers or beneficiaries.”
All correspondence regarding Civil Monetary Penalties will be mailed to the RRE Authorized Representative with a copy sent to the Account Manager. RREs should be certain that the contact information on the CMS Profile Report is correct. CMS has confirmed that failure to the accuracy of contact information will not be accepted as a defense to the imposition of a penalty.
When CMS has identified a claim for assessment of a potential penalty, CMS will mail an initial notice providing the RRE 30 days to respond with mitigating evidence. CMS will review any mitigating evidence submitted within the 30 day period and decide whether to impose a penalty. If CMS decides to impose a penalty, they will mail a Notice of Proposed Determination, which RREs can appeal by requesting an Administrative Law Judge hearing within 60 days. RREs will have 30 days to appeal an unfavorable ALJ decision to the Departmental Appeals Board and 60 days to appeal an unfavorable Departmental Appeals Board decision to federal district court.
Penalties will be imposed in a tiered fashion, with penalties of $250 per day per beneficiary for claims reported more than 1 year late, penalties of $500 per day per beneficiary for claims reported more than 2 years late, and penalties of $1,000 per day per beneficiary imposed for claims reported more than 3 years late. Penalties are adjusted annually for inflation. For 2024, the $1,000 penalty adjusted for inflation is $1,428. The maximum penalty that may be imposed is $365,000 per beneficiary, subject to the annual inflation adjustment.
The Final Rule provides that an RRE will not be subject to a penalty if the RRE is unable to report a claim for a beneficiary because the RRE has been unable to obtain the individual’s last name, first name, date of birth, gender, Medicare Beneficiary Identifier (MBI), Social Security Number (SSN), or the last 5 digits of the SSN, and the RRE has made a good faith effort to obtain the information by meeting the following:
Has communicated the need for this information to the individual and his or her attorney, or other representative, if applicable, or both.
Has requested the information from the individual and his or her attorney, or other representative (if applicable), at least three times—
i. Once in writing (including electronic mail);
ii. Then at least once more by mail; and
iii. At least once more by phone or other means of contact in the absence of a response to the mailings.
Has not received a response or has received a written response clearly indicating that the individual refuses to provide the needed information. Should the applicable plan receive a written response from the individual or their attorney or representative that clearly and unambiguously declines or refuses to provide any portion of the information specified herein, no additional communications with the individual or their attorney or other representative are required.
Has documented its efforts to obtain the MBI or SSN (or the last 5 digits of the SSN). This documentation, including any written rejection correspondence, must be retained for a minimum of 5 years.
The Final Rule confirms that CMS will apply a five year statute of limitations as required by 28 U.S.C. 2462. The statute of limitations runs from the date the noncompliance occurred, with noncompliance occurring on every day that a claim is not reported after the one year time frame for reporting has passed.
The Final Rule is available at https://www.cms.gov/files/document/civil-money-penalties-final-rule.pdf. CMS has made additional information regarding the imposition of penalties available at https://www.cms.gov/medicare/coordination-benefits-recovery/mandatory-insurer-reporting-nghp/nghp-civil-money-penalties. Please do not hesitate to contact us with any questions regarding the imposition of penalties, Section 111 compliance, and best practices.
