CMS Issues Proposed Rule for Mandatory Insurer Reporting Penalties

February 18, 2020

bullhorn illustration alerting you to avoid reporting penalties

On February 18, 2020, the Centers for Medicare and Medicaid Services (CMS) issued a proposed regulation which would specify how and when CMS will calculate and impose what are called civil money penalties (CMPs) when group health plan (GHP) and non-group health plan (NGHP) responsible reporting entities (RREs) fail to meet their Section 111 Medicare Mandatory Insurer Reporting responsibilities.  NGHPs include workers’ compensation (including self-insurance) liability and no-fault insurers.


Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 added requirements for GHPs and NHGPs to report Medicare beneficiary enrollees and claimants to Medicare on a quarterly basis.  NGHPs are specifically required to report acceptance and termination of ongoing responsibility for medical (ORM), if any, and total payment obligation to the claimant (TPOC), a settlement, judgment award or other payment. 

The statute originally called for a mandatory penalty of $1,000 per day per claimant for noncompliance with reporting.  Subsequently, the SMART Act of 2012 made CMPs discretionary for NGHPs, modifying the language to indicate that penalties of up to $1,000 per day per claimant may be imposed. The SMART Act also required CMS to issue regulations prior to imposing CMPs.

CMS’s CMP Regulation Proposal

Situations where CMS may impose penalties:

  • when RREs fail to register and report as required by MSP reporting requirements;
  • when RREs report as required, but report in a manner that exceeds error tolerances established by the Secretary of the Department of Health and Human Services (the Secretary);
  • when RREs contradict the information, the RREs have reported when CMS attempts to recover its payments from these RREs.

CMS further states,

This proposed rule would also establish CMP amounts and circumstances under which CMPs would and would not be imposed.

Failure to report at all

Should it fail to perform the required Section 111 reporting at all within one year of the date a settlement or other payment obligation was established, an NGHP would be subject to a CMP of up to $1,000 for each day of noncompliance for each individual whose information should have been reported. A maximum penalty of $365,000 per individual per year applies. 

RREs responses to conditional payment contradict the information the RREs previously reported

Entities that have performed Section 111 reporting as required, but subsequently provide information that contradicts reported information in response to MSP recovery efforts, would be subject to a CMP based on the number of days that the entity failed to appropriately report updates to beneficiary records. For NGHP entities, the penalty would be up to $1,000 per day of noncompliance, for a maximum penalty of $365,000 (365 days) per individual.

Data reported by RRE in error

If a GHP or NGHP entity has reported, and exceeds any error tolerance(s) threshold established by the Secretary in any 4 out of 8 consecutive reporting periods we propose that the initial and maximum error tolerance threshold would be 20 percent (representing errors that prevent 20

percent or more of the beneficiary records from being processed), with any reduction in that tolerance to be published for notice and comment in advance of implementation. We intend for this tolerance to be applied as an absolute percentage of the records submitted in a given reporting cycle.

CMS goes on to note that it is not just any error, but significant errors, as defined in the Section 111 User Guide, which prevent a file from being accepted. Examples include failure to provide an individual’s last name or valid date of birth, or failure to provide a matching Tax Identification Number.

For NGHPs, penalties would be similar, but on a tiered approach with an initial $250 penalty per day of noncompliance for each individual; it increases each subsequent quarter of noncompliance by $250 per day to a maximum of $1,000 per day (it is standardized to 90 days for a total of up to $90,000 per individual per reporting period).  Penalties reduce by $250 per day for each subsequent quarter of compliance.

Safe harbors from reporting penalties

Penalties will not be imposed if any of the following are true:

  • An NGHP entity reports information within one year of the date of settlement;
  • A reporting entity’s submission complies with the reporting error thresholds; or
  • If an NGHP entity is unable to obtain required reporting information from Medicare beneficiaries document their good faith efforts to obtain the information.

In regard to documenting good faith efforts, all of the following are required:

  • The NGHP has communicated the need for this information to the individual and his or her attorney or other representative and requested the information from the individual and his or her attorney or other representative at least twice by mail and at least once by phone or other means of contact such as electronic mail in the absence of a response to the mailings.
  • The NGHP certifies that it has not received a response in writing, or has received a response in writing that the individual will not provide his or her MBI or SSN (or last 5 digits of his or her SSN).
  • The NGHP has documented its records to reflect its efforts to obtain the MBI or SSN (or the last 5 digits of the SSN) and the reason for the failure to collect this information.
  • The NGHP entity should maintain records of these good faith efforts (such as dates and types of communications with the individual) in order to be produced as mitigating evidence should CMS contemplate the imposition of a CMP. Such records must be maintained for a period of 5 years.

Penalties will be prospective

CMS advised that  it “would evaluate compliance based only upon files submitted by the RRE on or after the effective date of any final rule.”

Statute of limitations

CMS “will apply the 5-year statute of limitations as required by 28 U.S.C. 2462. Under 28 U.S.C. 2462, we may only impose a CMP within 5 years from the date when the noncompliance was identified by CMS.”

Informal notice

CMS advised that it expects to communicate with the RRE on an informal basis through a “pre-notice” process that would allow the RRE the opportunity to present mitigating evidence within 30 calendar days before the imposition of the CMP.

Appeals process

Per CMS:

In broad terms, parties subject to CMP would receive formal written notice at the time penalty is proposed.  The recipient would have the right to request a hearing with an Administrative Law Judge (ALJ) within 60 calendar days of receipt. Any party may appeal the initial decision of the ALJ to the Departmental Appeals Board (DAB) within 30 calendar days. The DAB’s decision becomes binding 60 calendar days following service of the DAB’s decision, absent petition for judicial review.

Comment period

CMS has provided for a 60-day comment period to the proposed regulations with comments due by April 20, 2020.  It is expected that following CMS’s review of the comments a final rule will be issued before the end of the year.

Practical Implications

These proposed regulations make it clear that NGHPs, which have a responsibility to report under the Section 111 Mandatory Insurer Reporting provisions, must do so promptly and accurately.  Failure to meet this obligation will result in significant penalties. 

Where RREs do report and later contradict the reported information in response to a recovery demand, the penalty seems much worse than the offense.  For example, thousands of dollars in penalties could be assessed for what amounts to a conditional payment demand of $2,000.  It was thought the SMART Act changes allowing for more discretion would reduce the $1,000-per-day-per-claimant penalty under these scenarios. However, this proposal leaves little room for forgiveness of the inevitable errors which occur with reporting large amounts of data

When it comes to the data that is actually reported, CMS does allow for some forgiveness.  Penalties will only be imposed for submitting data in error over a certain threshold, currently proposed at 20%, and over a certain time, namely 4 out of 8 reporting periods. 

Significantly, CMS states that it will apply the rule prospectively meaning that it will rely upon data reported post final implementation of the rule to determine whether CMPs will be issued.  In other words, CMS is giving RREs one last chance to register and report data if they have not previously done so and for those RREs who have been reporting, to ensure the accuracy of all past ORM and TPOC reporting.

Through client education and regular communication, Tower makes certain reporting is not only timely, but is also an accurate depiction of current status, both from the standpoint of accepted and denied ICD10 codes, as well as termination of ORM through the ORM Term Date when TPOCs are submitted.  With that being said, we can report only what we receive.  As such, it is critical that claims systems provide an accurate representation and communication of the current status of each claim. 

Tower will continue to consider the implications of the proposed rules and comments in response to these rules.  You are encouraged to submit your own comments to CMS or provide comments to Tower who will in turn provide to CMS.  Please contact Dan Anders at or (888) 331-4941 with comments or questions.