Group Health Plans and Medicare Secondary Payer Rules: Do the Mandatory Reporting Obligations Apply to You?   
Medicare Card & Stethoscope

Final Regulations regarding penalties on failure to provide required information are effective December 11, 2023.

The Medicare Secondary Payer provisions (MSP) apply to group health plans sponsored by employers with 20 or more employees, in both the private and public sectors. MSP’s mandatory reporting requirements are designed to determine whether Medicare or the employer-sponsored health plan should be the primary payer for a Medicare-eligible individual's healthcare expenses. Under MSP, “group health plans” include traditional employee health plans, dental and vision plans, and health reimbursement arrangements with annual benefits in excess of $5,000.

MSP’s mandatory reporting requirements direct responsible reporting entities (RRE) to submit a report to the Centers for Medicare & Medicaid Services (CMS) identifying any Medicare beneficiary who is covered by the group health plan. RREs include any entity serving as an insurer or third-party administrator for a group health plan. In the case of a group health plan that is self-insured and self-administered, a plan administrator or fiduciary (roles often held by the employer) is the RRE.

CMS issued final regulations on October 11, 2023 regarding civil money penalties under the MSP Rules (the “Final Regulations”) for an RRE’s failure to provide required information to CMS in a timely fashion.  The Final Regulations are effective on December 11, 2023.

Under the Final Regulations, RREs are required to submit the Medicare beneficiary coverage report to CMS within 365 days from the later of two possible dates: the effective date of an individual's coverage under the group health plan, or the  Medicare beneficiary's entitlement date. The entitlement date is typically around age 65, but it can be earlier if eligibility for Medicare coverage is available prior to age 65. The Medicare beneficiary for reporting purposes includes an active employee and the active employee’s spouse and dependents covered by the group health plan.

Failure to submit the required coverage information within the specified timeline incurs penalties. The daily penalty is $1,000, adjusted for inflation. The maximum penalty that may be imposed for noncompliance related to any one individual for whom required information should have been submitted is $365,000, adjusted for inflation. As of the date of this article, the adjusted daily penalty is $1,325 and the adjusted maximum penalty is $488,625.

Most group health plans have third party claim administrators or insurers assuming the RRE role for the plan. Employers acting as the plan administrators of their self-funded and self-administrated group health plans may not be aware of their RRE role under the MSP reporting obligation. Given the significant penalties that may arise, it is time to take notice and action.

If you have any questions about the application of the Medicare Secondary Payer rules to your business’s group health plans, please contact any member of our Employee Benefits practice group.

Posted in Health Care

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