CMS’s Section 111 daily CMPs max rate for NGHP reporting is now $1,474

In a new Section 111 development, the maximum daily civil monetary penalties (CMPs) amount regarding non-group health plan (NGHP) Section 111 reporting was recently increased. The authors outline this new update, and related matters, as follows:

Summary

The daily maximum CMPs amount pertaining to Section 111 NGHP reporting has been increased from $1,428 to $1,474 ($46 increase) as part of wide-scale general annual CMPs inflation adjustments recently announced in the Federal Register (August 8, 2024).^[1]The now replaced $1,428 figure had been in place since October 2023.^[2]The newly adjusted maximum daily CMPs amount of $1,474 is effective August 8, 2024, and applies to penalties assessed on or after this date.^[3]This figure is referenced to as the "2024 maximum adjusted penalty."^[4] From the authors' research, CMS had not issued any information regarding this increase as of the time this article was released.

Background

Under the Medicare Secondary Payer (MSP) statute, Section 111 NGHP RREs are subject to CMPs, in pertinent part, "of up to $1,000 for each day of noncompliance with respect to each claimant." (42 U.S.C. § 1395y(b)(8)(E)(i)).^[5]This amount is subject to an annual inflation adjustment.^[6] At the time CMS's final rule was released in October 2023, the annually adjusted maximum daily CMPs amount was $1,428.^[7] This amount, as noted above, has now been increased from $1,428 to $1,474, effective August 8, 2024.^[8]

As a refresher, NGHP RREs are subject to CMPs for untimely TPOC and ORM reporting under CMS's CMPs final rule.^[9]In general, per 42 CFR § 402.1(22)(i), CMS may impose CMPs when the NGHP RRE "[f]ails to report any beneficiary record within 1 year from the date of the settlement, judgment, award, or other payment, or the effective date where on-going payment responsibility for medical care has been assumed by the entity" as more specifically defined in CMS's final rule. Id.

CMPs Amounts/Application

Final Rule

In general, CMS will apply CMPs against NGHP RREs using a "three-tiered" approach based on the length of time an NGHP RRE is late in successfully submitting a required TPOC and/or ORM report.^[10] In this regard, as part of its October 2023 final rule, CMS, applying the statutory "base" figure of "up to $1,000," calculated the "daily penalty" amount per each tier as follows: Under Tier 1, $250 (or 25% of the base max $1,000 figure) for each calendar day of non-compliance where the record is reported 1 year or more, but less than 2 years after, the required date.^[11] Under Tier 2, $500 (or 50% of the base max rate) for each calendar day of non-compliance where the record is reported 2 years or more, but less than 3 years after, the required reporting date.^[12] Finally, under Tier 3, $1,000 (100% of statutory base max rate) for each calendar day of non-compliance where the record is reported 3 years or more after the required reporting date. In addition, as part of the final rule, CMS noted that the total penalty for any one instance of noncompliance would be no greater than $365,000.^[13] Importantly, CMS alerts the public that each of these starter "base" amounts, as well as the total maximum penalty amount of $365,000 are subject to annual inflation adjustments under 45 CFR part 102.^[14]

CMS's January 18, 2024 Webinar

As part its January 2024 webinar, CMS announced recalculated CMPs amounts based on an inflation increase to the maximum daily CMPs rate to $1,428.^[15]Applying the same 25%, 50%, and 100% calculation methodology outlined in the final rule above, CMS updated the CMPs amounts as follows: Tier 1: $357 for each calendar day of non-compliance where the record is reported 1 year or more, but less than 2 years after, the required date.^[16]Tier 2: $714 for each calendar day of non-compliance where the record is reported 2 years or more, but less than 3 years after, the required reporting date.^[17]Tier 3: $1,428(max rate) for each calendar day of non-compliance where the record is reported 3 years or more after the required reporting date.^[18]

August 2024 - Inflation Increase

Against this backdrop, as noted above, the newly inflation adjusted maximum daily CMPs rate is $1,474 as announced in the Federal Register (August 8, 2024). To the authors' knowledge, CMS has not yet officially released recalculated CMPs amounts based on this new maximum rate. However, based on how CMS calculated CMPs in its final rule (and its January webinar), and assuming CMS follows the same calculation methodology per tier (e.g., 25%, 50%, 100%), the new CMPs rates can be calculated as follows: Tier 1: $368.50 for each calendar day of non-compliance where the record is reported 1 year or more, but less than 2 years after, the required date. Tier 2: $737 for each calendar day of non-compliance where the record is reported 2 years or more, but less than 3 years after, the required reporting date. Tier 3: $1,474(max rate) for each calendar day of non-compliance where the record is reported 3 years or more after the required reporting date. The total maximum penalty amount increases to $538, 010 applying the new inflation adjusted rate contained in the Federal Register (August 8, 2024). Again, assuming CMS maintains the calculation method it has been using as outlined, the above would be the new rates per the August inflation adjustment. We will continue to monitor any new information CMS may release related to the new inflation adjustment going forward.

CMPs final rule becomes applicable October 11, 2024

In the big picture, it is important to keep in mind that October 11, 2024 is the date that CMS's Section 111 CMPs final rule becomes "applicable" for NGHP Section 111 penalties.^[19] As part of its January webinar, CMS explained that this is the date the clock starts running in terms of CMS calculating the timeliness of Section 111 submissions for potential CMPs.^[20] In this regard, CMS has advised that only coverage record submissions with coverage effective dates [ORM dates] or TPOC dates of October 11, 2024 or later are in scope for penalties and, accordingly, the agency will not seek to assess penalties for submissions where the coverage effective dates.^[21]

While Section 111 submissions with ORM coverage effective dates or TPOC dates of October 11, 2024 or later are in scope for potential CMPs, CMS has stated that the earliest it may impose a CMP against an NGHP RRE is October 2025."^[22] Thus, it is possible that there may be another annual inflation adjustment to the CMPs rate by the time CMS actually starts to levy CMPs.

Going Forward

NGHP RREs may wish to note this updated maximum daily CMPs amount as part of their Section 111 compliance protocols. In the interim, we will continue to monitor any future releases from CMS related to this CMPs inflation adjustment. Also, as noted immediately above, keep in mind that it is possible that there may be another annual inflation adjustment to the CMPs rate by the time CMS actually starts to levy CMPs.

In the interim, please do not hesitate to contact the authors if you have any questions.

[1] Annual Civil Monetary Penalties Inflation Adjustment, 89 Fed. Reg. 64815 (August 8, 2024)(amending 45 C.F.R. § 102.3). As part of this update, the following is stated in the Federal Register: "The Department of Health and Human Services (HHS) is updating its regulations to reflect required annual inflation-related increases to the civil monetary penalty (CMP) amounts in its statutes and regulations, under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015." Annual Civil Monetary Penalties Inflation Adjustment, 89 Fed. Reg. 64815 (August 8, 2024)(amending 45 C.F.R. § 102.3).

[2] Annual Civil Monetary Penalties Inflation Adjustment, 88 Fed. Reg. 69531 (October 6, 2023) (amending 45 C.F.R. Part 102).

[3]Annual Civil Monetary Penalties Inflation Adjustment, 89 Fed. Reg. 64815 (August 8, 2024)(amending 45 C.F.R. § 102.3).

[4] Annual Civil Monetary Penalties Inflation Adjustment, 89 Fed. Reg. 64815, 64818 (August 8, 2024)(amending 45 C.F.R. § 102.3). It is noted that the previous maximum daily amount of $1,428 is referenced as the "2023 maximum adjusted penalty." See, Annual Civil Monetary Penalties Inflation Adjustment, 88 Fed. Reg. 69531, 69533 (October 6, 2023) (amending 45 C.F.R. Part 102).

[5] 42 U.S.C. § 1395y(b)(8)(E)(i) states, in pertinent part, as follows: "An applicable plan that fails to comply with the [Section 111 reporting] requirements … may be subject to a civil money penalty of up to $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." Id.

[6] See, 45 C.F.R. § 102.3. Further, as noted in n.1 above, the following is stated in the Federal Register: "The Department of Health and Human Services (HHS) is updating its regulations to reflect required annual inflation-related increases to the civil monetary penalty (CMP) amounts in its statutes and regulations, under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015." Annual Civil Monetary Penalties Inflation Adjustment, 89 Fed. Reg. 64815 (August 8, 2024)(amending 45 C.F.R. § 102.3).

[7] Annual Civil Monetary Penalties Inflation Adjustment, 88 Fed. Reg. 69531 (October 6, 2023) (amending 45 C.F.R. Part 102). On this point, the authors note that as part of CMS's final rule released on October 11, 2023, the agency actually referenced the maximum daily CMPs amount as $1,325 based on the agency's reference to a June 8, 2023 update contained in the Federal Register, cited by CMS as 87 Fed. Reg. 15101. See, Medicare Program; Medicare Secondary Payer and Certain Civil Money Penalties, 88 Fed. Reg. 70363, 70366, (October 11, 2023) (amending 42 C.F.R. Part 402 and 45 C.F.R. Part 102). However, of note, in reviewing CMS's cite to 87 Fed. Reg, 15101, the authors note that this reflects that the $1,325 adjustment was actually made on (and became effective) March 17, 2022. Further, from the authors' research, this amount was then amended to $1,428 on October 6, 2023 (approximately five days before CMS final rule release). See, Annual Civil Monetary Penalties Inflation Adjustment, 88 Fed. Reg. 69531 (October 6, 2023) (amending 45 C.F.R. Part 102). For reasons unknown, CMS did not include or reference this October adjustment in its final rule released on October 11, 2023, and instead referenced the maximum daily CMPs rate as $1,325 as noted above. In any event, CMS eventually referenced the $1,428 adjusted figure as noted in the Federal Register on October 6, 2023 as part of its release of a "corrected" final rule on November 27, 2023. See, Medicare Program; Medicare Secondary Payer and Certain Civil Money Penalties; Correction, 88 Fed. Reg. 82786 (November 27, 2023) Annual Civil Monetary Penalties Inflation Adjustment, 88 Fed. Reg. 69531 (October 6, 2023) (amending 45 C.F.R. Part 102). Further, as discussed later in this article, CMS ultimately used the $1,428 figure as part of its CMPs calculations announced by the agency as part of its January 18, 2024 webinar. It would now appear that CMS will need to update its calculations based on the newly released daily maximum CMPs rate.

[8] Annual Civil Monetary Penalties Inflation Adjustment, 89 Fed. Reg. 64815 (August 8, 2024) (amending 45 C.F.R. § 102.3).

[9] "TPOC" is the abbreviation for "total payment obligation to the claimant." Very generally, under CMS's TPOC reporting trigger, reporting is required upon claim resolution (or partial resolution) through a settlement, judgment, award, or other payment for cases in which the claimant is/was a Medicare beneficiary as of the TPOC date and where medicals were claimed and/or released, or the settlement, judgment, award, or other payment has the effect of releasing medicals. Under CMS's current thresholds, physical trauma based liability, no-fault and workers' compensation settlements greater than $750 are required to be reported under the Section 111 reporting process. The $750 threshold does not apply to settlements involving exposure, ingestion, or implantation cases. See generally, CMS's Section 111 NGHP User Guide (Version 7.6, July 1, 2024), Chapter III and IV, Section 6.4.4.

"ORM" is the abbreviation for "on-going responsibility for medicals." Very generally, CMS states that "the trigger for reporting ORM is the determination to assume ORM by the RRE, which is when the RRE learns, through normal due diligence, that the beneficiary has received (or is receiving) medical treatment related to the injury or illness sustained. Required reporting of ORM by the RRE does not necessarily require the RRE to have made payment for Medicare-covered items or services when the RRE assumed ORM, nor does a provider or supplier necessarily have to have submitted a claim for such items or services to the RRE for the RRE to assume ORM. The effective date for ORM is the DOI, regardless of when the beneficiary receives the first medical treatment or when ORM is reported." See generally, CMS's Section 111 NGHP User Guide (Version 7.6, July 1, 2024), Chapter III Section 6.3.

[10] See generally, Medicare Program; Medicare Secondary Payer and Certain Civil Money Penalties, 88 Fed. Reg. 70363, 70370, (October 11, 2023) (amending 42 C.F.R. Part 402 and 45 C.F.R. Part 102) and 42 C.F.R. § 402.105 (3)(i) and (ii).

[11] Id. at 70370.

[12] Id.

[13] Id.

[14] Id.

[15] See n. 7 above.

[16] CMS's January 18, 2024 CMPs webinar (see slide 13 of CMS's power point used during the webinar).

[17] CMS's January 18, 2024 CMPs webinar (see slide 13 of CMS's power point used during the webinar).

[18] CMS's January 18, 2024 CMPs webinar (see slide 13 of CMS's power point used during the webinar).

[19]Fed. Reg. Vol. 88, No. 195, 70363 (October 11, 2023).

[20] CMS's Section 111 CMPs webinar, January 18. 2024.

[21] Id.

[22] See CMS's Section 111 CMPs FAQ document (November 2, 2023), Medicare Secondary Payer and Certain Civil Money Penalties: Frequently Asked Questions CMS's FAQ on this point reads, in full, as follows: "Q. When will CMS issue the first penalties under this rule? A. The earliest a CMP may be imposed is October 2025. The 1-year period to report the required information before CMPs would potentially be imposed would begin on the latter of the rule effective date or the settlement or coverage effective dates which an RRE is required to report in accordance with sections 1862(b)(7) and (b)(8) of the Act. There will be no 'look back' period and all penalties will be prospective in nature." Id.

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