CMS Preparing to Address Section 111 Reporting Penalties

By Mark Popolizio  |  December 17, 2018

The Office of Management and Budget (OMB) has issued a notice entitled Civil Money Penalties and Medicare Secondary Payer Reporting Requirements (CMS-6061-P) indicating that the Centers for Medicare and Medicaid Services (CMS) is planning to release proposed rules for public comment regarding Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Section 111) reporting civil money penalties (CMP) for non-group health plans. Based on this notice, CMS is apparently ready to take the next steps toward implementing formal criteria and practices for which CMPs would (and would not) apply relative to Section 111’s “$1,000 per day” penalty as required under the Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act).

The following provides an overview and level set of this issue:

Section 111 Penalties - Background  

The original Section 111 penalty provision stated that an applicable plan[1] “shall be subject to a civil money penalty of $1,000 for each day of noncompliance with respect to each claimant.”[2] This section did not contain any specific provisions outlining practices for which CMPs would (and would not) be imposed. [3]

As such, the original text raised concerns for applicable plans that the penalty could end up being applied in an ad hoc or unpredictable manner. The phrase “shall be subject” raised particular concerns that a strict interpretation of this provision could result in the penalty being automatically assessed, without consideration of legitimate defenses or disputes an applicable plan may have; or without regard to the plan’s inability to comply with Section 111 despite due diligence and good faith efforts.

SMART Act Revisions

In light of these concerns, steps were taken to modify the Section 111 penalty provision as part of the SMART Act reform bill which was signed into law by President Obama in January 2013.

Section 203 of the SMART Act modified the penalty provision by adding a discretionary element to the penalty’s application and amount. Specifically, Section 203 struck the “shall be subject” language and replaced it with the phrase “may be subject to a civil money penalty up to $1,000 for each day of noncompliance with respect to each claimant.”

In addition, Section 203 required CMS to solicit proposed regulations “for which sanctions will and will not be imposed…including not imposing sanctions for good faith efforts to identify a [Medicare] beneficiary” for Section 111 purposes “not later than 60 days after” the SMART Act’s enactment. From there, CMS was required to publish notice in the Federal Register proposed practices for which CMPs would be (and would not be) imposed, subject to public comment.

In December 2013, CMS released an Advance Notice of Proposed Rulemaking (CMS-ANPRM-6061) seeking public comment and input toward developing Section 111 penalties for both non-group health (NGHP) and group health (GHP) plans. This ANPRM did not contain any specific penalty proposals from CMS; rather, it simply sought industry comment around certain focus points. Interested parties had until February 10, 2014 to submit comments. CMS then took no further action after the comment period closed and all has been quiet on this front until the new OMB notice.

New OMB Notice

The newly released OMB notice states as follows:

Section 516 of the Medicare Access and CHIP Reauthorization Act of 2015 amended the Social Security Act (the Act) by repealing certain duplicative Medicare Secondary Payer reporting requirements. This rule would propose to remove obsolete Civil Money Penalty (CMP) regulations associated with this repeal. The rule would also propose to replace those obsolete regulations by soliciting public comment on proposed criteria and practices for which CMPs would and would not be imposed under the Act, as amended by Section 203 of the Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act).

This notice is the first signs that CMS is apparently ready to take the next steps regarding Section 111 penalties since the agency released its ANRPM back in 2013. 

What’s Next?

As noted, the OMB notice does not provide any information on the specific penalty proposals; rather it simply advises the public that CMS will be issuing proposed rules on Section 111 CMPs at some point in the future. Thus, the industry needs to be on alert for release of CMS’ formal proposals which will, according to the OMB notice, allow for public comment. It will be interesting indeed to assess the nature and extent of CMS’ proposals, including proposed criteria for establishing “good faith” safe harbor provisions.

ISO Claims Partners is closely monitoring this issue and will provide future updates as developments. In the interim, if you have any questions, please contact the author at mpopolizio@iso.com or 786.459.9117.


[1] Applicable plans include liability (including self-insurance), no-fault insurance, and workers’ compensation laws or plans. 42 U.S.C. 1395y (b)(8)(F).  As part of CMS’ implementation of Section 111, the agency refers to the party obligated to report as the Responsible Reporting Entity (RRE). Under Section 111, applicable plans are required to report certain claims and settlements involving Medicare beneficiaries to CMS in accordance with CMS’s Section 111 reporting directives.

[2] The Section 111 penalty provision for non-group health plans is codified at 42 U.S.C. 1395y (b)(8)(E).

[3] The Section 111 reporting requirements are codified at 42 U.S.C. § 1395y(b)(7) and (8). Subsection (7) concerns group health plans; while subsection (8) addresses reporting obligations for non-group health plans.  The OMB notice relates to non-group health plans.


Mark Popolizio

Mark Popolizio is the Vice President of MSP Compliance and Policy for ISO Claims Partners. Mark’s area of specialty is Medicare secondary payer compliance. He authors regular articles and provides educational presentations across the country on MSP issues. Mark's e-mail address is mpopolizio@iso.com.