CMS pushes back the timeline to release its Section 111 penalties

February 22, 2023 / 19 min read

In a major Section 111 development, the Centers for Medicare and Medicaid Services (CMS) has extended the timeline to release its Section 111 civil money penalties (CMP) “final rule” until February 18, 2024. As outlined more fully below, CMS notes, in main part, that it needs additional time to further assess the potential economic impact of the final rule. Of note, CMS states that this time extension in not a solicitation for further comment on CMS’s actual CMP proposals.

CMS’s notice is posted in the Federal Register at 88 Fed. Reg. No. 35, 10868 (February 22, 2023). This notice states, in part: “As of February 22, 2023, the timeline for publication of the final rule to finalize the provisions of the proposed rule published on February 18, 2020 (85 FR 8793) is extended until February 18, 2024.”^[1]

Summary

Over the past several weeks, a key question that had increasingly surfaced was whether CMS would release its Section 111 CMPs final rule by February 18^th -- the three-year anniversary date from when CMS released its CMPs proposals. On this point, the Office of Information and Regulatory Affairs (OIRA) issued a notice back in August 2020 indicating that CMS’s final rule was targeted for release within the standard three-year timeframe under the rulemaking process (which would have been by February 18, 2023).^[2]

CMS’s new release now answers this question with the agency pushing back the targeted release of the final rule until February 18, 2024. In support of this one-year time extension, CMS notes, in part, that it was unable to meet the initial targeted three-year release deadline (February 18, 2023) “due to delays related to the need for additional, time-consuming data analysis resulting from public inquiry” regarding the economic impact of the final rule.^[3] CMS further comments that additional time is necessary as it is “preparing additional data analysis and predictive modeling to better understand the economic impact of the proposed rule across different insurer types” and that “[t]his data analysis is designed to review the actual current reporting and model potential penalties that would be imposed were the final rule in place.”^[4]

In the bigger picture, CMS’s new announcement gives Section 111 RREs a better idea as to where CMS stands regarding the CMPs final rule – and provides additional time for RREs to assess how their current practices measure up against CMS’s penalty proposals. Of note, while CMS has extended the timeline to release the final rule until February 18, 2024, it is possible that the rule could be released prior to that date if the agency completes its additional data analysis earlier. Going forward, it will also be interesting to see how, if at all, CMS’s additional evaluation modifies its prior economic impact analysis (outlined below) and/or affects the agency’s ultimate efforts to implement the Section 111 CMP final rule.

For those interested in additional information related to CMS’s time extension, the author provides the following overview:

CMS’s prior CMPs economic impact assessment

As noted, CMS cites the need to conduct additional analysis into the potential economic impact of its Section 111 CMPs final rule as the main basis for its one-year time extension. Given this focus, it may be helpful to refresh ourselves with CMS’s prior assessment of economic impact to give us a measuring point to evaluate whatever additional information CMS may release in the future.

In this regard, as part of CMS’s Section 111 CMPs proposals released in February 2020,^[5]CMS issued a required “regulatory impact statement” through which the agency provided its economic impact assessment of its proposed CMPs.^[6]While a detailed analysis into the various regulatory requirements is beyond this article’s scope, in general, it is noted that a detailed regulatory impact analysis must be prepared for “major rules” with “economically significant” effects defined, in part, as rules ”[having] an annual effect on the economy of $100 million or more, or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.”^[7] In addition, major rules require, in part, the issuing agency “to provide an explanation of the need for the regulatory action and an assessment of potential costs and benefits.”^[8]

As part of CMS’s economic impact analysis as contained in its initial CMPs proposals in February 2020, the agency commented that “[e]stimating the economic [effects] of this rule presents a significant challenge under current circumstances.”^[9]After taking various factors into consideration, CMS ultimately concluded that its proposal was not a major rule stating: “At this point in time, we do not expect to collect CMPs totaling $100 million or more in any given year, nor do we expect this rule to have any other economic effects that meet or exceed that threshold. Therefore, this rule is not considered a major rule [under the Congressional Review Act].”^[10]

In addition, at that time CMS concluded that its CMPs proposals would not have a significant economic impact on a substantial number of “small entities” as defined under the Regulatory Flexibility Act.^[11]CMS also concluded that its CMPs proposal would have “no consequential effect on state, local, or tribal governments or on the private sector” since its estimated economic impact would not meet the $154 million threshold figure under the Unfunded Mandates Reform Act of 1995.^[12]Likewise, CMS concluded that its proposal “does not impose any costs on State or local governments” within the meaning of Executive Order 13132.^[13]

Further, as part of its prior analysis, CMS stated that: “We note that we are currently implementing monitoring systems that will allow us to better model future reporting violations and CMP imposition. Therefore, when we are ready to develop the final rule we expect to have available a significantly increased array of relevant data. As a result, we commit to providing a detailed analysis of the costs and benefits of this rule at that time.”^[14]

CMS extends the final rule release date – needs more time to assess economic impact

Against this backdrop, CMS has now decided to extend the timeline to publish the final rule for one-year (until February 18, 2024) to conduct additional analysis into the economic impact of the final rule. As part of this notice, CMS first outlined several bases regarding its ability to extend the timeline under applicable rulemaking provisions. This part of CMS’s notice, which is not the focus of this article, can be viewed in the endnote to this sentence.^[15]

Regarding economic impact, CMS outlined the following reasons in support of its need for additional time before it can publish the final rule:

We are not able to meet the initial targeted 3-year timeline for publication due to delays related to the need for additional, time-consuming data analysis resulting from public inquiry. It was not possible to conclude this data analysis on the initial, targeted timeline for the proposed rule because public listening sessions raised additional concerns that CMS believed were important to properly and thoroughly research prior to publishing the final rule. We have decided that it is critical to conduct additional analysis about the economic impact of the rule. We are preparing additional data analysis and predictive modeling to better understand the economic impact of the proposed rule across different insurer types. This data analysis is designed to review the actual current reporting and model potential penalties that would be imposed were the final rule in place. Along with delays resulting from the agency's focus on the COVID 19 public health emergency, we determined that additional time is needed to address the complex policy and operational issues that were raised. We are extending the publication deadline so as to provide the most accurate, complete, and robust data possible to confirm the intent and economic impact of the final rule. This document extends the timeline for publication of the final rule for one year until February 18, 2024.^[16]

Outside of what is stated above, CMS’s notice does not provide any further information regarding any particular focus or interest areas subject to further evaluation. Going forward, as noted above, it will be interesting to see how, if at all, CMS’s additional assessment modifies its prior economic impact analysis (outlined above) and/or affects the agency’s ultimate efforts to implement the Section 111 CMP final rule. In the interim, Section 111 RREs have a reprieve (at least for now) from the Section 111 penalties going live. RREs may wish to use this time to evaluate how their current reporting practices measure up against CMS’s CMPs proposals.

Questions?

Verisk will continue to monitor events and provide updates as warranted. In the meantime, please do not hesitate to contact the author if you have any questions.

Check out our Section 111 CMPs level-set “FAQ” article

For a more in-depth overview of Section 111 CMPs, see our article Section 111 penalties level-set: FAQs, updates, and what’s next

How can Verisk help?

As mentioned above, RREs may wish to use this additional time to evaluate their current Section 111 reporting programs. Verisk can help you here! We offer our very popular Section 111 audit/review service which can help you gauge the status of your current program and how you may be able to improve your Section 111 reporting practices. In addition, our innovative and user-friendly MSP Navigator reporting tool provides state of the art reporting capabilities for virtually error-free reporting. Please contact the author if you would like to learn more about these services.

[1] 88 Fed. Reg. No. 35, 10868 (February 22, 2023).

[2] In this regard, OIRA’s notice referenced, in part, that in keeping with certain Medicare rulemaking provisions, “[w]e schedule all Medicare final regulations for publication within the 3-year standardized time limit in the current Unified Agenda. We do not intend to delay publishing a Medicare final regulation for 3 years if we are able to publish it sooner.”

[3] 88 Fed. Reg. No. 35, 10868 (February 22, 2023).

[4] 88 Fed. Reg. No. 35, 10868 (February 22, 2023).

[5] Of note, CMS’s Section 111 CMPs proposals related to both Non-Group Health Plans (NGHPs) and Group Health Plans (GHPs). This article focuses on CMS’s Section 111 CMPs proposals only from the perspective of NGHPs. In general, CMS is proposing to penalize NGHP RREs in the following three situations: (i) the RRE fails to report any NGHP beneficiary record within the required timeframe (not more than one year after TPOC); (ii) the RRE’s response to CMS recovery efforts contradicts the RRE’s Section 111 reporting; and/or (iii) the RRE has reported and exceeds any error tolerance(s) threshold (currently proposed at 20%) established by CMS in any four out of eight consecutive reporting periods. 85 Fed. Reg., No. 32, 8797-8799, (Feb. 18, 2020). CMS indicates that the CMPs will be “prospective” in nature stating that “[w]e … would evaluate compliance based only upon files submitted by the RRE on or after the effective date of any final rule.” 85 Fed. Reg., No. 32, 8796.

In addition, CMS is proposing a Section 111 compliance safe harbor in situations where the NGHP RRE is unable to report because it is unable to obtain the necessary data elements to determine a claimant’s Medicare beneficiary status despite a “good faith” effort to do so as follows:

If an NGHP RRE fails to report required information because it was unable to obtain information necessary for reporting from the reportable individual, including his/her last name, first name, date of birth, gender, MBI, or SSN (or the last 5 digits of the SSN), and the NGHP RRE has made and maintained records of its good faith effort to obtain this information by taking all the following steps:

(i)The NGHP RRE 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:

(ii)The NGHP RRE 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); and

(iii)The NGHP RRE 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. 85 Fed. Reg., No. 32 at 8880 (Feb. 18, 2020).

CMS states further that “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.” Id.

[5]Responsible Reporting Entities (RREs) are the parties who are obligated to report under Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (P.L. 110-173). While Section 111 applies to both group health plans (GHP) and non-group health plans (NGHP) (i.e., workers’ compensation, liability, self-insurance, and no-fault insurance), references to Section 111 in this article relate to Section 111 reporting in the NGHP context as codified at 42 § U.S.C. 1395y(b)(8). In general, RREs are insurers and self-insurers but could involve other entities such as self-insurance pools or assigned claims funds depending on the facts. (See generally, CMS’s Section 111 NGHP User Guide, Chapter III (Version 6.9, October 3, 2022), Chapter 6. Expanding on this concept further, 42 U.S.C. § 1395y(b)(8) provides that the “applicable plan” is the RRE and defines the term “applicable plan” to include liability insurance (including self-insurance), no-fault insurance, and workers’ compensation laws or plans.) However, claimants and their lawyers are not RREs and do not have reporting responsibilities under Section 111. Id

[6] CMS referenced the following authority on this point: Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96– 354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104–4), Executive Order 13132 on Federalism (August 4, 1999), the Congressional Review Act (CRA) (5 U.S.C. 804(2)), and Executive Order 13771 on Reducing Regulation and Controlling Regulatory Costs (January 30, 2017). See, 85 Fed. Reg., No. 32 at 8880 (Feb. 18, 2020).

[7] 85 Fed. Reg., No. 32 at 8880 (Feb. 18, 2020). In addition, the following description s contained as part of Reginfo.gov under the “FAQs/Resources” tab: https://www.reginfo.gov/public/jsp/Utilities/faq.myjsp

Q. What does it mean when a regulatory action is determined to be "significant?"

A. Under Executive Order 12866, OIRA is responsible for determining which agency regulatory actions are "significant" and, in turn, subject to interagency review. Significant regulatory actions are defined in the Executive Order as those that:

Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;

Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive order.

The Executive Order requires that significant regulatory actions be reviewed by OIRA before they are published in the Federal Register or otherwise issued to the public. The Executive Order also requires agencies to provide an explanation of the need for the regulatory action and an assessment of potential costs and benefits. OIRA generally designates between 500-700 regulatory actions as significant each year

[8] Id.

[9] 85 Fed. Reg., No. 32 at 8880 (Feb. 18, 2020).

[10] 85 Fed. Reg., No. 32 at 8880 (Feb. 18, 2020). On this point, CMS stated more fully as follows:

Estimating the economic effects of this rule presents a significant challenge under current circumstances. At this point in time, the reporting program has not yet reached a level of maturity where we have definitively identified any additional RREs that have failed to register and report as required. We have purposely selected an error tolerance threshold (20 percent) that is achievable for all current RREs based on recent performance, and thus would not impose any CMPs based on current performance. However, we do not yet have eight consecutive reporting periods of data, and, as such, we are not able to currently model the potential imposition of CMPs on this basis at this time. We also do not have the systems in place at this time to monitor when entities contradict their reported data in response to CMS MSP recovery efforts. At this point in time, we do not expect to collect CMPs totaling $100 million or more in any given year, nor do we expect this rule to have any other economic effects that meet or exceed that threshold. Therefore, this rule is not considered a major rule under the CRA. We note that we are currently implementing monitoring systems that will allow us to better model future reporting violations and CMP imposition. Therefore, when we are ready to develop the final rule we expect to have available a significantly increased array of relevant data. As a result, we commit to providing a detailed analysis of the costs and benefits of this rule at that time. We also invite feedback from the public that would assist us in determining the quantifiable costs and benefits of this proposed rule. 85 Fed. Reg., No. 32 at 8880 (Feb. 18, 2020).

[11] 85 Fed. Reg., No. 32 at 8801 (Feb. 18, 2020). In this regard, CMS stated as follows:

The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of $7.0 million to $35.5 million in any 1 year. Individuals and States are not included in the definition of a small entity. We consider a rule to have a significant impact on a substantial number of small entities if it has at least a 3-percent impact of revenue on at least 5 percent of small entities. Affected entities with reporting responsibilities have been required to comply with sections 1862(b)(7) and (b)(8) of the Act since these provisions were added to the Act in 2007. This proposed rule is intended to define how CMPs would be compliance with these statutory obligations, and thus does not present any additional burden beyond the review of the rule. As discussed later in this section, the total cost impact of reviewing this rule by all 20,855 currently registered RREs, regardless of size, is estimated to be $6,842,437, or $328 per entity. This falls below the standard definition of ‘‘significance’’ of 3 or more of small entity revenue. As a result, we have determined, and the Secretary certifies, that this proposed rule would not have a significant economic impact on a substantial number of small entities.

[12] 85 Fed. Reg., No. 32 at 8801 (Feb. 18, 2020). On this point, CMS states: “Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2019, that threshold is approximately $154 million. This proposed rule has no consequential effect on state, local, or tribal governments or on the private sector.” Id.

[13] 85 Fed. Reg., No. 32 at 8801 (Feb. 18, 2020). CMS stated: “Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has federalism implications. Since this regulation does not impose any costs on State or local governments, the requirements of Executive Order 13132 are not applicable.” Id.

[14] 85 Fed. Reg., No. 32 at 8880 (Feb. 18, 2020).

[15] On this point, CMS states as follows:

This document announces an extension of the timeline for publication of the final rule. Section 1871(a)(3)(A) of the Act requires us to establish and publish a regular timeline for the publication of final regulations based on the previous publication of a proposed regulation. Section 1871(a)(3)(B) of the Act allows the regular timeline for publishing Medicare final regulations to vary based on the complexity of the regulation, number and scope of comments received, and other related factors. The initial targeted timeline for a rule cannot exceed 3 years from the date of publishing the proposed regulation, absent exceptional circumstances. For the February 18, 2020 proposed rule, the timeline established by the Secretary provided a targeted publication date of February 18, 2023. The Secretary may extend the initial targeted publication date of the final regulation if the Secretary provides public notice, including a brief explanation of the justification for the variation, no later than the regulation’s previously established proposed publication date. Consistent with the aforementioned statutory provision, we are providing a brief explanation of the agency’s circumstances that have led us to vary the timeline for publishing the final rule. These are exceptional circumstances, although the Act does not require exceptional circumstances for such extensions. (For more detailed information, see footnote number 24 in the February 1, 2023 Federal Register document (88 FR 6648)). 88 Fed. Reg. No. 35, 10868 (February 22, 2023).

[16] 88 Fed. Reg. No. 35, 10868 (February 22, 2023).