Key changes to Michigan PIP start July 1, 2020 – Medicare Secondary Payer compliance impact

June 16, 2020 / 9 min read

Last year on May 30, 2019, Michigan Governor Gretchen Whitmer signed into law Senate Bill 1 (S.B.1)[1] which makes certain, and significant, changes to Michigan’s personal injury protection (PIP) system for applicable policies issued or renewed after July 1, 2020, including, in part, allowing policy limit PIP plans and a PIP opt-out feature for Medicare beneficiaries. Lowering Michigan’s high PIP premium costs was one objective behind S.B. 1.[2] While this new law addresses many different aspects of Michigan PIP, this article highlights the changes made to PIP coverage relative to their potential impact on Medicare Secondary Payer (MSP) obligations as follows:

New Michigan PIP coverage and opt-out features

Michigan has long been unique nationally in allowing for unlimited PIP benefits. Under the new law, however, while individuals will still be able to elect unlimited PIP coverage, for applicable policies issued or renewed after July 1, 2020, PIP plans with different coverage limits may also now be purchased. In general, subject to certain qualifications and criteria, individuals will be able to purchase PIP plans with policy limits of $500,000.00, $250,000.00, or $50,000.00.[3]

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Also, the new law allows certain individuals to opt-out of PIP coverage altogether. For example, S.B. 1 provides, in part, that individuals may “elect not to maintain coverage for personal protection insurance benefits” if they have “qualified health coverage” which is defined, in part, as “[o]ther health or accident coverage” that “does not exclude or limit coverage for injuries related to motor vehicle accidents”[4] Likewise, individuals with “[c]overage under parts A and B of the federal Medicare program” may also opt-out out of PIP.[5]

PIP Medicare opt-out provision – potential challenges?

The PIP Medicare opt-out option may raise Medicare secondary payer (MSP) considerations given the MSP statute’s overall objective of ensuring Medicare’s secondary payer status concerning injury claims. On this point, it is noted that 42 C.F.R. § 411.32(a)(1) provides that “Medicare benefits are secondary to benefits payable by a primary payer even if State law or the primary payer states that its benefits are secondary to Medicare benefits or otherwise limits its payments to Medicare beneficiaries.” Thus, it will be interesting to see if this part of the new law will eventually be challenged as improperly making Medicare the primary payer, either by CMS, a third-party action against an insurer that accepts a Medicare opt-out as part of the policy procurement process, or other interested parties.

Section 111 reporting – ORM impact

From the Section 111 angle, up until this point with unlimited PIP, Michigan PIP Responsible Reporting Entities (RREs) have grown accustomed to having open-ended assumption of ongoing responsibility (ORM) per CMS’s ORM reporting rules. This has often resulted in ORM remaining open on these claims, even when the claimant’s treatment has tailed off, or the claim is considered inactive.[6]

With S.B. 1 now allowing insurers to issue Michigan PIP policies with coverage limits, Michigan PIP RREs should note that under CMS’s Section 111 guidelines ORM termination is permitted when “the insurer’s responsibility for ORM has been terminated per the terms of the pertinent insurance contract, such as maximum coverage benefits.”[7] Accordingly, this section would allow Michigan PIP RREs to terminate ORM upon policy exhaustion regarding those PIP policies with coverage limits.[8] Properly terminating ORM in these instances will be important not only for proper Section 111 compliance but also in terms of proper coordination of benefits for the claimant and to prevent Medicare conditional payments from accruing beyond the period in which the PIP carrier is no longer responsible. On this latter point, it is important to note that under one of CMS’s current Section 111 penalty proposals, RREs may be subject to penalties in situations where the RRE’s response to CMS recovery efforts contradicts the RRE’s Section 111 reporting.[9] Further, this proposal would seemingly place a premium on ensuring proper ICD code reporting as part of the Section 111 process. It is unknown whether CMS’s final regulations will incorporate this proposal in its form “as is” or whether it will somehow be modified. Notwithstanding, PIP RREs should keep this proposal closely in mind. Thus, for these reasons, going forward, it is critical that Michigan PIP RREs are aware of the type of policy at issue to properly monitor if, and when, ORM termination becomes applicable.

Conditional payments – limiting Medicare’s recovery

In terms of Medicare conditional payment recovery, unlimited PIP benefits have effectively created a situation where the Michigan PIP insurer can face unlimited conditional payment exposure, notwithstanding available defenses (i.e., causal relationship, etc.). This reality has grown even more prevalent over the past five years as CMS has ramped up recovery efforts against no-fault insurers in ORM situations[10].

This situation, however, will now change in those instances where there is a PIP policy with coverage limits at play. In these situations, CMS’s recovery under the MSP is limited to the available policy limits (See, e.g., 42 C.F.R. § 411.24 (c)(1)(ii)). By way of example, in a situation involving a $50,000 PIP policy, Medicare would only have a right of recovery up to $50,000 (the total amount of available benefits for that policy). As with Section 111, going forward, it is essential Michigan PIP insurers recognize Medicare’s limited recovery rights in situations where there are PIP coverage policy limits as this could prove important in disputing conditional payments.

Questions?

Please feel free to contact the author at mpopolizio@verisk.com or 786-459-9117 for any questions, or to learn how ISO Claims Partners can help you meet your MSP compliance obligations.

[1] S.B. 1 is titled as “Insurance; no-fault; coverage and benefits; make miscellaneous changes.”

[2] On this note, it was reported in one source that Michigan has the highest average auto insurance premiums in the nation. Specifically, in the article Has Michigan Fixed Its Broken Auto Insurance System? Ray Lehman, Insurance Journal (May 28, 2019), the author noted Michigan’s average premium cost stood at $2,611 a year, reportedly more than double the averages in neighboring states like Indiana ($1,181), $1,175 in Ohio ($1,175) and Wisconsin ($951). Id.

[3] M.C.L.A. § 500.3107c.

[4] M.C.L.A. § 500.3107d(7)(b)(i).

[5] M.C.L.A. § 500.3107d(7)(b)(ii). Based on the literal text of this section, this Medicare opt-out would only be available to beneficiaries enrolled in Traditional Medicare (comprised of Medicare Parts A and B), and is inapplicable to those beneficiaries enrolled in Medicare Part C (Medicare Advantage).

[6] While a complete examination of CMS’s ORM assumption and termination rules is outside the scope of this article, in general, under CMS’s Section 111 directives, ORM exists so long as it is “subject to reopening or otherwise subject to a further request for payment.” If this is the case, then CMS advises that ORM should remain open, even though the insurer may view the claim as inactive or administratively closed. This can result in ORM records remaining “open” indefinitely in situations where a claimant remains eligible for benefits either statutorily (i.e., workers’ compensation) or when there is unlimited PIP coverage, even if the claimant’s treatment has curtailed. Recognizing this possibility, for these situations CMS created the “Special Exception” which allows RREs to terminate ORM “if they have a signed statement from the injured individual’s treating physician that he or she will require no further medical items or services associated with the claim/claimed injuries, regardless of the fact that the claim may be subject to reopening or otherwise subject to a claim for further payment.” See e.g., CMS’s Section 111 NGHP User Guide (Version 5.8, January 31, 2020), Chapter IV, sec. 6.7.1 and Chapter III, sec. 6.3.2.

[7] See, e.g., CMS’s Section 111 NGHP User Guide (Version 5.8, January 31, 2020), Chapter III, sec. 6.3.2.

[8] While the Section 111 NGHP User Guide sec. 6.3.2 allows ORM termination in situations where “the insurer’s responsibility for ORM has been terminated per the terms of the pertinent insurance contract, such as maximum coverage benefits,” it is important to keep in mind CMS’s recent Alert released by the agency as a “reminder” to RREs regarding the reporting of PIP and Med-Pay policy limits on NGHP claim input files in situations where separate Med-Pay and PIP coverages are being paid out under a single policy for the same injured party and incident. In this instance, CMS states that both the Med-Pay and PIP coverage should be included when reporting the No-Fault Insurance Limit (Field 61 of the Claim Input File). As such, in this instance, CMS states that the NGHP RRE “must combine both the Med-Pay and PIP coverage limits for a policy when they are separate coverages being paid out on claims for the same injured party under a single policy.” Further, CMS indicates that ORM should not terminate until both the Med-Pay and PIP coverage limits are exhausted. See, CMS’s Alert: Reporting No-Fault Insurance Limit on Non-Group Health Plan (NGHP) Claim Input Files (June 8, 2020) and CMS’s NGHP Section 111 User Guide, Version 5.8 (January 31, 2020), Chapter III: Policy Guidance, Section 6.5 – Additional Requirements (p. 6-20). To learn more, see our recent article.

[9] See, 85 Fed. Reg. No. 32, p. 8793-8804 (February 18, 2020), Medicare Program: Medicare Secondary Payer and Certain Civil Money Penalties. This specific proposal is proposed to be added to 42 C.F.R. 402.1(22)(ii) which states, in part, that a civil money penalty (CMP) could be imposed against a non-group health plan RRE when the RRE “[c]ontradicts its reporting under [Section 111] in response to CMS recovery efforts.”

CMS provides additional information regarding this proposal as follows:

If … [a] NGHP’s response to CMS recovery efforts contradicts the entity’s section 111 of MMSEA reporting. For example, if an RRE reported and repeatedly affirmed ongoing primary payment responsibility for a given beneficiary, then responded to recovery efforts with the assertion that coverage for that beneficiary actually terminated 2 years prior to the issuance of the recovery demand letter. The penalty would be calculated based on the number of calendar days that the entity failed to appropriately report updates to beneficiary records, as required for accurate and timely reporting under section 111 of MMSE … For an NGHP, the penalty would be up to $1,000 (as adjusted annually under 45 CFR part (102) per calendar day of noncompliance for each individual, for a maximum annual penalty of $365,000 (as adjusted annually under 45 CFR part 102) for each individual for which the required information should have been submitted. 85 Fed. Reg. No. 32 at 8798.

To learn more about CMS’s current Section 111 penalty proposals, click here.

[10] In October 2015, CMS added the Commercial Repayment Contractor (CRC) as a contractor to assist it with conditional payment recovery. For more information on the CRC and its role, see, The Medicare Secondary Payer Commercial Repayment Center in Fiscal Year 2017, Report to Congress as Required by Section 1893(h) of the Social Security Act for FY 2017, (March 2018). Page one of this report provides background related to CMS’ CRC recovery process, as well as its specific relation to non-group health plans (such as no-fault carriers). Also, see CMS’ website: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Non-Group-Health-Plan-Recovery/Non-Group-Health-Plan-Recovery.html