S111 CMP Audits Start January 2026

By Mark Popolizio, J.D., Jeremy Farquhar

December 18, 2025 / 8 min read

Starting January 2026, CMS will start Section 111 randomized quarterly audits regarding non-group health plan (NGHP) Section 111 reporting. CMS will use this process to determine whether an NGHP Responsible Reporting Entity (RRE) may be subject to Section 111 civil money penalties (CMPs). In the big picture, CMS’s audit process is the last step in its overall CMPs implementation process. With this final piece in place, RREs may begin to receive CMPs notices starting in January.

S111 Penalty Audits Begin in January

Summary

As a brief refresher, NGHP RREs can be penalized, in general, when they fail to report their TPOC and ORM reports within 1 year as more fully defined and discussed in the endnote to this sentence.^[1]An RRE’s failure to timely report TPOC and ORM can result in a penalty of up to $1,474, per day, per claim, which is the current inflation adjusted daily maximum CMPs amount as reflected in the Federal Code of Regulations.^[2]

In October 2025, CMS’s Section 111 CMPs took a big step forward to becoming reality. Specifically, as of October 11, 2025, late TPOC and ORM reports, as defined under CMS’s regulations, are now in scope for potential CMPs assessment.

Against this backdrop, the final step in CMS’s lengthy CMPs implementation process happens starting January 2026 – this is when, as noted above, CMS begins its quarterly randomized Section 111 audits, and when RREs may start to receive actual CMPs notices. Thus, as we head into the new year, RREs will now face, for the first time since Section 111 reporting began over a decade ago, the potential of actual Section 111 monetary fines.

As January quickly approaches, the authors outline how CMS’s audit process will work, and provide an overview of CMS’s notice/appeal process (which will come into play if CMS starts the CMPs process against an RRE), as follows:

CMS’s Audit Process

CMS will randomly review 250 records per quarter – divided proportionally between NGHP and GHP reports

Starting January 2026, CMS will conduct its CMPs audits on a quarterly basis. Originally, CMS planned to start its audit process in April 2026, but CMS subsequently pushed up this date to January 2026 as outlined in its NGHP Civil Money Penalties webpage released in October 2024.^[3]

As part of the audit process, each quarter CMS will randomly select 250 records for review “across the entire universe of accepted new Section 111 records received during the specific review period, as well as records Medicare received from non-Section 111 sources such as providers or beneficiaries.”^[4]The records selected for review will be proportionate to the volume of coverage records accepted in connection with the both GHP and NGHP reporting processes for the quarter in question.^[5]

To help illustrate the above, CMS provides the following example in its final rule: “If over the calendar quarter being evaluated, CMS received 600,000 GHP records and 400,000 NGHP records for a total of 1,000,000 recently added beneficiary records, then 60 percent of the 250 records audited for that quarter would be GHP records, and 40 percent would be NGHP records.”^[6]

What remains unknown is exactly how CMS will “randomly select” the records for review via their quarterly process.^[7]However, CMS did offer a notable point of clarification in response to a question during the agency’s October 17, 2024, CMPs webinar. Specifically, an attendee asked CMS “if an audited record is found to be non-compliant, does that trigger an expanded audit on that RRE?”^[8] CMS responded that it would not and that “only the individual records that are randomly selected for the quarterly audit will be reviewed for compliance by CMS.”^[9]

CMS’s audits will also include “non-Section 111” records

As reflected above, CMS will include both Section 111 and non-Section 111 records as part of its audit process. Regarding “non-section 111 records,” CMS defines these “as a TPOC and/or ORM record that has been reported via other coordination of benefits and data collection methods.”^[10]In addition, CMS notes that “[f]or the purposes of CMS’s audit, any non-Section 111 records captured are those that were reported the same quarter CMS is reviewing, but from the prior year, since RREs are required to report within 1 year (365 days) of the latter of either the Settlement Date reported in ‘Field 80’ or the Funding Delayed Beyond TPOC Date reported in ‘Field 82’ AND the MSP Effective Date and ORM are selected as ‘Y.’”^[11]

CMS will notify the RRE only if its audit identifies potential non-compliance

CMS notes that an RRE will be notified only when one of its records has been identified as potentially non-compliant.^[12] On this point, CMS’s CMPs webpage states, in pertinent part: “CMS will audit the sampled records to identify potential instances of non-compliance. Records reviewed and identified as ‘compliant’ will not trigger any notification to the RRE. An RRE will only receive CMS correspondence if one of its records has been identified as potentially noncompliant.”^[13]

Notice & Appeal

CMS will give RREs advance notice of potential CMPs (RREs can submit mitigating evidence)

If CMS identifies a potentially non-compliant record as part of the audit process, it will first give the RRE advance notice (“informal notice”) of potential CMPs.^[14] The RRE will then have 30 days to submit mitigating evidence.^[15]Per CMS, when it issues an informal notice, “[a] CMP is not being assessed at this point [but] rather, the RRE’s noncompliant record is identified along with the associated information so that an RRE may investigate the record.”^[16]CMS notes that it will send this notice to the RRE’s Authorized Representative, with a copy to the Account Manager.^[17]CMS in its January 18, 2024 webinar stated that its “informal” notice will be sent via e-mail, while it will send its “formal” CMPs notices via certified mail (see next section below).

Regarding mitigating evidence, CMS explains that this “is the opportunity for RREs to explain why a CMP should not be imposed” and that RREs will be allowed to “submit mitigating information, in an attempt to explain or defend technical or administrative issues resulting in the noncompliance.”^[18] Of note, RREs will have only one opportunity to submit mitigating evidence and this information must be submitted to CMS “within 30 days of receipt of the Informal Notice,” with CMS noting that time extensions will not be granted.^[19]

CMS will give RREs “formal notice” before levying penalties (RREs can appeal)

After providing informal notice, CMS will then provide the RRE with “formal” notice (a “Notice of Proposed Determination”) if (a) CMS has not received a response to its informal notice or (b) the RRE has not provided CMS with sufficient mitigating evidence.^[20]This notice will be sent via Certified Mail and will provide the RRE with the CMP amount, along with information on how the RRE can file an appeal.^[21]In general, under the CMPs appeals process, the RRE can request a hearing, have the dispute heard before an Administrative Law Judge, as well as the Departmental Appeals Board, and ultimately seek judicial review as outlined more fully in the endnote to this sentence.^[22]

CMPs Payment

CMS will send a “Notice of Final Determination” for CMPs payment

As part of the notice and appeal process, CMS will issue a “Notice of Final Determination” which is the agency’s notice to the RRE that its CMPs imposition is final.^[23]CMS notes that it will issue a Notice of Final Determination when the RRE fails to request a hearing, elects to terminate the appeals process, or otherwise exhausts all available administrative appeal rights and the CMP is upheld.^[24]CMS notes that “[t]his letter (notice), [will be sent] sent via Certified Mail … [and] confirms that the imposition of the RRE’s CMP is final.”^[25]Further, this notice will provide payment instructions, including how the RRE should remit payment and its due date.^[26]

Reminder: CMS’s NGHP Section 111 CMPs Webinar – 1/15/26 at 1:00 p.m. ET

As an important reminder, CMS is holding an NGHP CMPs webinar on January 15, 2026, at 1:00 p.m. ET. Per CMS’s notice, topics will include reminders about the CMS’s CMPs Final Rule and auditing process, anticipated correspondence, and a question-and-answer session. Thus, it will be interesting to see what information CMS plans to discuss regarding its upcoming audit process as part of this upcoming webinar, as well as other topics the agency decides to discuss. See or instructions on how to attend this CMS webinar event. Per usual, Verisk policy team members will attend this webinar, and we will release a webinar summary shortly following this event.

Compliance Considerations

As noted above, the start of CMPs audits in January is significant as RREs can now finally be subject to actual CMPs fines, a decade plus after CMS’s reporting requirements went live. As such, RREs, if they have not already done so, should assess their Section 111 CMPs readiness to make sure claims and reporting processes are in place to mitigate against potential CMPs. In the big picture, the scope of CMS’s audit process (250 records per quarter) is smaller than many RREs likely envisioned. However, from the authors’ view, this should not lull RREs into complacency, as if an RREs “number is called,” the RRE can face very real and significant monetary consequences.

How Verisk Can Help

For additional information regarding the above topics, as well as CMS’s Section 111 CMPs in general, please see the authors recently released Section 111 FAQs. In addition, see our Medicare Compliance and Reporting Solutions page to learn more about how Verisk’s state-of-the-art Section 111 MSP Navigator tool can help you improve your Section 111 reporting practices and how we can assist in helping you build holistic MSP compliance solutions.

Questions?

Please do not hesitate to contact the authors if you have any questions regarding Section 111 CMPs, or how Verisk services can help you stay compliant with Section 111 reporting.

[1] Very generally, under CMS’s final rule, CMS may impose CMPs if an RRE, “[f]ails to report any beneficiary record within 1 year from the date of the settlement, judgment, award, or other payment [TPOC], or the effective date where ongoing payment responsibility for medical care [ORM] has been assumed by the entity.” See, Fed. Reg. Vol. 88, No. 195, at 70372 (October 11, 2023) and 42 CFR § 402.1(22)(i). CMS notes that Section 111 “records are required to be submitted in a timely manner” and that “[c]ompliance with reporting obligations is defined by the rule as the successful submission and acceptance of the report of NGHP coverage, acceptance of ORM, or TPOC.” CMS’s NGHP Civil Money Penalties Webpage, Section: Non-Compliance. Per CMS’s CMPs webpage, “a ‘record’ is defined as any individual occurrence of a TPOC or ORM for a Medicare beneficiary that must be submitted via the Section 111 reporting process” and CMS states that “if a particular case has both an ORM and a TPOC component, this will constitute two records. CMS’s NGHP Civil Money Penalties Webpage, Section: Non-Compliance.

In terms of measuring timelines regarding TPOC reports, CMS will compare the date CMS received the RRE’s successful file submission with the TPOC Date or, if the Funding Delayed Beyond TPOC Start Date is also submitted, the Funding Delayed Beyond TPOC Start Date will be utilized to calculate timeliness as opposed to the TPOC Date. Regarding ORM, CMS will compare the date CMS received the RRE’s successful file submission with the date ORM was assumed by the RRE and, if the Date of Incident is found to be more than one year prior to the date of the initial successful report, the RRE would be considered non-compliant and potentially subject to a penalty. Fed. Reg. Vol. 88, No. 195, at 70372 (October 11, 2023) and CMS’s NGHP Section 111 CMPs Webinar (January 18, 2024). For additional information regarding how CMS measures timeliness, see the author’s recently released Section 111 FAQ (FAQs #1-3).

CMS has stated that it will apply its CMPs regulations prospectively. CMS’s Section 111 NGHP CMPs webinar (January 18, 2024) and CMS’s NGHP Civil Money Penalties Webpage, introductory paragraphs. Specifically, CMS has stated that only coverage record submissions with coverage effective dates [ORM] or TPOC dates of October 11, 2024, or later, are in scope for penalties and, as such, the agency will not seek to assess penalties for submissions where the coverage effective dates [ORM] or TPOC dates occurred prior to October 11, 2024. CMS’s Section 111 NGHP CMPs webinar (January 18, 2024) and CMS’s NGHP Section 111 CMPs Webinar (October 17, 2024).

While CMS notes that its CMPs regulations are prospective, the agency has reminded RREs that they still have a statutory requirement to make sure their reporting on older claims records is accurate and RREs could still face other potential recourses, including potential False Claims Act suits or administrative recovery. CMS states: “A note of caution: While CMPs will be issued on a prospective basis for new coverage records, accurate reporting overall is still statutorily required, in addition to being an important tool the Medicare program uses to ensure proper payment of claims. RREs who fail to meet their full reporting obligations may face other recovery actions including, but not limited to, False Claims Act suits or administrative recovery efforts.” CMS’s NGHP Civil Money Penalties Webpage, Section: Non-Compliance. See also, CMS’s NGHP Section 111 CMPs Webinar (October 17 2024).

[2] See, Annual Civil Monetary Penalties Inflation Adjustment, 89 Fed. Reg. 64815 (August 8, 2024)(amending 45 C.F.R. § 102.3). Of note, CMS will apply Section 111 CMPs using a “tiered” approach. 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).

Applying the inflation adjusted maximum daily CMPs amount of $1,474, the current CMPs rates are 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 current total maximum penalty amount for any single instance of noncompliance is $538,010, applying the adjusted inflation rate contained in the Federal Register (August 8, 2024).

[3] CMS’s NGHP Civil Money Penalties Webpage, Section: Review of Records to Identify Non-Compliance.

[4] CMS’s NGHP Civil Money Penalties Webpage, Section: Review of Records to Identify Non-Compliance. CMS also noted this information in its final rule stating: “CMS has determined that, given the time and resources necessary to accurately and thoroughly evaluate the accuracy of any submitted record, it would be possible to audit a total of 1,000 records per calendar year across all RRE submissions, divided evenly among each calendar quarter (250 individual beneficiary records per quarter).” Medicare Secondary Payer and Certain Civil Money Penalties, 88 Fed. Reg. 70363, 70369-70370 (October 11, 2023). See also, CMS’s NGHP Section 111 CMPs Webinar (October 17, 2024).

Regarding CMS’s reference that it will also include “records Medicare received from non-Section 111 sources such as providers or beneficiaries,” CMS first referred to the inclusion of records “outside” of the Section 111 reporting process in its FAQ document (November 2, 2023). On this point, as part of CMS’s FAQ resource, CMS states: “CMS will audit a random sample of 250 records that were added on a quarterly basis from across all reported records for a total of 1,000 records to be reviewed annually. This sample will reflect a proportionate number of GHP and NGHP records and may shift each quarter as GHP and NGHP record volumes vary. When a sampled record is from a source other than Section 111 reporting, CMS will identify and review the associated Section 111 record for compliance. If the Section 111 record has not been successfully reported at the time of review, noncompliance will be determined based on the information supplied in the other record (e.g., the date of settlement).” CMS’s FAQ (November 2, 2023) (Authors’ emphasis). See also, CMS’s NGHP Section 111 CMPs Webinar (October 17, 2024).

[5] CMS’s NGHP Civil Money Penalties Webpage, Section: Review of Records to Identify Non-Compliance. CMS also notes this information in its final rule stating: “CMS will evaluate a proportionate number of GHP and NGHP records based on the pro-rata count of recently added records for both types of coverage over the calendar quarter under evaluation. For example, if over the calendar quarter being evaluated, CMS received 600,000 GHP records and 400,000 NGHP records for a total of 1,000,000 recently added beneficiary records, then 60 percent of the 250 records audited for that quarter would be GHP records, and 40 percent would be NGHP records.” Medicare Secondary Payer and Certain Civil Money Penalties, 88 Fed. Reg. 70363, 70370 (October 11, 2023).

[6] Medicare Secondary Payer and Certain Civil Money Penalties, 88 Fed. Reg. 70363, 70370 (October 11, 2023).

[7] CMS’s NGHP Civil Money Penalties Webpage, Section: Review of Records to Identify Non-Compliance.

[8] CMS’s NGHP Section 111 CMPs Webinar (October 17, 2024).

[9] CMS’s NGHP Section 111 CMPs Webinar (October 17, 2024).

[10] CMS’s NGHP Civil Money Penalties Webpage, Section: Review of Records to Identify Non-Compliance.

[11] CMS’s NGHP Civil Money Penalties Webpage, Section: Review of Records to Identify Non-Compliance.

[12] CMS’s NGHP Civil Money Penalties Webpage, Section: Review of Records to Identify Non-Compliance.

[13] CMS’s NGHP Civil Money Penalties Webpage, Section: Review of Records to Identify Non-Compliance.

[14] CMS’s NGHP Civil Money Penalties Webpage, Section: Review of Records to Identify Non-Compliance.

[15] CMS’s NGHP Civil Money Penalties Webpage, Section: Review of Records to Identify Non-Compliance.

[16] Id.

[17] CMS’s NGHP Civil Money Penalties Webpage, Section: Letters. On this point, as part of its January 18, 2024 webinar, CMS advised that it would send its informal written pre-notice of a potential CMP via e-mail to the RRE’s Authorized Representative with a “cc” copy sent to the RRE’s Account Manager. However, at that time, CMS did not mention to whom it would send the formal notice, although, as speculated by the authors in their prior articles, it would seem logical that this notice would also go to the RRE’s Authorized Representatives, with a copy to the Account Manager, using the physical addresses maintained in the RRE's Section 111 profile report. The information now posted by CMS on its webpage as noted above now confirms that “[t]he RRE’s Authorized Representative will receive all CMP correspondence, with a copy issued to the Account Manager.” CMS’s NGHP Civil Money Penalties Webpage.

[18] CMS’s NGHP Civil Money Penalties Webpage, Section: Informal Notice- Intention to Impose a Civil Money Penalty.

[19] CMS’s NGHP Civil Money Penalties Webpage, Section: Decision Regarding Mitigating Evidence Submission.

[20] CMS’s NGHP Civil Money Penalties Webpage, Section: Notice of Proposed Determination to Impose a Civil Money Penalty.

[21] Id.

[22] As part of its CMPs webpage, CMS describes the formal appeal process as follows: “RREs are afforded the right to request a hearing as set forth under 42 CFR § 405 and in accordance with 42 CFR Part 1005 and must do so within 60 calendar days of receipt of the Notice of Proposed Determination. The process to request a hearing with an Administrative Law Judge (ALJ) is outlined in this letter and must be completed within the required timeframes, must be filed electronically with the Departmental Appeals Board (DAB), Civil Remedies Division, using the DAB E-File System available at https://dab.efile.hhs.gov, and must be completed within the required timeframes. The RRE may appeal the ALJ’s initial decision to the DAB’s Appellate Division (the “Board”) within 30 calendar days of the ALJ decision. Appeals to the Board must also be submitted through DAB E-File. The Board’s decision becomes binding 60 calendar days following service of the Board’s decision, absent petition for judicial review. The RRE will be precluded from appealing a final determination to impose a CMP, pursuant to 42 CFR § 402.9(c), if the hearing is not requested within the required timeframe.” CMS’s NGHP Civil Money Penalties Webpage, Section: Notice of Proposed Determination to Impose a Civil Money Penalty.

[23] CMS’s NGHP Civil Money Penalties Webpage, Section: Notice of Final Determination to Impose a Civil Money Penalty.

[24] CMS’s NGHP Civil Money Penalties Webpage, Section: Notice of Final Determination to Impose a Civil Money Penalty.

[25] Id.

[26] Id.