CMS’s Section 111 penalty proposals – current status and FAQsBy Mark Popolizio, Kate Riordan | April 14, 2021
There remains much anticipation regarding the current state of the Centers for Medicare and Medicaid Services’ (CMS’s) Section 111 civil money penalties (CMP) proposals. What is the current status of CMS’s proposals? When is CMS proposing to penalize non-group health plan (NGHP) RREs? Will there be a compliance “safe harbor?” When will the final CMP regulations go live? These are just some of the questions circulating around the industry as we await CMS’s next move.
To help level-set these and other questions regarding CMS’s proposals, the author provides the following update in “question/answer” format which NGHP RREs may find helpful:
- When did CMS release its Section 111 CMP proposals?
CMS released its Section 111 CMP proposals in February 2020 as part of a notice for proposed rulemaking (NPRM) for non-group health plans (NGHP) and group health plans (GHP), as contained in 85 Fed. Reg. 8793, No. 32 (February 18, 2020). For purposes of this update, the proposed CMPs that are discussed only concern NGHP reporting.
- What gives CMS the authority to impose Section 111 CMPs?
CMS’s right to impose CMPs originates from 42 U.S.C. § 1395y(b)(8)(E)(i) which states 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. (Emphasis Added).
To effectuate this provision, CMS is tasked with "specifying practices for which sanctions will and will not be imposed under subparagraph (E), including not imposing sanctions for good faith efforts to identify a beneficiary pursuant to this paragraph under an applicable entity responsible for reporting information.” 42 U.S.C. § 1395y(b)(8)(I).
Accordingly, these provisions provide CMS the authority to formulate Section 111 CMPs and require the agency to establish a “good faith” compliance safe harbor in certain situations as more fully discussed below. Of note, Section 111’s “up to $1,000” penalty amount will be adjusted annually for inflation under 45 CFR part 102.
- Has CMS allowed public comment on its Section 111 CMP proposals?
Yes. CMS opened a public comment period to allow for feedback on its proposals which closed on April 20, 2020. Many NGHP RREs, Section 111 reporting agents, industry groups, and other interested parties submitted commentary responses to CMS’s proposals. CMS has published the comments it has received for public viewing. ISO CP submitted comments to CMS’s proposals which can be viewed here. It is expected CMS is reviewing the submitted comments as part of its continuing process toward developing its final Section 111 CMP regulations.
- Are CMS’s Section 111 CMPs proposals “final?” If not, when will the Section 111 CMP provisions go “live?”
CMS’s Section 111 CMP proposals have not been finalized and are not “live” at this time. CMS’s eventual final CMP provisions will be made part of 42 C.F.R. Part 402 (Civil Money Penalties, Assessments, and Exclusions) and 42 C.F.R. 102 (Adjustment of Civil Money Penalties for Inflation) which are existing regulations addressing civil money penalties.
Also, CMS has not provided any specific date regarding when its final CMP provisions will go live. On this point, in August 2020 the Office of Information and Regulatory Affairs (OIRA) released a notice indicating that CMS expects to complete and release its final rule within the standard three-year period for release, which in this instance would be sometime on or before February 2023. However, CMS notes that it does not intend on delaying the release of its final regulations for three years if it is able to publish it sooner.
Once the Final Rule is issued, it would likely not become effective for at least 30 days after being published in the Federal Register. It will be interesting to see if CMS will simply make its current CMP proposals the final penalty regulations, or whether it will modify its current proposals in any way.
- When is CMS proposing to penalize NGHP REEs?
As outlined in the Federal Register, CMS is proposing to penalize NGHP RREs in the following three situations:
- the RRE fails to report any NGHP beneficiary record within the required timeframe (not more than one year after TPOC);
- the RRE’s response to CMS recovery efforts contradicts the RRE’s Section 111 reporting; and/or
- 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.
See our prior article for a deeper analysis into each of the above CMP proposals.
- Will there be a CMP “good faith” compliance safe harbor in certain situations?
Yes. 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.
CMS outlines its proposed compliance safe harbor 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 of the following steps:
- 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.;
- 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
- 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.
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.”
- If I want to discuss CMS’s Section 111 CMPs or set up a webinar, what do I do?
Additional article resources
For additional information on Section 111 CMPs, see our prior article releases: CMS’s Section 111 penalty proposals are here; CMS’s Section 111 civil money penalties comment period closes; and OIRA releases updated information on Section 111 CMPs
How can ISO CP help?
As CMS’s final Section 111 CMP rules draw closer, now is the time to make sure your reporting practices are compliant to avoid potential CMP fines - -and we can help.
Our Section 111 Audit service can help you evaluate the current state of your reporting program. This service examines key points of Section 111 reporting to assess your current compliance practices, including: evaluating your query data processes; determining reportable events; obtaining required reporting data; submitting quarterly reports; and evaluating quarterly report responses.
MSP Navigator is our industry leading Section 111 reporting solution which provides its users with an easy-to-use interface, clear reports, targeted reminders, and numerous “smart prompts” to help address CMS’s Section 111 reporting directives. With over 5,000 RREs and 200 million claimants queried, 99.9 percent of claims processed through MSP Navigator contained ZERO errors. Our proven Section 111 solutions can help you get ahead of the curve and minimize potential Section 111 CMPs – contact us today!
 85 Fed. Reg., No. 32, 8797, (Feb. 18, 2020).
 See generally, 5 U.S.C. § 553(c) which requires governmental agencies to give “consideration of the relevant matter presented” as part of the rulemaking process.
 85 Fed. Reg., No. 32, 8793, (Feb. 18, 2020).
 On these points, the OIRA notice states, in part, as follows:
Overall Description of Deadline: Per the CMS notice published December 30, 2004 (69 FR 78442), except for certain Medicare payment regulations and certain other statutorily-mandated regulations, we 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.
 See generally, A Guide to the Rulemaking Process, see section entitled “When do final rules go into effect?“ This section further explains that sometimes an agency may attempt to make the Final Rule effective sooner but to do this it must cite “good cause” (persuasive reasons) as to why this would be in the public interest. In addition, this section notes that a 60-day effective date is required in situations where the proposed rules are considered either a “significant rule” as defined by Executive Order (EO) 12866 or a “major rule” under the Congressional Review Act (CRA) (5 U.S.C. § 804(2)) (which is also known as the Small Business Regulatory Enforcement Fairness Act). While a detailed analysis into the criteria of what constitutes a “significant” or “major” rule is outside the scope of this analysis, it is noted CMS has taken the position that the impact of its proposals does not meet the “significant rule” criteria under EO 12866 or the definition of a “major rule” under the CRA. 85 Fed. Reg., No. 32, 8800-8801 (Feb. 18, 2020).
 While a complete review into the nuances of the federal rulemaking process is outside this article’s scope, in general, CMS’s next steps include three possible scenarios as follows: CMS could simply decide to move ahead to the Final Rule using its current NPRM proposals “as is” or with minor modifications. Alternatively, CMS could decide to open a second comment period if it felt additional feedback was necessary, or to allow an opportunity for additional comments in the event it decided to substantially revise its proposals. Rounding it out, the third possibility involves CMS deciding to withdraw its current NPRM and issuing a new set of proposals. While the authors have no special insight or information regarding which path CMS may take, it seems to make the most sense for NGHP RREs to keep their guard up and assume CMS is positioning to proceed toward implementing its Final Rule. See generally, A Guide to the Rulemaking Process, see section entitled “How do public comments affect the final rule?” www.federalregister.gov. It is noted the Final Rule must not be arbitrary and capricious (i.e., fail to provide a rational basis for the decision). See, 5 U.S.C. § 706. A Final Rule must be within the scope and a “logical outgrowth” of the proposed rule. A Final Rule can be substantially different from the NRPM so long as the agency provided adequate notice to the public of the possibility for changes of the type that were adopted. The Reg Map, Informal Rulemaking; www.reginfo.gov/public/
 85 Fed. Reg., No. 32, 8797-8799, (Feb. 18, 2020). In addition to the three cited proposals as contained in the Federal Register, the OIRA in its August 2020 notice, as part of its general description regarding when CMPs may be imposed includes, in part, a reference to when RREs “fail to register and report” as required under Section 111. It is interesting to note that CMS’s CMP proposals as released in the Federal Register did not list this as a potential basis for potential CMPs. It remains to be seen if CMS’s final rule will also include penalty provisions regarding RREs who have failed to “register and report” as required under Section 111.
 85 Fed. Reg., No. 32, 8880 (Feb. 18, 2020).
 This figure is based on 2019 data.
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