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CMS’ Section 111 penalty proposals are one step closer

By Mark Popolizio  |  September 25, 2019

A new release from the Office of Information and Regulatory Affairs (OIRA) indicates that the Centers for Medicare and Medicaid Services (CMS) is one step closer to releasing its much-anticipated Section 111 reporting civil money penalties (CMP) for non-group health plans regarding Section 111’s “up to $1,000 per day” penalty as required under the Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act). 

The OIRA’s release is entitled Civil Money Penalties and Medicare Secondary Payer Reporting Requirements (CMS-6061-P)(RIN: 0938-AT 86, Publication ID: Spring 2019) and indicates that a Notice of Proposed Rulemaking (NPRM) is scheduled to be released in October 2019. In addition, and significantly, the notice states that this matter is “pending review” which means that CMS has completed drafting its proposed CMPs and they are now being reviewed by the Office of Management and Budget (OMB) per standard protocol.[1]

As the industry braces for CMS’ release, the author provides the below summary to help set the stage to review the forthcoming proposals:

Section 111 Penalties - Background  

The original Section 111 penalty provision stated that an applicable plan[2] “shall be subject to a civil money penalty of $1,000 for each day of noncompliance with respect to each claimant.”[3] This section did not contain any specific provisions outlining practices for which CMPs would (and would not) be imposed.[4] 

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 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.

All then fell silent on this front until December 2018 when the OIRA released its Civil Money Penalties and Medicare Secondary Payer Reporting Requirements (CMS-6061-P), (RIN: 0938-AT 86, Publication ID: Fall 2018) notice indicating that CMS expected to release a NPRM on this issue in September 2019. The OIRA’s new notice now updates its December 2018 release and, as mentioned, indicates that the NRPM is now expected to be released in October 2019.

What’s Next?

The new OIRA notice does not provide any information on the specific penalty proposals; rather it simply advises the public that CMS is expected to release its proposed rules on Section 111 CMPs in October 2019. Thus, the industry needs to be on alert for release of CMS’ formal proposals. As part of the normal rule making process, it is expected that CMS will allow parties to submit comments and responses to its proposals. It will be interesting indeed to assess the nature and extent of CMS’ proposals, including proposed criteria for establishing “good faith” safe harbor provisions as required under the SMART Act.

ISO Claims Partners is closely monitoring this issue and will provide future updates as developments warrant. In the interim, if you have any questions, please contact the author at or 786-459-9117.

[1] This information was provided to the author by the Office of Management and Budget (OMB) per his call with the agency on 9/24/19.

[2] 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.

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

[4] 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 OIRA notice relates to non-group health plans.

Mark Popolizio, J.D., is vice president of MSP compliance and policy at ISO Claims Partners, a Verisk business. You can contact Mark at