The Medicare, Medicaid, and SCHIP Extension Act of 2007 (the "Act") will require group health plan insurers, third-party administrators, and some plan administrators and fiduciaries to comply with new Medicare Secondary Payer ("MSP") reporting requirements effective January 1, 2009.
MSP rules dictate whether a group health plan or Medicare is primary when an individual has coverage from both sources. In general, a group health plan pays primary for coverage due to current employment status and secondary to Medicare for retiree coverage. Special MSP rules apply to individuals who have end stage renal disease.
Under the Act, a group health plan's insurer or third-party administrator ("TPA") or, in the uncommon situation of a self-funded and self-administered plan, the plan administrator or another plan fiduciary must:
- obtain information from the plan sponsor and plan
participants (as specified in future Department of Health and
Human Services ("HHS") regulations) "for the
purpose of identifying situations where the group health plan
is or has been a primary plan" to Medicare; and
- submit that information to HHS in the time, form and
manner specified in future HHS regulations.
HHS will presumably use this information to determine whether group health plans are complying with MSP rules.
The Act does not define what constitutes a "group health plan" for purposes of this new reporting requirement, so the broad definition in the MSP rules will apply. A group health plan would include health, dental and vision plans and health reimbursement arrangements. The definition is broad enough to also include a health FSA, although the Centers for Medicare and Medicaid Services has previously suggested that MSP rules may not apply to health FSAs.
Because of MSP rules that prohibit taking into account Medicare entitlement for a current employee or his or her family members, many group health plans do not know whether their participants (particularly dependent participants) are entitled to Medicare. This is why many group health plans distribute Medicare Part D notices to all participants. The Act therefore is likely to require gathering new participant information.
An entity that does not comply with the new reporting requirements is subject to a civil monetary penalty of $1,000 for each day of noncompliance for each individual for which the information should have been submitted. In addition, the standard penalties for violating MSP requirements remain applicable (e.g., excise tax).
The Act includes broad provisions for other sharing of information between HHS and various entities, pursuant to terms and conditions established by HHS:
- The Act requires HHS to share information on Medicare
Part A entitlement and Medicare Part B enrollment with
insurers, TPAs, and plan administrators and fiduciaries of
self-insured and self-administered plans.
- The Act permits HHS to share information on Medicare Part
A entitlement and Medicare Part B enrollment with entities
and persons other than group health plan insurers, TPAs, and
plan administrators and fiduciaries of self-insured and
self-administered plans (e.g., plan administrator of a plan
that is not self-administered).
- The Act permits the Secretary to share information with
unspecified persons and entities for coordination of benefits
purposes.
The Act provides for these disclosures "[n]otwithstanding any other provisions of law." There is no specific reference in the Act to the interaction of these provisions with the HIPAA privacy rule.
Action items:
- Insurers, TPAs and plan sponsors will need to review the
HHS regulations when issued to determine what data will need
to be reported and the mechanics of reporting it.
- Although the Act requires insurers and TPAs of group
health plans that are not both self-funded and
self-administered to comply with these new reporting
requirements, insurers and TPAs may seek to obligate plan
sponsors (by contract) to assist in collecting the
information. In addition, TPAs may seek (by contract) to
shift the risk of statutory penalties for violations of the
reporting requirements to the plan sponsor and such terms
will need to be reviewed and negotiated.
- Plan sponsors should consider whether, as a result of the
Act's information collection and sharing provisions,
their insurers or TPAs will have access to the information
necessary to send targeted Medicare Part D notices to
Medicare Part D eligible individuals (instead of sending them
to all covered employees, spouses and dependents).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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