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”) guidance) “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 guidance.
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.
Insurers, TPAs and plan sponsors will need to review the HHS guidance 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).