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The Centers for Medicare & Medicaid Services (CMS) recently issued final rules outlining the penalties for responsible reporting entities (RREs) that fail to meet Medicare Secondary Payer (MSP) reporting obligations. The regulations were applicable as of October 11, 2024, and enforcement will begin in October 2025. The penalties for non-compliance are steep.
Background on Medicare Secondary Payer (MSP) Rules
Medicare acts as a secondary payer in specific situations where an employer’s group health plan provides primary coverage. These scenarios include:
- Individuals and their spouses who are age 65 or older and covered by a group health plan if the employer has 20 or more employees.
- Disabled individuals covered through a spouse who is actively employed, and the employer has 100 or more
- Individuals with end-stage renal disease during the “coordination ”
MSP rules require group health plans to report details about individuals enrolled in both Medicare and the employer’s health plan. The “record” of an individual’s coverage is required to be reported within one year of the latter of either the effective date of the coverage or the date when the individual became a Medicare beneficiary. CMS uses this information to ensure that Medicare only pays after the appropriate primary payer has made payments.
Who is the responsible reporting entity (RRE)?
Under the MSP rules, the obligation to report rests with the RRE. For group health plans, an RRE may include:
- The insurer of the plan
- A third-party administrator (TPA) that handles claim payments or adjudications
- The plan administrator in cases of self-insured and self-administered plans
Employers do not qualify as RREs and are therefore not directly responsible for reporting unless they self-insure and self-administer their health plans. Even in this case, employers may contract with an agent to act as their RRE. However, employers are expected to provide the RRE with accurate information to facilitate proper reporting to CMS.
Penalties for Noncompliance
CMS’s final regulations stipulate steep daily penalties for RREs that fail to meet the MSP reporting requirements. CMS has adopted a tiered approach of penalties per individual, per day:
- $250 per day if the record is reported 1 to 2 years after the required
- $500 per day if the record is reported 2 to 3 years after the required
- $1,000 per day if the record is reported 3 or more years after the required
The total penalty for any one individual will not exceed $365,000 per year. Penalties will be adjusted annually for inflation. CMS clarified that these penalties will be applied prospectively, with enforcement beginning on October 11, 2025.
Penalties will not be applied retroactively for past noncompliance. If an RRE believes extenuating circumstances prevented timely reporting, it can appeal the penalty assessment. CMS may waive penalties for “good faith efforts” at reporting.
Employer Action Items
Although employers may not be directly responsible for reporting, they play a critical role in ensuring compliance.
- Identify your Plans
Identify your group health plans subject to the MSP reporting rules.
- Identify your RRE
If you are self-insured and self-administered, ensure that you and your appointed agent are aware of reporting requirements.
- Communicate with your RRE
If your group health plan is administered by a third-party insurer or TPA, confirm they understand the MSP reporting rules and are prepared to comply.
- Provide accurate information
Ensure that your organization supplies the RRE with accurate and timely information regarding individuals enrolled in both Medicare and your health plan.
- Monitor Compliance
Establish an internal point of contact responsible for overseeing compliance with MSP rules.
- Stay informed on regulations
Keep track of updates from CMS to ensure ongoing compliance and avoid unexpected penalties.
This information has been prepared for UBA by Fisher & Phillips LLP. It is general information and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.
