It's Finally Here
Feb 19, 2020

CIVIL MONETARY PENALTIES

The Centers for Medicare & Medicaid Services (CMS) has released its long-awaited Section 111 civil monetary penalties (CMPs) Proposed Rule, which specifies how and when CMS must calculate and impose CMPs when a non-group health plan (NGHP, meaning workers’ compensation, general liability, and no-fault insureds/self-insureds) responsible reporting entities (RREs) fail to comply with the Medicare Secondary Payer (MSP) reporting requirements.  (Sorry – that was a lot of acronyms!)  Let’s take a look at the good, bad, and ugly.

 

30 SECONDS – GIVE ME SOME BACKGROUND

Back in 2007, Congress established Section 111 reporting requirements mandating any company or organization settling or paying a claim involving a Medicare beneficiary to file a report to CMS advising the agency about the settlement, judgment, or award.  Jump to 2012, the SMART Act streamlined the MSP reporting process to protect entities making good-faith efforts to comply and eliminated the strict liability of late reporting to a sliding scale penalty approach of up to $1,000 in penalties per claim.  Now jump to 2020, this proposed rule is an attempt to finally establish a penalty policy.  One question: do you feel lucky?

 

A FISTFUL OF DOLLARS

CMS laid out four scenarios where it would impose a CMP.  The first three scenarios call for a maximum annual penalty of $365,000 for each individual that should have been submitted: an entity fails to register as an RRE; failure to report a Total Payment Obligation to Claimant (TPOC) within one year of the settlement, judgment, or award; and when RREs contradict information the RREs have reported when CMS attempts to recover.  The last scenario calls for a type of sliding scale of 25% - 100% of the maximum per day penalty of $1,000 based on if an RRE exceeds the error tolerance threshold in any four out of eight consecutive reporting periods.

 

IN A PERFECT WORLD

CMS also laid out four scenarios that it would not impose CMPs: RRE fails to report because it is unable to obtain information from the reporting individual and the RRE made good faith effort to obtain it; RRE reports a TPOC no later than one year after the TPOC date; RRE complies with any TPOC reporting thresholds or reporting exclusion published in the User Guides; and RRE doesn’t exceed any error tolerances in four out of eight consecutive reporting periods.  Good news: the rule would only be based upon files submitted on or after the effective date of any final rule.

 

AS THE SAYING GOES, WHAT DO WE DO NOW?

With penalties this high, the industry will be commenting on what CMS got right, discrepancies, and how to improve the rule.  CMS is accepting comments until April 20, 2020. 

 

Construction Defect

COLORADO

A bill that could dramatically change the landscape of construction defect litigation by extending the time frame within which claimants are permitted to file claims took another step forward in the Senate.  Senate Bill 138 cleared the Senate Judiciary Committee last week.  The bill would increase the statutory limitation period from six years to 10 years; allow tolling of the limitation period on any statutory or equitable basis; and require tolling of the limitation period until the claimant discovers not only the manifestation of a construction defect but also its cause.  Opponents of the bill claim that the bill is too broadly written, would affect all kinds of construction, not just homes, and would lead to more construction defect lawsuits.

 

NEW JERSEY

Last week, the U.S. District Court for District of New Jersey provided clarification on application of continuous trigger theory in construction defect cases.  In this case, the court addressed at what point the continuous trigger theory begins.  The court clarified that property damage must occur before an insured may invoke a continuous trigger theory.  We’ll keep watching efforts affecting the construction industry.

 

Making Our Way Around the Country

ILLINOIS

A number of workers’ compensation bills have been recently filed in the Illinois Legislature.  In a mix of issues, one bill (H.B. 5178) proposes in part that accidental injuries sustained while traveling to or from work do not arise out of and in the course of employment, provides for an evidence-based drug formulary, and amends the Illinois Insurance Code to provide that a premium is excessive if it is likely to produce a long run profit that is unreasonably high for the insurance provided in relation to the services rendered.  Another bill (S.B. 3560) would amend the Workers’ Compensation Act to provide that an injury to the shoulder will be considered an injury to part of the arm and an injury to the hip will be considered an injury to part of the leg.  There are more bills filed, and we’ll keep reporting on proposed legislation in the Prairie State.

 

MARIJUANA IN WORK COMP

The New Jersey Assembly advanced two bills out of committee that could bring protections for companies that insure cannabis-related companies and also allow those on workers’ compensation to be reimbursed for medical marijuana.  One bill (A 1708) would require workers’ compensation and personal injury protection to cover costs associated with medical marijuana in certain circumstances.  Just last month, the state Appellate Division ruled a construction company had to reimburse an injured worker for medicinal marijuana.  The other bill (A 377) would protect insurance companies from retaliation from state or local government if they engage with marijuana-related businesses.  If these bills are signed into law, it would not supersede federal laws and regulations.

 

FLU REPORT

More than 26 million Americans (including my household last week) have gotten sick with the flu so far this season, and a second wave of the illness is hitting the U.S. this month.  Wash your hands and keep warm to try to stay healthy.  Unlike our 9th President of the United States, William Henry Harrison who had the shortest presidency lasting only a month.  Click here to enjoy other fun presidential facts as we celebrated President’s Day this week.

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