I have a lot to share with you about the newly released User Guide and recent alerts from CMS. Before I start, I would be remiss; if I didn't first thank Jim Price from Aon San Francisco for his thoughtful read of my draft and time he has spent with me discussing the possible ramifications of these recent publications. This is already an exceptionally dense topic; and it is going to take time to digest what happened last week and how the industry will sort out responsibilities.
As you already surmised, CMS issued further Section 111 requirements with the publication of its long awaited User Guide, version 3.0, effective 2/22/2010. Aside from the fact that User Guide is now almost seventy pages longer, than the previous version, it is already superseded in some parts by CMS alerts that have posted in the past week. Alerts dated subsequent to the currently published User Guide takes precedence. (See User Guide, ver. 3.0 at page 10). Consequently, when framing any MSP issue, read both the user guide and subsequent alerts before drawing your conclusion. No guidance is offered with regard to prior alerts that have not been incorporated into the latest user guide. For example alerts with regard to guidance on collection of social security numbers are not mentioned.
Section 1 of the User Guide is important as it provides a summary of the material changes that were made to the User Guide and can be found on pages 6 - 9. I would encourage reading through this section and also following-up with the applicable section in the Guide. The areas I found most interesting were:
Again, I would encourage all of you to read beyond the highlighted changes in Section One and review the entire User Guide in detail. The examples contained within the User Guide may prove helpful in answering questions that will no doubt arise as this law is being implemented. For example, in reading Section 11.2.5 on ICD-9-CM Codes, we now have clarity on how the RRE may go about selecting the ICD-9 diagnosis codes for reporting. Guidance is provided that the RRE may derive these codes from the claim information on file and DOES NOT have to be diagnosis codes specifically made by a provider or supplier of medical services. (See User Guide, ver. 3.0 at page 45). This information is very helpful, but keep in mind that careless identification could lead to unintended consequences for the Medicare beneficiary with regard to their future benefits.
Overall, the User Guide is what we expected it would become - larger and more complex. CMS admits there will be further updates and we can expect the User Guide to grow in size and reach. If it is not already clear, our fundamental approach to resolving claims has changed where a Medicare beneficiary is involved. There is little authority to help us navigate a settlement, award, judgment or other payment to a Medicare beneficiary and CMS publications, like the User Guide will continue to have an impact on our industry. Therefore, it makes sense to remain familiar with its contents and updates.
The importance of the preceding paragraph can be demonstrated by discussing the CMS alerts that were issued last week, concurrent with the Town Hall Conference Call. These alerts take precedence over the User Guide because their effective date (2/24/2010) is subsequent to the effective date of the User Guide. The alert that has drawn the most attention of the industry deals with Who Must Report and replaces in its entirety Section 7.1 of the User Guide. The change will require every Plan to re-evaluate whether they are an "applicable plan" subject to electronic reporting under Section 111. In some cases, it may result in the deletion of RRE registration completed by certain Plans.
Insurance with deductibles have caused the most angst with regard to RRE identification and registration. In the past, CMS adopted a "follow the funds" approach with regard to payment to the Medicare beneficiary to determine if the Plan was also an "applicable plan" and therefore a RRE for electronic reporting purposes. Thus, if an insured made direct payment of its deductible to a Medicare beneficiary, it was under the old rules a RRE for its payment. If the insurance carrier made a payment over that deductible, the insurance carrier would have a separate reporting responsibility for its portion. The rule was different if the carrier made the entire payment to the Medicare beneficiary and was reimbursed the deductible by the insured. In that case, only the carrier was the RRE and the insured had no electronic reporting responsibility.
The new alert no longer adopts the "follow the funds" approach at least with regard to the primary layer. Now, irrespective of who pays the deductible, the insurance carrier is always the RRE, EXCEPT where the insurance policy is a fronting policy or where the insured chooses to resolve a claim without "informing its insurer". Different RRE rules apply for policies/risk transfer programs in excess of primary coverages - more on that later. What's important to understand is the fundamental shift in CMS policy has occurred as to who is a RRE for the primary layer, and it appears to be laid at the feet of the insurance industry.
What's interesting about this alert is that CMS has already noted that it will issue a revised alert to clear-up inconsistencies between pages 4 and 12 about its intent to have the insurance industry be the RRE as noted above. The amended alert is expected in the very near future, but the actual date of release is unclear. I suspect that CMS may still consider comments and to the extent that any of you have something to say about who should be the RRE, I urge you to send it in to the CMS mailbox (firstname.lastname@example.org) as soon as practical.
Here is what CMS said with regard to deductible policies that in my interpretation apply to the first layer of coverage.
"Where an entity engages in a business, trade, or profession, deductible amounts are self-insurance for MSP purposes. However, where the self-insurance in question is a deductible, and the insurer is responsible for Section 111 reporting with respect to the policy, it is responsible for reporting both the deductible and any amount in excess of the deductible. The deductible is not reported as "self-insurance"; it is reported under the applicable policy number. The total of both the deductible and any amount in excess of the deductible is reported. (Please note that government entities are considered to be entities engaged in a business.)"
It then went on to say the following:
"If an insured entity engages in a business, trade, or profession and acts without recourse to its insurance, it is responsible for Section 111 reporting with respect to those actions. For example: A claim is made against Company X which has insurance through Insurer Y. Company X settles the claim without informing its insurer. Company X is responsible for Section 111 reporting for the claim regardless of whether or not the settlement amount is within the deductible or in excess of the deductible." (Emphasis Added)
Commentaries I have with regard to these passages within the alert are:
1. What does CMS means when it employs the phrase, "without recourse to its insurance" to identify an exception where the insured that pays its deductible is the RRE? Is it meant to foreclose the insured from other protections afforded under the policy, i.e., payment for defense, etc.? This is really key. In self-directed, self-administered insurance programs, insurance companies generally only require notification of the 'nine deadly sins" or if a claim reserve threshold has been met (usually a function of the level of the deductible). Further, the insured generally pays these claims and the carrier will not know that a claim has settled until after the fact; and then usually on a periodic basis. Under such circumstances, one can see the difficulties that carriers will have in reporting these claims to Medicare.
2. I also find the phrase "without informing its insurer" interesting. What happens if the insured did not notify its insured before settlement, but in the usual custom and practice transmits data to the carrier after? Is the RRE the insurance carrier or the insured that settled "without informing its insurer"? Did CMS intend to mean that the insured is the RRE where it settles, but does not notify its insurance carrier before it has obligated itself to the terms of the settlement or does it really mean that any time the settlement is communicated to the carrier, irrespective of whether the RRE entered into it without the carrier's knowledge that the insurance company is the RRE? This is an important distinction as a number of data transfers occur back and forth between the insurance company and the insured and at some point they will have been "informed" of the settlement. Furthermore, the timing of the data transfer under such scenarios may present some major logistical impediments for insurance companies' ability to report timely to within their designated Medicare quarterly reporting window.
3. Does the new RRE definition imply into every policy the 10th deadly sin for reporting to the insurance company claims resolved below the deductible that will now include a trigger for where the Claimant is a Medicare beneficiary?
4. Where the insured self directs its claims (usually within the deductible), does the new RRE definition impacts who will be responsible for general MSP compliance? Will it be the insured whose funds are used to resolve the claim and therefore is defined as a Primary Plan for MSP purposes under 42 USC §1395y(b)(2) or is it now the insurance carrier that reports the information under Section 111? There appears to be a split of responsibility with regard to MSP compliance and it would appear that the insurance carrier may have to dictate general MSP compliance processes to ensure proper electronic reporting. How this will work out between the insurance carrier and its insured remains to be seen. For those that may think this is not an issue, consider the following example: Insured settles case with Medicare beneficiary within the deductible and informs its insurance company. Insured requires as part of settlement that Medicare beneficiary and its attorney be responsible for Medicare conditional payments and closes file. Insurance carrier reports as RRE and the conditional payments go unresolved. Who will get the letters from the MSPRC demanding conditional payment? Will it be the insured that has left it up to the plaintiff attorney to handle the conditional payment or will it be the insurance company that has reported the settlement? Who will get the MSPRC intent letter to refer to the Department of Treasury? I suspect the entity in the Medicare databases will have to deal with these notices and the ramifications thereof. It will take time to sort these issues out and more likely than not, litigation may result between the insured and its insurer to resolve who has what responsibilities.
The alert also creates an interesting situation for coverages or risk transfer programs that are in excess of the primary layer. For those situations, it appears that CMS has retained the "follow the money" concept and if the insured pays the Medicare beneficiary directly and is later reimbursed, it is the RRE. If it doesn't pay the money directly, it is not the RRE.
In light of the way CMS has defined coverages or risk transfer programs in excess of the primary layer, everyone will need to pause and re-evaluate its present RRE status. The initial reaction to the alert was a wholesale deletion of RREs. However, given how your program is structured you may still be an RRE; and it is something that will need to re-evaluate every year as coverages and programs renew or evolve into more sophisticated risk transfer vehicles.
Of course the alert did not stop there and there are other interesting points worthy of noting for your further consideration on how it may impact your program:
There is a lot here and I regret the length of this note. The alerts and user guide will no doubt cause further discussion amongst the industry. No easy answers exist, we will all have to work together to resolve. I encourage all of you to consider joining the Medicare Advocacy Recovery Coalition. We can improve this process, but it will require us to speak with one voice. For more information about the coalition, please visit the website, www.marccoaliton.com.
Thank you for your continued support!