Question: How should employers address a CMS GHP Demand Letter?

Short Answer: The Medicare Secondary Payer rules are designed to ensure that employer-sponsored group health plans (GHPs) pay primary for employees and their spouses enrolled in active GHP coverage and Medicare. Where Medicare incorrectly pays primary for a participant enrolled in active GHP coverage, CMS will send a GHP Demand Letter to the employer informing them of the error. Employers should work with their insurance carrier or TPA to properly reprocess the claim with the GHP as primary.

Starting Point: The Medicare Secondary Payer (MSP) Rules
The MSP rules for Medicare entitlement based on age (i.e., reaching age 65) apply to employers with 20 or more employees for each working day for at least 20 calendar weeks in either the current or preceding calendar year. In general, the MSP rules prohibit the employer-sponsored group health plan from taking into account the Medicare enrollment of a current employee or a current employee’s spouse or family member.

There are a number of basic rules that flow from this general principle, including:

• For any active employee or family member covered by the employer-sponsored group health plan and Medicare, the employer-sponsored group health plan pays primary.

• The employer-sponsored group health plan must provide the same benefits under the same conditions to employee and family members who are Medicare-eligible.

• The MSP rules prohibit offering employees or family members eligible for Medicare any additional financial or other incentives (e.g., opt-out credits) beyond those made to other pre-65 employees to waive the employer-sponsored group health plan.

For more details:

• Newfront Medicare for Employers Guide

• Medicare Secondary Payer Employer Size Requirements

• MSP Prohibition of Incentives for Active Employees to Enroll in Medicare

How CMS Determines MSP Payment Errors: Section 111 Reporting
Section 111 of the SCHIP Extension Act of 2007 created a reporting requirement to ensure proper administration of the MSP rules in GHPs. The information collected is used to identify and recover claim payments incorrectly made with Medicare as primary coverage where MSP rules require the GHP to be primary.

Employers Not Directly Responsible for Section 111 Reporting
Section 111 Reporting requirement applies to Responsible Reporting Entities (RREs). In a rare departure from the standard approach of applying obligations directly to the group health plan, these rules designate the insurance carrier as the RRE for fully insured plans, and the third-party administrator (TPA) as the RRE for self-insured plans. The CMS GHP User Guide includes full details on the reporting process for RREs. Employers generally do not have to worry about the specifics of this process because they are not an RRE (their carrier or TPA is responsible). RREs are subject to penalties for failure to comply of up to $1,474 (indexed) per violation.

Limited Employer Role: Assist RRE with Compliance
RREs will in some cases request information from the employer to confirm certain details such as the employer’s size for MSP status. The employer should assist in compiling the information for the RRE (the insurance carrier or TPA) to avoid any inquiry or recovery action. This will help avoid situations where Medicare improperly pays primary for employees and spouses covered under the GHP’s active coverage, ultimately leading to the CMS GHP Demand Letters being sent to employers.

The Process of Generating a CMS GHP Demand Letter
There is a complex labyrinth of divisions within CMS designed to identify improper Medicare payments (i.e., situations where CMS believes Medicare incorrectly paid primary on a claim instead of the GHP) and issue a GHP Demand Letter to recover the overpayment.

Umbrella Entity: Coordination of Benefits & Recovery (COB&R) Program
The COB&R program is responsible for all activities that support the collection, management, and reporting of other insurance coverage of Medicare beneficiaries, and the collection of conditional payments or mistaken primary payments that should have been paid under a GHP.

There are two entities that comprise all COB&R activities:

• Benefits Coordination & Recovery Center (BCRC)

• Commercial Repayment Center (CRC)

Information Hub: The Benefits Coordination & Recovery Center (BCRC)
The BCRC consolidates the activities that support the collection, management, and reporting of other insurance coverage for beneficiaries. The BCRC takes actions to identify the health benefits available to a beneficiary and coordinates the payment process to prevent mistaken payment of Medicare benefits.

For example, the BCRC is responsible for initiating an investigation when it learns that a person has other insurance and determining whether Medicare should be the primary claims payer. That includes collecting information from the beneficiary, service provider, and GHP. Once the BCRC has completed its initial MSP development activities, it will notify the Commercial Repayment Center (CRC) to recover any overpayments.

Recovery Division: The Commercial Repayment Center (CRC)
The CRC is responsible for the functions and workloads related to GHP MSP recovery, including identifying and recovering Medicare mistaken payments where a GHP has primary payment responsibility. Some of these responsibilities include issuing a Primary Payment Notice (PPN) to verify MSP information, issuing CMS GHP Demand Letters when mistaken primary payments are identified, receiving payments, resolving outstanding debts, and referring delinquent debt to the Department of Treasury for further collection actions.

Where an employer receives a GHP Demand Letter, it comes from the CRC on CMS and COB&R letterhead.

The CMS GHP Demand Letter
The CMS GHP Demand Letter informs the employer of a Medicare overpayment made for a participant in the employer’s GHP for which the GHP should have paid primary. The letter informs the employer that Medicare incorrectly paid as primary, and (per the MSP requirements) the incorrect Medicare payment must be repaid. At its core, this is a standard coordination of benefits (COB) issue requiring proper reprocessing of a claim, but of course COB matters are more complex when the government is a party to the overpayment.

The CMS GHP Demand Letter includes the following content:

• Statement of requirement to repay Medicare for claims where Medicare mistakenly paid primary for an active GHP participant;

• The total amount due to Medicare for the overpayment and the response due date;

• Claims summary report listing beneficiary, dates of service, provider, and the amounts at issue;

• Description of how the overpayment occurred;

• How to resolve the recovery demand;

• Overview of the valid defenses if there is disagreement as to the facts or process; and

• The relevant deadlines for payment and potential interest/excise taxes for failures to timely pay.

CMS makes a Sample GHP Demand Letter and a Defense Reference Guide available for reference at its Group Health Plan Recovery website.

Who is Responsible for Responding to a CMS GHP Demand Letter?
The CMS GHP Demand Letter states that the “employer, insurer, claims processing third party administrator (“TPA”), GHP, or other plan sponsor” are all “Responsible Entities” for the repayment. In other words, all of the relevant parties are responsible. The letter is addressed to the employer (plan sponsor) with a copy sent to either the insurance carrier (fully insured) or TPA (self-insured).

The Practical Reality: Carrier/TPA Should Handle the Repayment Process
As a practical matter, employers will generally not be involved in the process because employers are not involved in claims processing. That should be squarely the responsibility of the employer’s insurance carrier or TPA. Employers will therefore appropriately expect their insurance carrier or TPA (or prior carrier/TPA if relating to a claim from a prior year after a vendor change) to fully resolve the matter. The insurance carrier/TPA has 60 days to respond to the CMS GHP Demand Letter with the refund check or a valid documented defense.

Ultimately, Medicare still retains the right to pursue recovery directly against the employer if the repayment process is not properly handled by the carrier/TPA. CMS guidance provides that “[a]n employer may authorize an insurer or TPA to respond on its behalf but may not transfer responsibility for a debt to the insurer or TPA.” Furthermore, there is at least one case where the court held that Medicare may seek recovery against an employer sponsoring a fully insured plan where the insurance carrier failed to properly repay the amount at issue in the CMS GHP Demand Letter.

• Bottom Line: Employers should reach out to their carrier/TPA to confirm that it is appropriately addressing the letter, and request confirmation that the repayment and claim reprocessing has timely been resolved to the satisfaction of Medicare and the CRC.

One Situation Where Employer Must Be Involved: Participant Not Enrolled in Plan
There are a number of “valid defenses” the GHP may raise against all or a portion of the demand for repayment. As with most other items related to the MSP GHP Demand Letter, any applicable defenses will typically be addressed directly by the carrier/TPA without the employer’s involvement. However, one such defense can be asserted only by the employer.

If the individual was not covered by the employer’s GHP (or cannot be identified) the employer must certify on company letterhead that the GHP enrollment records show no record of the individual being covered by the GHP. The guidance confirms that the carrier/TPA cannot make this certification on the employer’s behalf. Outside of this limited scenario, employer involvement in the process will generally be limited to confirming the carrier/TPA is handling the matter.

Summary
CMS GHP Demand Letters are fairly routine, and employers should expect to receive them periodically. At their essence, these letters are primarily a carrier/TPA COB issue—with heightened scrutiny because the federal coffers (i.e., Medicare) are adversely affected by the claims processing error.

The Medicare Secondary Payer (MSP) rules require that the GHP provide primary coverage for active employee or dependent, and that any Medicare coverage be secondary. The CMS GHP Demand Letters arise where there has been a mistake that caused claims to be paid with Medicare as the primary payer for an active employee or dependent. The good news is that these letters are typically fairly easy to resolve.

Employers receiving a CMS GHP Demand letter should work with the carrier/TPA to ensure the claims reprocessing/repayment is handled properly—or alternatively to confirm that the letter was sent in error and dismissed pursuant to a valid defense. The insurance carrier or TPA will generally take the lead in resolving the matter. Although it is only on very rare occasions the employer will have an issue with the carrier or TPA handling the response in a timely manner, employers should remain aware of the status of the matter and request confirmation when it is resolved to ensure they avoid any potential liability for the overpayment.

Relevant Cites:

42 U.S.C. § 1395y(b)(2)(B):
(ii) Repayment required. Subject to paragraph (9), a primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this title with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.
…
(iii) Action by United States. In order to recover payment made under this title for an item or service, the United States may bring an action against any or all entities that are or were required or responsible (directly, as an insurer or self-insurer, as a third-party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan.
…
(7) Required submission of information by group health plans.
(A) Requirement. On and after the first day of the first calendar quarter beginning after the date that is 1 year after the date of the enactment of this paragraph, an entity serving as an insurer or third party administrator for a group health plan, as defined in paragraph (1)(A)(v), and, in the case of a group health plan that is self-insured and self-administered, a plan administrator or fiduciary, shall—
(i) secure from the plan sponsor and plan participants such information as the Secretary shall specify for the purpose of identifying situations where the group health plan is or has been—
(I) a primary plan to the program under this title; or
(II) for calendar quarters beginning on or after January 1, 2020, a primary payer with respect to benefits relating to prescription drug coverage under part D; and
(ii) submit such information to the Secretary in a form and manner (including frequency) specified by the Secretary.

42 CFR §411.24:
(b) Right to initiate recovery. CMS may initiate recovery as soon as it learns that payment has been made or could be made under workers’ compensation, any liability or no-fault insurance, or an employer group health plan.

42 CFR §411.25:
(a) If it is demonstrated to a primary payer that CMS has made a Medicare primary payment for services for which the primary payer has made or should have made primary payment, it must provide notice about primary payment responsibility and information about the underlying MSP situation to the entity or entities designated by CMS to receive and process that information.

(b) The notice must describe the specific situation and the circumstances (including the particular type of insurance coverage as specified in § 411.20(a)) and, if appropriate, the time period during which the insurer is primary to Medicare.

(c) The primary payer must provide additional information to the designated entity or entities as the designated entity or entities may require this information to update CMS’ system of records.

Telecare Corp. v. Leavitt, 409 F.3d 1345 (Fed. Cir. 2005):
Therefore, we hold that the statute allows the United States to initiate an action against any employer that "sponsors or contributes to a group health plan," where the group health plan "make[s] payment with respect to the same item or service (or any portion thereof) under a primary plan." Such a construction gives reasonable meaning and effect to all the words in the statute, and is to be preferred over Telecare's proposed interpretation, which would render parts of the statute inoperative. Telecare sponsors and contributes to the group health plan, and under the plain language of the statute it cannot prevail.

Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship. Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).