June 24, 2009, 12:59 PM — Insurance companies offering liability coverage, workers compensation, and those that are self insured have struggled to prepare for the new Medicare reporting requirements since the federal mandates were announced. The legislation is expected to reduce Medicare costs by protecting its secondary payer status when eligible claimants can be covered by alternative sources. Unfortunately for insurers, the new laws will increase paperwork, but failing to act on them will carry stiff penalties.
In contrast with previous legislation, the burden of proof now rests on insurers to determine whether tort plaintiffs are eligible for Medicare coverage, and to report this information to the government. The additional tracking can be considerable for those with eligible claimants. Insurers with minimal or no electronic files face the greatest challenges.
The drive toward compliance recently picked up speed: registration opened in May, 2009 for Responsible Reporting Entities (RREs) to express their intent to comply with the electronic reporting requirements. Those who haven’t adjusted their plans, policies, and systems to enable timely reporting must take action soon. Federal delays in enacting the legislation have ended. Fines for non-compliance or late reporting will be severe.
I asked Art Meadows, President and CEO of Panhandle Farmers Mutual Insurance Company and a recognized leader in the insurance field, if he would share some tips to help other insurers make sure they’re able and ready to comply. He shared his expertise and advice during a recent interview:
Q: What are the issues associated with the new legislation?
A: There are a number of requirements for insurers. First, they must identify claimants who are eligible for Medicare benefits. Ideally, they periodically download a list of Medicare-eligible claimants from their digital file repository and operating system that shows all pending claims and upload it to the Medicare site, or they can create and post the lists manually. As it currently stands, quarterly reports will be due starting in 2010. All pending claims must be tracked and reported as long as each claim remains open. If settlements, awards, or judgments are made, these also must be reported.
For insurers, the new legislation is all about facilitating compliance, mitigating risk, and minimizing the corporate expense of managing pertinent information.
Q: What kind of penalties are there for late or omitted reports?
A: Penalties are stiff, amounting to $1,000 per claimant per day. Since reporting will be quarterly, it could take a long time for companies to discover if they’ve made a mistake or omission. Fines could easily amass into hundreds of thousands of dollars with a small number of omissions or late reports. My advice to insurers: don’t just count on employees remembering to file, even if your company is small and files seem manageable. You will need to have a system in place that ensures reporting is done on time and no claimant is missed.
Q: Which companies will be most affected by the new requirements?
A: Companies that will struggle most are those without technology and electronic records. Many successful companies fall into this category. Some don’t even have Internet access in their offices. Without electronic records, a system that ensures reporting dates are met, and some form of automated tracking of eligible claims, compliance will be difficult, time consuming, and potentially prone to error. This could prove to be very costly due to fines.
Companies that have automated operating systems with electronic files and handle many liability claims may encounter fewer problems than those that have a small number and handle them manually. It’s difficult to remember to provide reports if your company only processes a few each year, and even fewer involving Medicare-eligible recipients. Administrative and litigation delays mean cases can remain open for years. Required reporting on claimants can last a long time.
Q: There are numerous companies offering to take on the burden of Medicare reporting for a fee. What are your thoughts about this?
A: This may be a good—or even necessary—situation for some companies, particularly if they are resorting to manual posting of reports. However, entrusting reporting to any outside organization puts your company at risk. Remember: you are delegating the task, but the responsibility to comply is still ultimately yours. I’m not sure I would want to relinquish the responsibility to someone else and risk penalties that might be avoidable by doing my own reporting. If you are considering using an outside agency, consider the risks and proceed carefully.
Q: What is your company doing to ensure it’s prepared when the new rules take effect?
A: Fortunately, we purchased a robust electronic document management system in 2003 and have created electronic reports for several years. Additionally, we are involved with a vendor and five other regional companies in developing a new operating system that will track and report these claims automatically. With direct integration to the Medicare site, we will be able to upload our reports easily, avoiding the time-consuming battle of manual entry.
As a part of our monthly close-out process we already create a variety of reports, such as agent commission checks and A+ ISO reports. We plan to add the Medicare reports as part of that process.
Q: What steps should companies take to register, and what should they expect?
A: Eligible insurers—those that underwrite liability insurance—must register with the Centers for Medicare and Medicaid Services. They must indicate that they are a Responsible Reporting Entity (RRE) and provide notice of their intent to comply with the electronic reporting requirements. They will then receive a company identification number and login information for the CMS program. Companies that still handle processes manually will need to input their information manually on the CMS website.
Q: Is there any additional advice you would like to share with insurers that are struggling with the new rules?
A: If you haven’t begun planning yet, start now. Register well ahead of the September deadline. The information you need to get started can be found on the CMS website, and the major insurance associations also have helpful resources.
Consider ways to make compliance easier. If you’re still managing everything on paper, this is a good time to convert to electronic document management.
Put plans in place to ensure prompt filing. Otherwise, late fines could accumulate for months before you are aware of them. Mistakes are costly. If you already have a digital repository with your policies, claims, and supporting documentation, you can simplify compliance with electronic workflow, establishing rules to remind you of impending deadlines and enforce timely reporting. Lastly, work with your operating system vendor to put programming in place that will track and monitor claims that need to be reported to CMS.
Q: Clearly digital documents make reporting easier. How else do document management and enterprise content management software fit into the compliance picture?
A: Digital trails don’t lie, and they don’t err. They show every document that’s captured and every transaction that occurs. If information is stored electronically and indexed for search, it will be found every time. In an audit, digital tracking of claims, related correspondence, and supporting materials ensures transparency and accuracy. With proper digital storage, files can’t be overlooked.
Finally, if you’re ready to convert to electronic records, or want to replace your imaging system with a better solution, talk with insurers like me who have successfully converted to digital records and electronic reporting. It’s an investment of time and money, but the payback is relatively quick. The increase in productivity and the savings long-term are significant. With recent increases in legislation, and more laws to follow, there’s no better time to invest in your future.
Art Meadows is the President and CEO of Panhandle Farmers Mutual Insurance Company in West Virginia. A National Association of Mutual Insurance Companies (NAMIC) Professional Farm Mutual Manager of the Year (2007) and recipient of the Service Award (2006), he has been a member of the NAMIC Merit Society since 1999. Formerly an insurance agent, property inspector, claims adjuster, and commercial/personal lines underwriter, Art served on the Governor’s Task Force to support West Virginia Tort Reform in 2005 and was president of the West Virginia Association of Mutual Insurance Companies from 1996 to 2005. Art can be reached at firstname.lastname@example.org.