The Problem and the Solution Medicare/Medicaid and SCHIP Extension Act of 2007 Errors and Omissions Liability Insurance for Medicare Statutory Compliance INSURANCE GROUP
In 1980, in an effort to help curb the rising cost of Medicare, Congress enacted the Medicare Secondary Payer statute to establish the principle that Medicare is always a secondary payer, or payer of last resort, when other sources of funding exist. All payments advanced by Medicare are in fact only conditional payments: Medicare is entitled to reimbursement when alternative sources are identified. Potentially ruinous to business! The Medicare, Medicaid and SCHIP Extension Act, signed into law in 2007, has wide-ranging and potentially ruinous consequences to all entities who choose to selfinsure their workers compensation or third-party liability exposures. These employers may soon be confronted with demands from Medicare for reimbursement for claims they thought were settled.
Beginning on January 1, 2010, Section 111 ( Medicare Secondary Payer ) of the 2007 Extension Act requires liability and workers compensation insurers (including self-insurers) to determine Medicare status for all claimants and to report all claims involving a Medicare beneficiary to the Centers for Medicare and Medicaid Services ( CMS ) when those claims are paid. How Bad is the Problem? The Extension Act gives the CMS a direct right of action against primary payers (insurers and self-insurers) and others responsible for paying liability and workers compensation claims and recipients of loss and medical payments from a primary payer. If Medicare is not reimbursed for its medical costs, CMS can sue the primary payers for reimbursement, even if the claims payments were made by a third party administrator, and regardless of whether the claims settlement was approved by a state court.
The Federal Government is entitled to double damages in the event it institutes legal action to effect reimbursement. Self insurers also face federal fines of up to $1,000 per day for each claim they fail to properly report in a timely manner. Who s at risk? Any business, corporation, partnership, public entity, governmental agency, pool, trust, state claims fund, etc. that self insures its liability with respect to injured individuals and/or its statutory liability to provide workers compensation or no-fault benefits to injured workers and other individuals. Included are state agencies which provide benefits directly to injured parties.
The application of the law is not limited to domestically domiciled self-insured entities. Multinational organizations, foreign nations, American Indian and Alaska Native Tribes are also subject to Medicare Secondary Payer provisions. Bankrupt organizations and entities in liquidation are at risk, as well. The Medicare Secondary Payer provision also applies to fronting policies obtained by self-insurers, since the intent of such arrangements is that the insured, rather than the fronting insurer, will pay all claims. When the insured pays the claims, the insured is considered the Responsible Reporting Entity (RRE). What s the Solution? Medicare Statutory Compliance Errors and Omission Liability Insurance from American Empire Surplus Lines Insurance Company is specifically tailored to address the new and emerging exposures created by the passage of the Medicare, Medicaid and SCHIP Extension Act of 2007 and Section 111. Medicare Statutory Compliance Errors and Omissions is targeted at a wide range of self insured entities. Our insuring agreement specifically targets violations of 42 U.S.C. 1395y(b)(2) or (8), or an equivalent state statute. Coverage is provided on a claims made basis. Various deductible levels can be offered. Limits up to $5,000,000 are available.
INSURANCE GROUP For more information, professional risk managers, agents and brokers may email American Empire at AskAESLIC@gaic.com. To download a policy application for Errors & Omissions Liability Insurance for Medicare Statutory Compliance, visit www.aeslic.com. Whenever laws are enacted or changed, it generally is beneficial for insurance agents and brokers to seek the advice of counsel to further their understanding of the responsibilities and resultant liabilities that are now imposed on their clients. The Medicare Statute enacted in 1980 and the SCHIP Extension Act of 2007 are complicated, as are the associated state statutes addressing Medicaid. We think it prudent for you to discuss these laws with legal counsel to fully understand their import. Underwritten by American Empire Surplus Lines Insurance Company, a Delaware corporation licensed in Delaware and an eligible surplus lines insurer in the other 49 states and the District of Columbia. INSURANCE GROUP Coverage benefits are summarized. Refer to the policy declarations and contract for a full description of applicable terms, conditions, exclusions and limitations. Coverage may not be available in all jurisdictions. This advertisement is intended for use by licensed insurance producers. It is not intended as a solicitation or offer to sell any insurance product in any jurisdiction in which such solicitation or offer, or the sale or purchase of the described insurance product would be unlawful under the insurance laws and regulations of such jurisdiction. American Empire Surplus Lines Insurance Company is a member of Great American Insurance Group, 580 Walnut Street, Cincinnati, OH 45202 GAIC 2770 (10/09)