Actions Resulting from GHP or LGHP Nonconformance

90 - Actions Resulting from GHP or LGHP Nonconformance (Rev. 11755, Issued:12-21-2022, Effective: 01-23-2023, Implementation: 01-23-23) A. Determination [See 42 CFR § 411.110] A determination of nonconformance is a CMS determination that a GHP or LGHP is a nonconforming plan as provided in this section. The CMS may make a finding of nonconformance for any GHP or LGHP that at any time during a calendar year fails to comply with any of the following statutory provisions: • The prohibition against taking into account that a beneficiary who is covered or seeks to be covered under the plan is entitled to Medicare on the basis of ESRD, age, or disability or eligible on the basis of ESRD (see §70.4 above); • The equal benefits clause for the working aged (see §70.5 above); • The non-differentiation clause for individuals with ESRD (see §70.3 above); or • The obligation to refund conditional Medicare primary payments. The CMS may make a finding of nonconformance for a GHP or LGHP that fails to provide correct, complete, and timely information, either voluntarily or in response to a CMS request, on the plan's primary payment obligation with respect to a given beneficiary if that failure contributes to: • Medicare mistakenly making a primary payment; or • A delay or foreclosure of CMS's ability to recover a mistaken primary payment. If CMS determines that a GHP fails to comply with the provision that prohibits taking into account entitlement to Medicare (see §70.4 above) in a particular year, the GHP is nonconforming for that year. If, in a subsequent year, that plan fails to repay the resulting mistaken primary payments, the plan is also nonconforming for the subsequent year. For example, if a plan paid secondary for the working aged in 2019, that plan was nonconforming for 2019. If in 2022 CMS identifies mistaken primary payments attributable to the 2019 violation and the plan refuses to repay, it is also nonconforming for 2022. B. Starting Dates for Determination of Nonconformance [See 42 CFR § 411.114] The CMS's authority to determine nonconformance of GHPs and LGHPs begins on the following dates: • January 1, 1987, for MSP provisions that affect the disabled; • December 20, 1989, for MSP provisions that affect ESRD beneficiaries and the working aged; and • August 10, 1993, for failure to refund mistaken Medicare primary payments. C. Notice to GHP or LGHP of Determination of Nonconformance [See 42 CFR § 411.115(a)] If central office determines that a GHP or a LGHP is nonconforming with respect to a particular calendar year, CMS will mail a written notice to the plan with the following: • The determination; • The basis for the determination; • The right of the parties to request a hearing. (The Parties are the GHP or LGHP for which CMS determined the nonconformance and any employers or employee organizations that contributed to the plan during the calendar year for which CMS determined nonconformance.); • An explanation of the procedure for requesting a hearing; • The tax that may be assessed by the IRS in accordance with §5000 of the IRC; and The fact that, if none of the parties requests a hearing within 65 days from the date on the notice, the determination is binding on all parties unless it is reopened. The notice also states that the plan must submit to CMS, within 30 days from the date on its notice, the names and addresses of all employers and employee organizations that contributed to the plan during the calendar year for which CMS has determined nonconformance. D. Notice to Contributing Employers and Employee Organizations [See CFR 42 §v 411.115(b)] The CMS mails written notice of the determination, including all the information specified in subsection C, above, to all contributing employers and employee organizations already known to CMS or identified by the plan in accordance with subsection C. Employer and employee organizations have 65 days from the date of their notice to request a hearing. E. Penalties Any entity that violates the prohibition described in subsection A is subject to a civil money penalty of up to $5,000 for each violation. If CMS Central Office determines that a plan has been a nonconforming GHP in a particular year, it refers its determination, including the identity of the contributors that it has identified, to the IRS, but only after the parties have exhausted all appeal rights with respect to the determination. Section 5000 of the Internal Revenue Code of 1986 imposes an excise tax penalty on employers and employee organizations that contribute to nonconforming GHPs. They are taxed 25 percent of the employer's or employee organization's expenses incurred during the calendar year for each GHP (conforming as well as nonconforming) to which they contribute. This tax penalty does not apply to Federal and other governmental employers. The IRS administers Section 5000 of the IRC, which imposes the tax on employers (other than governmental entities) or employee organizations that contribute to a nonconforming GHP mentioned in §80.