Insurers Want to Sink Medicare Penalty Symbol

Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.

By Mindy Yochelson

Health plans are pushing back against a new scarlet letter that Medicare is threatening to attach to those hit with penalties for failing to comply with program requirements.

The Centers for Medicare & Medicaid Services has proposed a “civil money penalty” icon be placed next to the name of penalized insurers. The icon would be on the agency’s Medicare Plan Finder, an online tool that beneficiaries use to search for Medicare Advantage (managed care) and Part D drug plans. The CMS also is considering a link to the letter the sponsor receives announcing the penalty.

The goal is to help beneficiaries make better informed choices on plans appropriate for them.

However, use of the icon also would likely lead to diminished enrollment for the designated plans, Regan Pennypacker, a senior vice president for the Washington-based Gorman Health Group, said.

Penalized plans are now able to “cut the check and be done with it” when they receive a penalty, Pennypacker told Bloomberg Law March 12. But if the icon is used, the impact won’t end at the plan finder website, she said. Competitors will take advantage of the situation to gain enrollment, she said.

Medicare plans should be concerned, Pennypacker said.

Concerned Comments

Their comments to the CMS show they are concerned.

The icon provision was in the CMS 2019 draft Call Letter, which spells out guidance for plans for the upcoming contract year. Comments were due to the agency on March 5 and the final version of the Call Letter will be out April 2.

Placement of the icon would lead to beneficiary confusion, not assistance, America’s Health Insurance Plans told the CMS.

The agency can levy penalties for a wide range of compliance issues, the health insurer trade group said. The size of the penalty varies significantly due to CMS’s complex formula, AHIP said. The proposed symbol would not promote an apples-to-apples comparison of plans, it said.

PBMs Object

Pharmacy benefit managers also turned an emphatic thumbs down.

Some penalties are given for major violations resulting in enrollment freezes, and others are for minor violations resulting in a fine, the Pharmaceutical Care Management Association, a Washington-based trade association that represents the drug middlemen, told the CMS.

Although penalties vary, there would be just one icon.

The pharmacy benefit managers also said they don’t understand the point of linking to the CMS’s correspondence to the penalized plans with its “detailed and technical content.”

Types of Infractions

Plans are penalized for activities that the agency believes leads to beneficiaries not getting full access to medical services and prescription drugs.

These could include failure to comply with drug formulary or appeals and grievance requirements.

Penalties result from agency audits or other actions, such as complaints.

“I would worry beneficiaries might put a disproportionate significance on the icon,” Janice Ziegler, a partner in the Life Sciences and Health Care sector team of Dentons US in Washington, told Bloomberg Law March 13.

Audit Results

Penalties following an audit are not unusual.

Nearly half (47 percent) of plan sponsors that were audited were hit with a civil money penalty between September 2017 and February 2018. These were based on findings from 2017 program audits, a Feb. 26 CMS memo said.

Ziegler said she’s neither for or against an icon. But some beneficiaries might view it as a “major negative,” even though the basis of the penalty might be highly technical, she said.

Brian Dickerson, a partner in the Washington office of FisherBroyles LLP, told Bloomberg Law March 13 that the icon could affect negotiations between the agency and the penalized plan.

Currently, plans may want to negotiate a settlement in order to move on. But if there’s potential for negative “branding,” the sponsor might try to fight the penalty rather than settle, he said.

Icon Support

On the flip side, others told the CMS the icon wasn’t a bad idea.

AARP said the icon would showcase “important differences among the available Part C and Part D plan options.”

However, the powerful seniors’ lobbying organization recommended that the CMS start with consumer testing to ensure that the symbols are designed in a way that beneficiaries interpret them appropriately.

The Center for Medicare Advocacy said it strongly supports the icon and urged that enforcement actions that result in the civil money penalties be revealed “in real time rather than the current practice of bunching releases of CMPs in February after the annual election period has ended.”

Active Enforcement Activities

Medicare wants to start using the icon next year based on penalties received in 2018.

The agency hasn’t been reluctant so far this year to impose civil penalties. The seven given to sponsors in January and February include one unusual seven-figure penalty imposed on a New York-based plan.

The company, Merit Health Insurance, Feb. 6 received a $1.37 million penalty following two audits.

On March 14, Merit received a $62,100 penalty after the agency found it was sending “inordinately high numbers of coverage determinations and redeterminations to the Independent Review Entity.”

The process of auto-forwarding determinations to the review entity, an organization with which Medicare contracts to handle appeal denials, “should not be a substitute for sponsors making coverage determinations and redeterminations within the required adjudication timeframes,” the CMS said in its letter to Merit.

With Merit’s additional penalty, the total for all plans so far in 2018 is $1.69 million.

Advice to Plan Sponsors

Both Pennypacker and Ziegler said to help their clients prepare for audits, they urge them to ensure that their “first tier” entities are able to support them. These are companies that contract with a Medicare plan sponsor to provide administrative or health-care services for enrollees.

The first tiers should be able to quickly gather the data that’s needed for an audit, Ziegler said.

The plan’s expectations for the first tier organization should be in a contract and measured through metrics, Pennypacker said.

She also recommended that the CMS’s various penalty letters to sponsors be shared with a company’s board as an educational tool for self-improvement.

Dickerson recommended plans proactively hire an outside auditor to look at operations before the CMS announces an audit.

“People take their cars in for annual checkups but they don’t do the same thing” for their organizations, he said.

To contact the reporter on this story: Mindy Yochelson in Washington at myochelson@bloomberglaw.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bloomberglaw.com

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Health Care on Bloomberg Law