Employee Benefits Compliance

Medicare Secondary Payer Reporting Penalties are Real. Have you Reported on Your Plan’s Status?

In addition to providing notices to Group Health Plan (GHP) members that may include Medicare-eligible individuals, GHP is also mandated to report this status to the Centers for Medicare and Medicaid Service (CMS). Recently, CMS has finalized its rule specifying how and when CMS will calculate and impose civil money penalties (CMPs) when GHP and Non-Group health Plan (NGHP) Responsible Reporting Entities (RREs) fail to meet their Medicare Secondary Payer (MSP) reporting obligations. (The text of the final rule should be reviewed in its entirety in the Federal Register.) To help RREs prepare for potential CMPs, CMS released Frequently Asked Questions (FAQ). CMS will also be hosting webinars in January 2024 to begin to share additional information about CMPs. More information on reporting requirements, data elements, and Medicare Secondary Payer (MSP) situations can be found in the Section 111 GHP User Guide. Also see the prior Leavitt Group article. on what is creditable and non-creditable coverage of prescription drug plans in GHPs. Creditable means the prescription drug coverage of the GHP is at least as good, if not better than the coverage Medicare Part D offers. See What is Creditable Coverage? 

There are two Medicare Part D disclosure requirements on GHPs:

  1. The first disclosure requirement is to provide a written disclosure notice to all Medicare eligible individuals annually who are covered under its prescription drug plan, prior to October 15th each year and at various times as stated in the regulations, including to a Medicare eligible individual when he/she joins the plan.
    • This disclosure must be provided to Medicare eligible active working individuals and their dependents, Medicare eligible COBRA individuals and their dependents, Medicare eligible disabled individuals covered under your prescription drug plan and any retirees and their dependents.
    • Medicare imposes a late enrollment penalty on individuals who do not maintain creditable coverage for a period of 63 days or longer following their initial enrollment period for the Medicare prescription drug benefit. Accordingly, this information is essential to an individual’s decision whether to enroll in a Medicare Part D prescription drug plan.
  2. The second disclosure requirement is for entities to complete the Online Disclosure to CMS Form to report the creditable coverage status of their prescription drug plan.
    • The Disclosure should be completed annually no later than 60 days from the beginning of a plan year (contract year, renewal year), within 30 days after termination of a prescription drug plan, or within 30 days after any change in creditable coverage status.
    • This requirement does not pertain to the Medicare beneficiaries for whom entities are receiving the Retiree Drug Subsidy (RDS).

Key Dates

  • October 11, 2023- Publication of the rule in the Federal Register.
  • December 11, 2023- The rule is effective and integrated into the Code of Federal Regulations.
  • October 11, 2024- The rule is applicable. From this date forward, Responsible Reporting Entities (RREs) will be held accountable for ensuring that all records are reported timely. In the past, there was no penalty for failure to complete disclosure #2 above.


Q. When will CMS issue the first penalties under this rule?
A. The earliest a CMP may be imposed is October 2025. The 1-year period to report the required information before CMPs would potentially be imposed would begin on the latter of the rule effective date or the settlement or coverage effective dates which an RRE is required to report. There will be no “look back” period and all penalties will be prospective in nature.


GHP RRE shall be subject to a penalty of $1,000 as adjusted annually under 45 CFR part 102 (currently $1,325 as of June 8, 2023; see 87 FR 15101)) for each calendar day of noncompliance for each individual for which the required information should have been submitted. Under section 1862(b)(8) of the Act, an NGHP RRE may be subject to a penalty of up to $1,000 as adjusted annually under 45 CFR part 102 (currently $1,325 as of June 8, 2023; see 87 FR 15101) for each calendar day of noncompliance with respect to each claimant. These penalties would be in addition to any other penalties prescribed by law, and in addition to any MSP claim under section 1862(b) of the Act with respect to an individual. CMS proposed that the penalty be calculated on a daily basis, based on the actual number of individual beneficiaries’ records that the entity submitted untimely (that is, beyond the required timeframe after the GHP MSP effective date). These penalties have a cap of up to a maximum penalty of $365,000 (as adjusted annually under 45 CFR part 102) per individual per year.


Plan sponsors should ensure they are reporting to CMS annually in order to avoid these penalties. Need help complying? Contact your Leavitt Group Trusted Advisor. We are here to help!