In 2020, the Centers for Medicare & Medicaid Services ("CMS") proposed rules for calculating and imposing civil monetary penalties when a group health plan ("GHP") or non-group health plan ("NGHP") fails to comply with Section 111 Medicare reporting requirements. CMS technically has until 2023 to issue a Final Rule for CMS penalty enforcement – however, the recent release of a new Medicare Reporting User Guide may signal that CMS will issue this Final Rule sooner rather than later.


In most cases, whenever a GHP or NGHP makes payment to a plan participant that is also a Medicare beneficiary, the GHP or NGHP must report those payments to CMS on a quarterly basis. CMS then can coordinate Medicare benefits with the other plan – including seeking recovery from the other plan for amounts that Medicare previously paid to the plan participant.

CMS specifies that NGHPs include workers’ compensation, no fault insurance and liability insurance. CMS has previously indicated that it considers a Texas Option Program to be (1) liability insurance with respect to negligence liability settlements, judgments, awards, or "other payments" for a Medicare beneficiary and/or (2) no fault insurance when a Texas Option Program has an ongoing responsibility for medical ("ORM") payments to a Medicare beneficiary.


The proposed rule provides specific guidance on penalties:

  • Failure to Report – CMS can penalize a Texas Option Program up to $1,000 for each day and for each person that the Texas Option Program fails to report an ORM or liability settlement/judgment/award/payment over $750. The maximum penalty is $365,000 per person per year.
  • Contradictory Report – CMS can impose this same penalty if a Texas Option Program (when responding to a CMS request to recover Medicare benefits) contradicts its previously reported information.
  • Ongoing Reporting Errors – For Texas Option Programs whose Medicare reporting results in an error rate over 20%, CMS penalties begin at $250 per day per person for the first quarter of noncompliance. For continued noncompliance, CMS increases these penalties by $250 each quarter up to a $1,000 per day per person maximum.

CMS clarifies in the proposed rule that it will not impose a penalty on any Medicare report that a Texas Option Program makes within one year of the reportable settlement, judgment, award or other payment. The proposed rule also provides a process for Texas Option Programs to avoid penalties by showing "good faith efforts" to obtain required Section 111 Medicare reporting information.

Claims Administrators for Texas Option Programs should be prepared to comply with the new NGHP User Guide beginning April 5, 2021. Over the next few months, employers should work with their PartnerSource consulting team in order to review the Section 111 Medicare Reporting practices and technical capabilities of their in-house claims team and/or third party claim administrator. For more information, you can visit the Section 111 CMS web page at