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2020 Penalty Adjustments Related to Health Care Plans

03.11.2020

The U.S. Department of Health and Human Services (HHS) recently announced its annual adjustments to civil monetary penalties for various statutes within its jurisdiction. The agency takes this step in accordance with a 2015 law requiring annual adjustments for inflation by January 15. The latest amounts are based on a cost-of-living increase of 1.01764%. Here are highlights of the adjustments potentially affecting employer-sponsored health plans:

HIPAA administrative simplification

Administrative simplification regarding the Health Insurance Portability and Accountability Act (HIPAA) encompasses standards for privacy, security, breach notification and electronic health care transactions.

The HITECH Act substantially increased the penalty amounts for violations of these standards, creating four categories of violations that reflect increasing levels of culpability. The law also established minimum and maximum penalty amounts, as well as an annual cap on penalties for multiple violations of an identical provision. The indexed penalty amounts for each violation of a HIPAA administrative simplification provision are as follows:

Tier 1: Lack of knowledge. The minimum penalty is $119 (up from $117); the maximum penalty is $59,522 (up from $58,490); and the calendar-year cap is $1,785,651 (up from $1,754,698).

Tier 2: Reasonable cause and not willful neglect. The minimum penalty is $1,191 (up from $1,170); the maximum penalty is $59,522 (up from $58,490); and the calendar-year cap is $1,785,651 (up from $1,754,698).

Tier 3: Willful neglect, corrected within 30 days. The minimum penalty is $11,904 (up from $11,698); the maximum penalty is $59,522 (up from $58,490); and the calendar-year cap is $1,785,651 (up from $1,754,698).

Tier 4: Willful neglect, not corrected within 30 days. The minimum penalty is $59,522 (up from $58,490); the maximum penalty is $1,785,651 (up from $1,754,698); and the calendar-year cap is $1,785,651 (up from $1,754,698).

Note: The calendar-year caps for Tiers 1, 2 and 3 don’t reflect the enforcement discretion announced by the HHS in April 2019, which significantly reduces the penalty caps for those tiers. This is perhaps because the agency still hasn’t formalized the enforcement discretion.

Medicare Secondary Payer statute

The Medicare Secondary Payer statute prohibits a group health plan from “taking into account” the Medicare entitlement of a current employee or a current employee’s spouse or family member. It imposes penalties for violations. The indexed amounts for violations applicable to employer-sponsored health plans are as follows:

  • Penalty for offering incentives to Medicare-eligible individuals not to enroll in a plan that would otherwise be primary: $9,639 (up from $9,472).
  • Penalty for willful or repeated failure to provide requested information regarding group health plan coverage: $1,569 (up from $1,542).
  • Penalty for responsible reporting entities that fail to provide information identifying situations where the group health plan is primary: $1,232 (up from $1,211).

Summary of benefits and coverage

A summary of benefits and coverage (SBC) generally must be provided to participants and beneficiaries before enrollment or re-enrollment in a group health plan. The penalty for a health insurer’s or nonfederal governmental health plan’s willful failure to provide an SBC is $1,176 (up from $1,156) for each failure.

Deterrent effect

These adjustments are effective for penalties assessed on or after January 17, 2020, for violations occurring on or after November 2, 2015. The penalties are designed to preserve their deterrent effect in the face of inflation.

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