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HHS Announces Adjustments to Civil Monetary Penalties

02.08.2019

The Department of Health and Human Services recently announced the annual adjustments of civil monetary penalties for statutes within its jurisdiction. A 2015 law requires these annual adjustments to specified penalty amounts. The latest ones are based on a cost-of-living increase of 2.04 percent. Here are highlights of the adjustments potentially affecting employer-sponsored health plans.

HIPAA administrative simplification

HIPAA administrative simplification 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 and establishing 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:

  1. Lack of knowledge. The minimum penalty is $114 (up from $112); the maximum penalty is $57,051 (up from $55,910); and the calendar-year cap is $1,711,533 (up from $1,677,299).
  2. Reasonable cause and not willful neglect. The minimum penalty is $1,141 (up from $1,118); the maximum penalty is $57,051 (up from $55,910); and the calendar-year cap is $1,711,533 (up from $1,677,299).
  3. Willful neglect, corrected within 30 days. The minimum penalty is $11,410 (up from $11,182); the maximum penalty is $57,051 (up from $55,910); and the calendar-year cap is $1,711,533 (up from $1,677,299).
  4. Willful neglect, not corrected within 30 days. The minimum penalty is $57,051; the maximum penalty is $1,711,533 (up from $1,677,299); and the calendar-year cap is $1,711,533 (up from $1,677,299).

Medicare Secondary Payer

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 and imposes penalties for violations. The indexed amounts for violations applicable to employer-sponsored health plans are as follows:

  • Penalty for an employer that offers incentives to Medicare-eligible individuals not to enroll in a plan that would otherwise be primary: $9,239 (up from $9,054),
  • Penalty for willful or repeated failure to provide requested information regarding group health plan coverage: $1,504 (up from $1,474), and
  • Penalty for responsible reporting entities that fail to provide information identifying situations where a group health plan is primary: $1,181 (up from $1,157).

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 $1,128 (up from $1,105) for each failure.

Amended procedure

These adjustments are effective for penalties assessed on or after October 11, 2018, for violations occurring on or after November 2, 2015. Congress amended the procedure for penalty adjustments in 2015 to preserve their deterrent effect in the face of inflation. Particularly with respect to HIPAA, the penalties can add up quickly and provide a strong incentive for compliance.

IRS makes final annual adjustment to PCORI fees

The IRS has announced the annual increase in Patient-Centered Outcomes Research Institute (PCORI) fees paid by health insurers and sponsors of self-insured health plans. The adjusted applicable dollar amount for PCORI fees for plan and policy years ending on or after October 1, 2018, and before October 1, 2019, is $2.45. This is a $0.06 increase from the amount in effect for plan and policy years ending on or after October 1, 2017, and before October 1, 2018.

PCORI fees are calculated by multiplying the applicable dollar amount for the year by the plan’s or policy’s average number of covered lives. IRS Form 720 is used for purposes of PCORI fee reporting and payment.

PCORI fees, which are used to fund research on patient-centered outcomes, apply to plan and policy years ending before October 1, 2019. Accordingly, it can be expected that this is the final annual adjustment. For calendar-year plans and policies, the 2018 plan or policy year is the last year for which PCORI fees apply.

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