Section 111 Reporting and Civil Money Penalties
CMS published regulations regarding Civil Money Penalties (CMPs) in the Federal Register on October 11, 2023. The regulations have been incorporated into the Code of Federal Regulations, and a copy can be found in the Downloads section below. These regulations are applicable as of October 11, 2024, and will be enforced as of October 11, 2025. While this section discusses compliance and CMPs, RREs are reminded to always refer to the GHP User Guide for information and instructions pertaining to the specifics of mandatory insurer reporting requirements. Any examples provided herein are intended to be illustrative only and should not be relied upon for policy guidance purposes. Where there appears to be a contradiction, the published User Guides take precedence over this information and should be referenced.
CMPs will only be issued by CMS on a prospective basis, and there will be no instances of retroactive enforcement related to noncompliant reporting. More details regarding what is considered timely reporting and when enforcement will begin can be found below.
Questions regarding CMPs should be directed to CMS via the dedicated resource mailbox at Sec111CMP@cms.hhs.gov. Technical reporting questions should continue to go to the assigned EDI Representative.
Non-Compliance
For the purposes of compliance with mandatory insurer reporting obligations, a “record” is defined as a single instance of coverage under a GHP arrangement (including primary prescription drug coverage) for any individual employee or dependent, where that individual has been identified as a Medicare beneficiary, that must be submitted via the Section 111 reporting process.
Records are required to be submitted in a timely manner. An RRE is considered to be in compliance with the timeliness requirement if a record is reported within 1 year (365 days) of the latter of either the effective date of the coverage or the date when the individual became a Medicare beneficiary. It is ultimately the RRE’s responsibility, and not the reporting agent’s responsibility, to ensure that Section 111 records are submitted to CMS in a timely manner, if such a service is being used.
The date the 365-day “compliance clock” begins to run, or is applicable, is October 11, 2024. Applicable means every reportable MSP occurrence that occurs on or after October 11, 2024, is eligible for review of compliance. Compliance with reporting obligation is defined by the rule as the successful submission and acceptance of the GHP coverage record.
GHP RREs are eligible to receive a CMP of $1,000 (as adjusted), per instance of noncompliance, for each calendar day a record is late with a maximum penalty of $365,000. More details regarding the calculation of CMP penalty amounts can be found below.
A note of caution: While CMPs will be issued on a prospective basis for new coverage records, accurate reporting overall is still statutorily required, in addition to being an important tool the Medicare program uses to ensure proper payment of claims. RREs who fail to meet their full reporting obligations may face other recovery actions including, but not limited to, False Claims Act suits or administrative recovery efforts.
Review of Records to Identify Non-Compliance
Beginning January 2026, and continuing on a quarterly basis, CMS will randomly select 250 MSP records to audit for Section 111 reporting compliance. This sample of 250 will be selected across the entire universe of accepted new Section 111 records received during the specific review period as well as records Medicare received from non-Section 111 sources such as providers or beneficiaries. The 250 records are not selected per each RRE. While statistically unlikely, there is always a chance that an RRE may have more than one (1) record selected in the sample. The 250 randomly selected records will proportionately represent the GHP and NGHP records accepted in a given quarter. For example, if during a given quarter 60% of the newly accepted records were NGHP and 40% of the newly accepted records were GHP, the 250 sampled records will reflect this distribution.
Note: The 250 randomly selected records will include both Section 111 and non-Section 111 records. A non-Section 111 record is defined as an MSP and/or primary drug record that has been reported via other coordination of benefits and data collection methods. For the purposes of CMS’ audit, any non-Section 111 records captured are those that were reported the same quarter CMS is reviewing, but from the prior year, since RREs are required to report within 1 year (365 days) of the latter of either the effective date of the coverage or the date when the individual became a Medicare beneficiary.
CMS will audit the sampled records to identify potential instances of non-compliance. Records reviewed and identified as “compliant” will not trigger any notification to the RRE. An RRE will only receive CMS correspondence if one of its records has been identified as potentially noncompliant. Additional information regarding CMP letters and the process RREs can anticipate if a potentially noncompliant record is identified can be found in the following section.
Penalty Amounts
If, in its review, CMS identifies any record where a GHP RRE has failed to meet the timeliness requirements, that RRE is subject to a $1,000 CMP (as adjusted for inflation) for each calendar day that record is considered to be out of compliance.
A GHP record is considered to be out of compliance if, at the time of its review, CMS identified that the RRE failed to report that record more than 1 year (366 days) from the date the RRE should have reported the MSP effective date of coverage, or the applicability date of the rule (October 11, 2024), whichever is later
Section 111 records that fail to meet the timeliness requirement will be identified through the date the record was reported and accepted, being 365 days greater than the date a record should have been reported (i.e.- the latest compliant submission date).
Example: An RRE’s record is randomly selected for a CMS quarterly audit. The RRE reported a Medicare beneficiary’s coverage on April 1, 2026, but the beneficiary enrolled in the new GHP with a coverage effective date of January 1, 2025.
The record should have been reported no later than January 1, 2026, but was actually reported 90 days later.
The RRE would be subject to a CMP for the period between January 1, 2026 through April 1, 2026. An Informal Notice identifying the noncompliant record would be issued with a potential CMP amount of $90,000 (as adjusted for inflation).
Non-Section 111 records are also a factor in the determination of timely reporting. A non-Section 111 record that is reported and accepted but does not have a corresponding Section 111 record submitted and accepted within 365 days of the MSP effective date of the non-Section 111 record, will fail to meet the timeliness requirement.
Example: A non-Section 111 record was randomly selected for a CMS quarterly audit, in which the self-report identified a Medicare beneficiary’s coverage effective date of April 1, 2025. As of July 1, 2026, the date of the CMS audit, the non-Section 111 record was not reported via Section 111.
The non-Section 111 record should have been reported via Section 111 no later than April 1, 2026.
The RRE would be subject to a CMP for the period of April 1, 2026 through July 1, 2026. An Informal Notice identifying the noncompliant record would be issued with a potential CMP amount of $90,000 (as adjusted for inflation).
CMS does not have the statutory authority to adjust or otherwise limit the penalty amounts for GHP RREs. The 2024 inflation-adjusted rate is $1,428. As required by law, the $1,000 daily CMP amount will be adjusted annually to account for inflation; upon publication of the adjustment notice in the Federal Register, an Alert will be posted on the What’s New page notifying RREs of the adjusted CMP amounts.
Letters
CMS will communicate with the RRE only when a potential instance of non-compliance is identified. The RRE’s Authorized Representative will receive all CMP correspondence, with a copy issued to the Account Manager.
Reminder: RREs must ensure the Profile Report recertification has been completed and all contact information is current to ensure that your organization does not miss any CMP-related correspondence. Failure to ensure all contact information is accurate is not an acceptable defense against a CMP.
For a visual representation of the CMP process and when RREs can anticipate receiving letters, please refer to the CMP Workflow available in the Downloads section below.
Informal Notice- Intention to Impose a Civil Money Penalty
First letter (Notice) issued when a noncompliant record was identified on CMS’ quarterly audit.
A CMP is not being assessed at this point, rather, the RRE’s noncompliant record is identified along with the associated information so that an RRE may investigate the record.
The process to submit mitigating information, in an attempt to explain or defend technical or administrative issues resulting in the noncompliance is outlined in this letter. Mitigating evidence must be submitted to CMS within 30 days of receipt of the Informal Notice. This is the opportunity for RREs to explain why a CMP should not be imposed.
Decision Regarding Mitigating Evidence Submission
If an RRE believes that there were circumstances beyond its control that prevented it from reporting on time, responding to the informal notice can help reduce the amount of a CMP or even avoid a CMP altogether. CMS reviews all reasonable evidence submitted timely by the RRE.
Extensions to the RRE’s required 30-day response time will not be granted.
Note: CMS may request clarification on, or further explanation of, an RRE’s submitted evidence, but this step of the process only affords the RRE one (1) submission opportunity.
If CMS determines the submitted evidence was sufficient and supports the RRE’s defense against CMS’ finding of noncompliance, a CMP will not be issued. No additional action is required by the RRE.
Each decision regarding the mitigating evidence submitted only pertains to that specific record referenced in the Informal Notice.
If CMS determines the submitted evidence was insufficient or the RRE’s submission of mitigating evidence was not submitted within the required timeframe, CMS’ original finding of noncompliance will be upheld and a Proposed Determination to impose a CMP will be issued.
Notice of Proposed Determination to Impose a Civil Money Penalty
If there is no response to the informal notice, or the RRE has not provided sufficient mitigating evidence, the process progresses to the first step of the formal process, with the issuance of the Notice of Proposed Determination. This letter (notice), sent via Certified Mail, provides the RRE with the CMP amount that CMS intends to impose, and how to further appeal.
RREs are afforded the right to request a hearing as set forth under 42 CFR § 405 and in accordance with 42 CFR Part 1005 and must do so within 60 calendar days of receipt of the Notice of Proposed Determination.
The process to request a hearing with an Administrative Law Judge (ALJ) is outlined in this letter, must be filed electronically with the Departmental Appeals Board (DAB), Civil Remedies Division, using the DAB E-File System available at https://dab.efile.hhs.gov, and must be completed within the required timeframes. The RRE may appeal the ALJ’s initial decision to the DAB’s Appellate Division (the “Board”) within 30 calendar days of the ALJ decision. Appeals to the Board must also be submitted through DAB E-File. The Board’s decision becomes binding 60 calendar days following service of the Board’s decision, absent petition for judicial review.
The RRE will be precluded from appealing a final determination to impose a CMP, pursuant to 42 CFR § 402.9(c), if the hearing is not requested within the required timeframe.
Notice of Final Determination to Impose a Civil Money Penalty
If the RRE does not request a hearing or appeal, elects to terminate the appeals process, or otherwise exhausts all available administrative appeal rights and the CMP is upheld, the Notice of Final Determination will be issued. This letter (notice), sent via Certified Mail, confirms that the imposition of the RRE’s CMP is final.
Instructions on how the RRE should remit payment, and its due date, are included in the Notice of Final Determination.