Yesterday, CMS announced that the threshold for liability settlements will reduce to $750. CMS will also maintain the $750 threshold for no-fault and workers’ compensation settlements, where the no-fault insurer or workers’ compensation entity does not otherwise have ongoing responsibility for medicals. To read CMS’ Alert click here. For CMS’ methodology in determining its 2017 thresholds, click here.
Recall that just a few months ago in late September, CMS announced that it would maintain its MSP liability settlement threshold at $1000 for the remainder of 2016. Additionally, CMS provided that it would introduce a threshold for workers’ compensation settlements of $750 or less, where the Responsible Reporting Entity (RRE) does not have ongoing responsibility for medicals (ORM). These monetary thresholds allow for an RRE to not be not be required to report the settlement via Section 111 Mandatory Insurer Reporting as well as not requiring reimbursement for conditional payments. For our prior blog, click here.
In determining the 2017 liability threshold, CMS found that its average cost of collection for a non-group health plan case was $368.75. CMS then compared the average cost of collection to the average demand amount per settlement range. The average demand amount for settlements of $750 or less was $384.25, therefore CMS found that a $750 threshold made sense to ensure that its costs did not exceed its potential recovery.
Similar methodology was applied to no-fault and workers’ compensation. CMS found that the average amount demanded for the settlement ranges for no-fault insurance and workers’ compensation was $510.03 and $573.27 respectively. Therefore, CMS found that these settlement ranges were closest to the estimated cost of collection of $368.75, where the average amount to be recovered exceeds the cost of collection.
Franco Signor Commentary: This is an important alert from CMS, and RREs/primary payers should adjust their internal Best Practices for 2017 to align with these $750 thresholds. These thresholds begin January 1, 2017. The $1000 threshold for liability claims will remain through December 31, 2016.
While we are surprised that the threshold was reduced and that the threshold is the same across all lines of non-group health plans, we thank CMS for continuously calculating thresholds as required by the SMART Act and timely notifying the industry of its determined thresholds for 2017.
Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP
Chief Legal Officer
Franco Signor LLC