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Paul Zimmerman

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CMS Increasingly Turns to Civil Monetary Penalties to Police Federally-Funded Health Programs

The federal government has upped the use of civil monetary penalties to enforce its regulations on subsidized health programs. In 2017, the Centers for Medicare & Medicaid Services (CMS) announced civil monetary penalties totaling $5.7 million against 27 Medicare Advantage and Part D prescription drug plans. CMS has been exceeding this pace in 2018, and through February has already announced $1.7 million in penalties against eight plans, slapping one with a $1.4 million fine.

CMS often levies civil monetary penalties on Medicare Advantage and Part D plans after conducting audits showing that they have imposed excessive cost-sharing on members or improper non-quantitative limits (such as inappropriate step therapy requirements for prescription drugs).

Regulations issued by the Department of Health and Human Services (HHS) also permit CMS to impose civil monetary penalties on the Qualified Health Plans (QHPS) that are sold on the 27 federally-run state exchanges. CMS can claim these penalties for misconduct or substantial noncompliance with its rules, including misconduct that affects enrollees (read: limiting access to medically necessary services, imposing excessive premiums, discouraging or delaying enrollment by persons with significant health needs, or noncompliance with rules on cost-sharing reductions and advance premium tax credits). Such noncompliance also includes process violations, such as not providing or misrepresenting information needed by CMS for enforcement, and failing to remit user fees.[1] Pursuant to its April 2018 revision of its rules for QHPs, HHS will now also permit CMS to also impose penalties where a plan engages in misconduct in connection with an audit of its risk adjustment data.[2]

Health insurers can appeal, and the regulations have provided some armor that a plan can use as a shield against a penalty. For calendar years 2014-2015, HHS’s regulations stated that sanctions would not be imposed if a QHP issuer showed it had made good faith efforts to comply with the rules. Of note, HHS has extended this safe harbor to the 2018 plan year as a market stabilization measure.[Penalties can also be reduced based on an issuer’s overall record of compliance, the frequency and financial magnitude of the violation and mitigating circumstances.[3]

David Johnson can be contacted at or (415) 857-6751.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.

[1] 45 C.F.R. §156.805

[2] 83 Fed.Reg. 16930, 17060 (Apr. 17, 2018)

[3] 45 C.F.R. § 156.805(b) and (c)