A consulting firm involved in helping companies comply with Centers for Medicare and Medicaid Services regulations believes that a CMS-proposed rule designed to implement a new insurance claims-settlement law may be unworkable.

A comment letter by officials of Allsup, Belleville, Ill., says the rule, which implements the so-called SMART Act, or the Strengthening Medicare and Repaying Taxpayers Act, will have a particularly negative impact on settling workers' compensation claims.

The letter also says the interim final rule (IFR) proposed by CMS will adversely affect a whole range of interested parties involved in settling claims where the ultimate beneficiary is a Medicare or Medicaid subscriber who must share some of the proceeds of the settlement with CMS. These include insurers, third-party administrators and self-insured employers.

In an interview, Aaron Frederickson, an expert in Medicare Secondary Payment Act compliance who joined Allsup in February 2013, said that the key problem with the interim final rule is that it extends the time period for CMS to approve a settlement to as long as 245 days, despite the fact that the SMART Act sets a 120-day limit for CMS to respond.

Indeed, the IFR is unclear, Frederickson said, with some interested parties interpreting it as providing CMS with 185 days to respond, while others say 245.

“This is the key problem with the IFR,” Frederickson said, “by decreasing the viability of settlements.”

He said it could also undermine public policy by discouraging settlements because it limits “judicial economy.”

Within the context of workers' comp cases, Frederickson said, “It raises the chances that the parties would decide to follow the hearing process instead of settling without hearing,” he explained.

The American Insurance Association, the Risk and Insurance Management Society and the Medicare Advocacy Recovery Coalition (MARC), which includes self-insured employers, have sent in comment letters voicing concerns.

The SMART Act aims to correct delays in workers' comp and personal-injury cases when Medicare conditional payments are paid back.

CMS is implementing the SMART Act by establishing a web portal through which interested parties can apply to CMS to receive approval for a proposed settlement. The law requires CMS to tell insurers how much of a proposed settlement involving federal health insurance recipients must be given to CMS.

Another issue raised regarding the IFR is that it went into effect last week without the usual delay in implementation accomplished through a notice-and-comment system.

Frederickson said the agency has full authority to revise the rule based on the comments.

In its letter, Allsup says the IFR “fails to present a workable, timely solution to resolve conditional payment” issues through the web portal.

The Allsup letter said the IFR “ignores the 120-day statutory time-frame” on CMS responding to a request for approval of a settlement.

The letter also notes that the SMART Act “was significant” because it was the first legislative attempt to codify a conditional payment resolution process in pending liability insurance, no-fault insurance and workers' comp settlements.

The IFR “ignores the reality of the settlement process” in workers' comp and personal-injury cases, the letter said.

“If the proposed regulations are allowed to survive, it will hinder settlements when unexpected delays arise,” the letter said. These delays include, but are not limited to, continuances granted by a presiding judicial official or administrative law judge, the letter said.

“It also ignores the reality of litigation where settlement conferences and other forms of alternative dispute resolution may initially fail, but further settlement efforts later on in the litigation process are successful,” the letter said.

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