State regulators are asking for relief from a federal agency’s new health plan reporting requirements.

Susan Voss, chair of the Receivership & Insolvency Task Force at the National Association of Insurance Commissioners, Kansas City, Mo., has sent a letter asking the Centers for Medicare & Medicaid Services to protect health plan receivers from Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007.

The new “secondary payer” reporting law and the regulations written to implement it require private health plans to give CMS extensive information about plan participants, to ensure that the private are taking their full share of responsibility for participants who may also be eligible for Medicare, Medicaid or State Children’s Health Insurance Program participants.

Voss is urging Barbara Wright, acting director of the Medicare debt management division at CMS, to exempt receivers of health plans that are in liquidation from the new reporting rules.

CMS also should exempt companies that are in rehabilitation and conservation, or else waive any Section 111 fines for those companies, Voss writes.

The receivers who handle troubled insurers work “to recover assets, adjudicate and pay claims, administer the estate of the insurance company, and in some cases rehabilitate the insurer,” Voss writes. “The Receiver’s overarching goal is to maximize the value of the estate for the claimants (e.g. policyholders, third parties, creditors, stockholders, etc.).”

Some receivers are trying to liquidate the companies, and others are trying to rehabilitate the companies, or at least to conserve their operations, Voss writes.

When receivers are liquidating companies, they may take years to find, recover and distribute the assets, and, in the majority of cases, a guaranty association will have paid all but $100 of each policy-related claim, Voss writes.

“In these cases,” Voss writes. “this $100.00 amount is the maximum amount an insured/claimant will be due from the Receiver….If a Receiver of a liquidated insurer is required to report its distributions to CMS pursuant to Section 111, CMS will be inundated with data regarding potentially un-reimbursable payments, which are mostly de minimus in amount and relate to transactions 7-10 years old or older…. It is hard to imagine a scenario where CMS would be able to effectively enforce Medicare secondary payer provisions on $100 transactions that took place almost a decade or more before the enforcement action.”

Collecting all of the claimant information would be expensive, and CMS would end up with little additional revenue as a result of all that effort, Voss writes.

Insurers under rehabilitation might have somewhat more ability to collect the required information, but, “in practice, the vast majority of rehabilitation receiverships are necessary due to the financial weakness, possibly even insolvency, of the insurers placed in receivership,” Voss writes. “Once in control of an insurer, a Receiver often finds not only that the financial problems of the insurer are worse than expected, but also that the quality of the data maintained by the insurer prior to receivership is very poor. Moreover, it is likely that Receivers will find that insurers that enter receivership in the future have not been complying with Section 111 reporting requirements.”

Piling Section 111 reporting burdens on top of a fragile company would lead to further deterioration of the company, Voss writes.

A copy of the NAIC letter to CMS is available here.