Workers' Compensation: CMS Penalties Hit Workers' Compensation

Workers' Compensation - Medicare Secondary Payer Compliance

On January 15, 2026, the Centers for Medicare & Medicaid Services (CMS) hosted its most recent informational webinar on Civil Money Penalties (CMPs) for Non-Group Health Plan (NGHP) Responsible Reporting Entities (RREs). For workers' compensation professionals, this webinar was a watershed moment — not because the rules changed overnight, but because CMS made clear that enforcement is no longer theoretical. It is underway.

Here is what every workers' compensation insurer, self-insurer, and third-party administrator needs to understand right now.

The Baseline: What Section 111 Reporting Requires

Under Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), any entity that settles, pays, or assumes ongoing medical responsibility for a claim involving a Medicare beneficiary is legally required to report that information to CMS. In the workers' compensation context, this means reporting Total Payment Obligations to Claimants (TPOCs) — i.e., settlements — and any Ongoing Responsibility for Medicals (ORM). Failure to do so has historically carried consequences in theory. As of 2026, it carries them in practice.

The Enforcement Clock Is Already Running

CMS began randomly auditing 250 NGHP Section 111 records per quarter in January 2026. The first batch of audits is expected to be completed in February 2026, with informal notices of potential CMPs going out as early as March 2026. For any TPOC or ORM event occurring on or after October 11, 2024, the RRE had 365 days to submit the required Section 111 report. Miss that window, and the record is fair game for a penalty.

The penalty structure is significant: up to $250 per day of noncompliance per record for NGHP RREs, with no cap on the number of records that could be flagged. If a single record goes unreported for a full year, the potential CMP exposure reaches $21,250 or more — adjusted annually for inflation.

The Workers' Compensation Exception — But Don't Get Comfortable

Here is where the January 15 webinar delivered its most important news for the workers' comp industry: CMS will not impose CMPs on workers' compensation TPOC and ORM records until July 2026.

The reason is procedural. In April 2025, CMS expanded Section 111 reporting to require seven new data fields related to Workers' Compensation Medicare Set-Aside Arrangements (WCMSAs) as part of TPOC reporting. Because federal regulations require RREs to be given adequate time to implement new reporting requirements, CMS granted a grace period. That grace period ends in July 2026.

This is not a reprieve from the obligation to report. It is a reprieve from the penalty for late reporting, and applies only to the new WCMSA data fields that triggered the implementation window. Workers' compensation RREs should use this runway to fully bring their reporting infrastructure into compliance, because once July 2026 arrives, the same quarterly audit mechanism that is already catching liability and no-fault carriers will turn its attention to workers' comp.

What the Appeals and Notice Process Looks Like

If an RRE's record is flagged during a quarterly audit, the process unfolds in a structured sequence. CMS sends an Informal Notice of Intent to Impose a CMP to the RRE's Authorized Representative and Account Manager — not to the Reporting Agent. The RRE has 30 days to respond with mitigating evidence. If CMS accepts that evidence, no penalty is issued. If not, or if the RRE fails to respond, a Notice of Proposed Determination follows.

From there, the RRE has three levels of administrative appeal: an Administrative Law Judge (ALJ), the Departmental Appeals Board, and ultimately Judicial Review. Each stage has its own deadline — 60, 30, and 60 days, respectively. If all appeals are exhausted or waived, the RRE must pay electronically through pay.gov.

One critical warning from the webinar: CMP correspondence goes to the Authorized Representative and Account Manager on file. If those individuals do not understand the significance of what they are receiving — or assume someone else is handling it — the organization will bear the full consequence with no opportunity for appeal.

The Safe Harbor and Why It Matters for Workers' Comp

CMS does provide a safe harbor for RREs that genuinely cannot obtain the information needed to file a Section 111 report. To qualify, the RRE must demonstrate three good faith attempts to get the required information — two in writing (to both the beneficiary and their attorney) and one by phone, mail, or email.

For workers' compensation cases, this is particularly relevant. Injured workers are frequently represented by attorneys, and state bar ethics rules often discourage direct contact with represented parties. CMS addressed this directly: federal reporting obligations override state ethics provisions. If an RRE contacts the claimant's attorney three times without receiving a response, CMS expects the RRE to contact the claimant directly. Only a written refusal from the attorney — clearly and unambiguously declining to provide the information — relieves the RRE of that obligation.

What Workers' Compensation Teams Should Do Now

The July 2026 deadline is closer than it feels. Here is where to focus attention between now and then.

First, audit your Section 111 reporting profile. Confirm who your Authorized Representative and Account Manager are, and make sure those individuals understand what CMP correspondence looks like and what to do when it arrives.

Second, coordinate with your Reporting Agent. CMS will not send notices to Reporting Agents directly. Build an internal process that ensures submissions are tracked, confirmed, and followed up on — especially rejected submissions, which leave the RRE exposed.

Third, begin implementing the seven new WCMSA data fields now, even though penalties are not yet in effect. The implementation window exists precisely so that RREs can be ready when it closes.

Fourth, establish your safe harbor documentation practices. For every workers' comp claim involving a potential Medicare beneficiary where information is difficult to obtain, document every outreach attempt — dates, methods, and responses — in a format that could withstand CMS scrutiny.

The Bottom Line

CMS has built the enforcement infrastructure, set the timeline, and begun running audits. The workers' compensation industry has a temporary window of protection — but it is a window with an expiration date. Organizations that treat the July 2026 deadline as the moment to start preparing will find themselves behind. The time to act is now.

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