Last year, the Centers for Medicare & Medicaid Services (CMS) made changes to its reporting rules, Section 111, specifically as it relates to Medicare Set-Asides (MSAs). Section 111 audits will begin next month, related to the rule change that is being enforced as of October 11, 2025, for applicable settlements from October 11, 2024, and forward. Here is what employers and insurance companies need to know.
Section 111 Rule Changes – October 2024
Effective October 11, 2024, all workers’ compensation settlements that involved 1) an injured worker who is or was on Medicare, and 2) settled out/closed future medical, must be reported to CMS, even if there is a zero MSA, non-submit MSA, or it is below the review threshold. CMS makes it mandatory for self-insured employers and insurance companies to report when these two conditions are satisfied.
Section 111 Reporting Form Changes – April 2025
Effective April 4, 2025, the Section 111 Report to CMS must include the MSA amount in addition to the date of settlement and total settlement amount.
Section 111 Penalties Enforced – October 2025
The effective enforcement date for penalties for failure to report/noncompliance was October 11, 2025, for settlements reached on or after October 11, 2024. There is a one-year lookback; in other words, failure to report a settlement reached on or after October 11, 2024, within one year of the settlement date, can result in penalties of $250 or more per day, adjusted for inflation to $357 per day for 2024. This is a maximum of $365,000.
Section 111 Audit Commencement – February 2026
Beginning February 2026, and continuing on a quarterly basis, CMS will randomly select 250 MSP records to audit for Section 111 reporting compliance. The likelihood your settlement will be selected for audit is minimal, but if it is, and you have failed to report, the penalties could be substantial, as discussed above.
Other Changes
If you want to submit an amended MSA review request for a workers’ compensation settlement that reaches the review thresholds, you do not have to wait a year after the initial submission. As of April 7, 2025, you can submit it right away.
Finally, effective July 17, 2025, CMS will not review zero MSAs (even if the settlement meets the review threshold). CMS guidance is to keep and maintain documents supporting the zero allocation in case CMS requests more information. Remember, treating doctors’ opinions is what CMS gives weight to in these situations.
Bottom Line
Self-insured employers and insurance companies for workers’ compensation claims should consider reviewing all their settlements from October 11, 2024, and identify those that 1) involved an injured worker who was on Medicare on or before the date of settlement and 2) settled out/closed future medical and should seek legal counsel regarding whether reporting to CMS is necessary.
