45344 federal register /vol. 60, no. 169/thursday, … register/vol. 60, no. 169/thursday, august...

45344 Federal Register / Vol. 60, No. 169 / Thursday, August 31, 1995 / Rules and Regulations

Future reviews of monitoring datawill be conducted, in conjunction withthe State of Iowa, at a minimum of everyfive years, or until such time when nohazardous substances, pollutants orcontaminants remain at the site abovelevels that allow for unrestricted useand unlimited exposure.

The EPA identifies sites that appear topresent a significant risk to publichealth, welfare, or the environment andmaintains the NPL as the list of thosesites. Sites on the NPL may be thesubject of remedial actions financed bythe Hazardous Substance ResponseFund (Fund). Pursuant to section 105(e)of CERCLA, any site deleted from theNPL remains eligible for Fund-financedRemedial Actions if conditions at thesite warrant such action. Deletion fromthe NPL does not affect responsibleparty liability or impede EPA efforts torecover costs associated with responseefforts.

List of Subjects in 40 CFR Part 300

Environmental protection, Chemicals,Hazardous substances, Hazardouswastes, Superfund.

Dennis Grams,

Regional Administrator.

For the reasons set out in thepreamble 40 CFR part 300 is amendedas follows:

PART 300—[AMENDED]

1. The authority citation for part 300continues to read as follows:

Authority: 42 U.S.C. 9601–9657; 33 U.S.C.1321(c)(2); E.O. 12777, 56 FR 54757, 3 CFR,1991 Comp., p. 351; E.O. 12580, 52 FR 2923,3 CFR, 1987 Comp., p. 193.

Appendix B—[Amended]

2. Table 1 of appendix B to part 300is amended by removing the Site‘‘Northwestern States Portland CementCompany Superfund Site, Cerro Gordo,Iowa’’.

[FR Doc. 95–21407 Filed 8–30–95; 8:45 am]

BILLING CODE 6560–50–P

DEPARTMENT OF HEALTH ANDHUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 400 and 411

[BPD–482–FC]

RIN 0938–AD73

Medicare Program; MedicareSecondary Payer for IndividualsEntitled to Medicare and Also CoveredUnder Group Health Plans

AGENCY: Health Care FinancingAdministration (HCFA), HHS.ACTION: Final rule with comment period.

SUMMARY: These regulations establishlimits on Medicare payment for servicesfurnished to individuals who areentitled to Medicare on the basis ofdisability and who are covered underlarge group health plans (LGHPs) byvirtue of their own or a family member’scurrent employment status with anemployer; and prohibit LGHPs fromtaking into account that thoseindividuals are entitled to Medicare onthe basis of disability.

They also implement certain otherprovisions of section 1862(b) of theSocial Security Act, as amended by theOmnibus Budget Reconciliation Acts of1986, 1989, 1990, and 1993 and theSocial Security Act Amendments of1994. Those amendments affect theMedicare secondary payer rules forindividuals who are entitled toMedicare on the basis of age or who areeligible or entitled on the basis of endstage renal disease and who are alsocovered under group health plans(GHPs). The provisions that apply to allthree groups include—

• The rules under which HCFAdetermines that a GHP or LGHP is notin conformance with the requirementsand prohibitions of the statute;

• The appeals procedures respectingGHPs and LGHPs that HCFA finds to benonconforming.

• The referral of nonconforming plansto the Internal Revenue Service; and

• The rules for recovery ofconditional or mistaken Medicarepayments made by HCFA.

The intent of the MSP provisions is toensure that Medicare does not payprimary benefits for services for whicha GHP or LGHP is the proper primarypayer and that beneficiaries coveredunder these plans are not disadvantagedvis-a-vis other individuals who arecovered under the plan but are notentitled to Medicare.DATES: Effective Dates: Theseregulations are effective on October 2,1995.

Comment Date: We will considercomments that we receive no later than5 p.m. on October 30, 1995.

ADDRESSES: Mail an original and 3copies of written comments to thefollowing address:

Health Care Financing Administration,Department of Health and HumanServices, Attention: BPD–482–FC,P.O. Box 26676, Baltimore, MD 21207.

If you prefer, you may deliver originaland 3 copies of your written commentsto one of the following addresses:

Room 309–G, Hubert H. HumphreyBuilding, 200 Independence Avenue,SW., Washington, DC 20201, or

Room C5–09–26, 7500 SecurityBoulevard, Baltimore, MD 21244–1850.

Because of staffing and resourcelimitations, we cannot accept commentsby facsimile (FAX) transmission. Incommenting, please refer to file codeBPD–482–FC. Comments receivedtimely will be available for publicinspection as they are received,generally beginning approximately 3weeks after publication of a document,in Room 309–G of the Department’soffices at 200 Independence Avenue,SW., Washington, DC, on Mondaythrough Friday of each week from 8:30a.m. to 5 p.m. (phone: (202) 690–7890).

For comments that relate toinformation collection requirements,mail a copy of comments to:

Office of Information and RegulatoryAffairs, Office of Management andBudget, Room 10235, New ExecutiveOffice Bldg., Washington, D.C. 30503,Attention: Allison Herron Eydt, DeskOfficer for HCFA

Copies: To order copies of the FederalRegister containing this document, sendyour request to: New Orders,Superintendent of Documents, P.O. Box371954, Pittsburgh, PA 15250–7954.Specify the date of the issue requestedand enclose a check or money orderpayable to the Superintendent ofDocuments, or enclose your Visa orMaster Card number and expirationdate. Credit card orders can also beplaced by calling the order desk at (202)512–1800 or by faxing to (202) 512–2250. The cost for each copy is $8. Asan alternative, you can view andphotocopy the Federal Registerdocument at most libraries designatedas Federal Depository Libraries and atmany other public and academiclibraries throughout the country thatreceive the Federal Register.

FOR FURTHER INFORMATION CONTACT:Herbert Pollock, (410) 786–4474.

45345Federal Register / Vol. 60, No. 169 / Thursday, August 31, 1995 / Rules and Regulations

SUPPLEMENTARY INFORMATION:

I. Background

During the first 15 years of theMedicare program, Medicare was theprimary payer for all Medicare-coveredservices with the sole exception ofservices covered under workers’compensation as provided in section1862 of the Act. Beginning in 1980, theCongress passed a series of amendmentsto section 1862 of the Act to makeMedicare the secondary payer forservices covered by other types ofinsurance. In general, Medicare is nowsecondary to all of the following:

1. All forms of liability insurance.2. Automobile and non-automobile

no-fault insurance.3. Group health plans (GHPs) that

cover end-stage renal disease (ESRD)patients (during the first 18 months ofMedicare eligibility or entitlement).

4. GHPs that cover aged individualswho have current employment statuswith an employer and aged spouses ofindividuals of any age who have currentemployment status with an employer.

5. Large group health plans (LGHPs)that cover disabled individuals if theindividual or a member of theindividual’s family has currentemployment status with an employer.(Current employment status issometimes referred to as ‘‘currentemployment.’’)

II. Statutory Amendments

A. Overview

1. Section 9319 of the OBRA ’86 (Pub.L. 99–509) added a new section1862(b)(4), which made Medicaresecondary to benefits payable by ‘‘largegroup health plans’’ for servicesfurnished to ‘‘active individuals,’’ whoare entitled to Medicare based ondisability.

2. Section 6202(b) of OBRA ’89 (Pub.L. 101–239) reorganized and clarifiedthe Medicare secondary payer (MSP)provisions and transferred theprovisions applicable to the disabled tosection 1862(b)(1)(B) of the Act.

3. Section 4204(g) of OBRA ’90 (Pub.L. 101–508) added a new section1862(b)(3)(C), which prohibitsemployers and other entities fromoffering Medicare beneficiariesincentives not to enroll or to terminateenrollment in a GHP that wouldotherwise be primary to Medicare.Section 1862(b)(3)(C) of the Actprovides for a civil money penalty of upto $5,000 for each violation.

Section 4203(c)(1) of OBRA ’90redefined the 12-month ESRD MSPcoordination period, during whichGHPs are required to pay primary to

Medicare, and extended that redefinedperiod from 12 to 18 months. A finalrule with comment period addressingthe section 4203(c)(1) changes waspublished in the Federal Register onAugust 12, 1992 (57 FR 36006–36016).

4. Section 13561(e) of OBRA ’93 (Pub.L. 103–66), effective August 10, 1993,changed the MSP provisions for thedisabled to make Medicare thesecondary payer for individuals whohave LGHP coverage by virtue of theindividual’s own or a family member’s‘‘current employment status with anemployer’’. An individual has currentemployment status with an employer ifthe individual is an employee, is theemployer (including a self-employedperson), or is associated with theemployer in a business relationship. Ingeneral, this means that the individualis on the employment rolls of theemployer. Before this change in the law,Medicare was also secondary payer forcertain nonworking disabledindividuals who were considered tohave employee status based on theirrelationship with the employer, eventhough they may not have been on theemployment rolls.

5. Sections 151(c) and 157(b) of theSocial Security Act Amendments of1994 (SSAA ’94) (Pub. L. 103–432)made miscellaneous and technicalcorrections to OBRA ’89, OBRA ’90, andOBRA ’93. Section 151(b)(3) addedexpress authority to assess interest if aconditional Medicare payment is notrefunded within 60 days.

B. OBRA ’86 Amendments—ActiveIndividuals Entitled to Medicare on theBasis of Disability

These amendments—1. Defined the term ‘‘active

individual’’ as ‘‘an employee (as may bedefined in regulations), the employer,an individual associated with theemployer in a business relationship, ora member of the family of any of suchpersons.’’

2. Defined ‘‘large group health plan’’by reference to section 5000(b) of theInternal Revenue Code (IRC) of 1986,which defined the term as ‘‘a plan of, orcontributed to by, an employer oremployee organization (including a self-insured plan), to provide health care(directly or otherwise) to the employees,former employees, the employer, othersassociated or formerly associated withthe employer in a business relationship,or their families, that covers employeesof at least one employer that normallyemployed at least 100 employees on atypical business day during the previouscalendar year.’’ (We have interpreted thephrase ‘‘normally employed at least 100employees on a typical business day’’ to

mean that the employer employed atleast 100 full-time or part-timeemployees during 50 percent or more ofthe employer’s business days during theprevious calendar year.)

3. Provided that Medicare may notpay for services furnished to an activeindividual on or after January 1, 1987,and before January 1, 1992, to the extentthat payment has been made or canreasonably be expected to be made byan LGHP. (Section 4203(b) of OBRA ’90changed the sunset provision fromJanuary 1, 1992, to October 1, 1995, andsection 13561(b) of OBRA ’93 changedthat date to October 1, 1998.)

4. Expanded HCFA’s recovery rightsunder previous amendments to theMedicare statute by providing thatHCFA may bring an action against anyentity that fails to pay primary benefitsfor services furnished to activeindividuals entitled on the basis ofdisability, as required under section1862(b) of the Act, and may collectdouble damages.

5. Created a private cause of actionunder which any claimant may seekdouble damages from any entityresponsible for payment that fails to payprimary benefits as required by thestatute.

6. Provided that an LGHP ‘‘may nottake into account that an activeindividual is eligible for or receives’’Medicare benefits on the basis ofdisability. The effect of this prohibitionwas to—

• Make Medicare secondary payer foractive individuals who were entitled toMedicare on the basis of disability andwhose LGHP coverage was linked totheir status as active individuals; forexample, individuals who had LGHPcoverage because they were employeesor spouses of employees; and

• Require the LGHP to treat suchactive individuals the same way ittreated similarly situated individuals.

C. OBRA ’89 Amendments

The OBRA ’89 amendments—1. Revised the definition of ‘‘active

individual’’ to include the phrase ‘‘self-employed individual (such as theemployer)’’;

2. Extended to individuals with ESRDand to the aged the prohibition againsttaking into account Medicareentitlement.

3. Required that GHPs—• Furnish to aged employees and

spouses the same benefits, under thesame conditions, that they furnish toemployees and spouses under 65; and

• Not differentiate in the benefits theyprovide between individuals with ESRDand other plan enrollees, on the basis of


the existence of ESRD, the need fordialysis, or in any other manner.

4. Extended to the MSP provisions forthe aged and for those with ESRD, theFederal Government’s right to recoverdouble damages; and

5. Exempted from the MSP provisionsservices performed for a religious orderby members of the order who take a vowof poverty; and

6. Provided a single formula fordetermining Medicare secondarypayment amounts under all MSPprovisions.

D. OBRA ’90 Amendments

These amendments made thefollowing changes:

1. Added a new section 1862(b)(3)(C)to the Act, which prohibited employersor other entities from offering to anindividual entitled to Medicare anyfinancial or other incentive not toenroll, or to terminate enrollment, in aGHP that would be primary to Medicare,unless the incentive was also offered toall individuals who are eligible forcoverage under the plan. That sectionalso provided for a penalty of up to$5,000 for each violation, which was tobe applied in accordance withprovisions of section 1128A of the Act.

2. Redefined and extended the ESRDMSP coordination period. The 12-monthESRD coordination period wasredefined to begin with the first monthof ESRD-based eligibility or entitlement,and that redefined period was extendedto 18 months. (Previously, the ESRDcoordination period was a 12-monthperiod that began with the first monthof dialysis rather than with the firstmonth of ESRD-based eligibility orentitlement, which generally occurs asof the fourth month of dialysis.) OnAugust 12, 1992, we published a finalrule with comment period (57 FR36006–36016) that incorporated thischange. We received one comment onthis particular aspect, but made nochange in the confirming final rulepublished on November 2, 1993 (58 FR58502–58504).

E. OBRA ’93—Amendments Treatmentof Individuals Entitled to Medicare onthe Basis of Disability Who Have LGHPCoverage by Virtue of Their Own or aFamily Member’s Current EmploymentStatus

The OBRA ’93 amendments made thefollowing changes, effective August 10,1993:

1. Eliminated the concept ‘‘activeindividual’’ and provided instead thatthe MSP disability provision appliesonly if the individual, or a familymember, is covered under an LGHP ‘‘by

virtue of the individual’s currentemployment status with an employer’’.

2. Provided that an individual has‘‘current employment status’’ if theindividual is an employee, the employer(including a self-employed person), or isassociated with the employer in abusiness relationship.

3. Required use of the IRS aggregationrules for determining employer sizeunder the working aged and disabilityprovisions.

4. Modified the MSP provisions forindividuals who are eligible for orentitled to Medicare on the basis ofESRD and also entitled on the basis ofage or disability.

5. Clarified that GHPs and LGHPs ofgovernmental entities are subject to theMSP provisions (although governmentalentities are exempt from the excise taxapplicable to employers that participatein nonconforming plans.)

F. The Social Security Act Amendmentsof 1994 (SSAA ’94)

The SSAA ’94 made the followingmiscellaneous and technicalcorrections:

1. Effective as if included in theenactment of OBRA ’93—

A. Clarified that plans must offer thesame benefits under the sameconditions to the age 65 or older spouseof any employee; that is, without regardto the employee’s age. (With regard tospouses, the wording of OBRA ’93 couldhave been misconstrued as applying theworking aged provision only to age 65or older spouses of employees age 65 orolder.) (Section 151(c)(1).)

B. Clarified that GHPs and LGHPs ofgovernmental entities have always beensubject to the MSP provisions. (OBRA’93 could have been misconstrued asproviding that plans of governmentalentities are subject to the MSPprovisions only as of August 10, 1993,the date of enactment of OBRA ’93,whereas governmental entities havealways been subject to the MSPprovisions, with the exception of theexcise tax applicable to employers thatparticipate in the nonconforming plans.)(Sections 151(c) (9) and (10).)

2. Effective as if included in theenactment of OBRA ’90—

A. Clarified that employers and otherentities are prohibited from offering toan individual entitled to Medicare anyfinancial or other incentive not to enrollin, or to terminate enrollment in, a GHPthat would be primary to Medicare,irrespective of whether the incentive isalso offered to all other individuals whoare eligible for coverage under the plan.(Section 157(b)(7). Refer to section VIII–K of this preamble.)

B. Clarified the extent to whichsection 1128A of the Act applies to thecivil money penalty of section1862(b)(3)(C) of the Act. (Section157(b)(7). Refer to section VIII–K of thispreamble.)

3. Effective as if included in theenactment of OBRA ’89—Clarified thatunder section 1862(b)(1)(C) plans maypay benefits secondary to Medicare afterthe 18-month period during which theplan is prohibited from taking intoaccount ESRD-based eligibility orentitlement but may not otherwisedifferentiate in benefits provided vis-a-vis other plan enrollees. The OBRA ’89language could have been misconstruedas permitting plans to discriminateagainst enrollees who had ESRD afterthe 18-month coordination period. Thatis, OBRA ’89 broadly stated that planswere not prohibited from ‘‘taking intoaccount’’ ESRD-based eligibility orentitlement after the 18-monthcoordination period; the SSAA ’94corrected that language to narrowly statethat plans are not prohibited frompaying benefits secondary to Medicareafter the 18-month coordination period.(Section 151(c)(5). Refer to section VIII–D of this preamble.)

The SSAA ’94 also added expressauthority to assess interest if aconditional Medicare primary paymentis not refunded within 60 days. Asauthorized under common law, and inaccordance with HHS regulations,consistent with the Federal ClaimsCollection Act (31 U.S.C. 3711), HCFAmay charge interest on amounts that anyresponsible party does not refundtimely. Section 151(b)(3) amendedsection 1862(b)(2)(B)(i) of the Act tomake explicit that the Secretary maycharge interest when timelyreimbursement is not made. This self-implementing statutory clarification iseffective for items and servicesfurnished on or after the date ofenactment, October 31, 1994. The rate ofinterest provided in section1862(b)(2)(B)(i) of the Act is the same asin sections 1815(d) and 1833(j), whichis reflected in regulations at 42 CFR405.376(d). We will include detailedpolicies regarding the statutoryprovision in a future regulation. (Referto section VIII–L of this preamble.)

III. Study by the Comptroller GeneralOBRA ’86 required the Comptroller

General to conduct a study to determinethe impact of the MSP provisions for thedisabled on the access that disabledindividuals and members of theirfamilies have to employment and healthinsurance. In the April 10, 1991, reportentitled Medicare: Millions in DisabledBeneficiary Expenditures Shifted to


Employers, the Comptroller Generalconcluded that ‘‘The OBRA ’86secondary payer provision has met itsobjective of shifting considerableMedicare expenditures to LGHPsapparently without significant adverseeffect’’ on the access of disabledbeneficiaries and their families toemployment and health services. Thereport further stated: ‘‘In addition tosuffering little adverse effect from theprovision, the disabled are safeguardedby regulations proposed by HCFA.These rules discourage employers fromtaking many of the actions they wereconsidering that would discriminateagainst disabled beneficiaries and theirfamilies in regard to health insurance.’’The report also recommended thatHCFA change its policy to remove the‘‘indicators’’ that, prior to the changesmade by OBRA ’93, were used todetermine whether an individual who isnot actively working for an employer isconsidered an employee. Thatrecommendation echoes those made bymany of the commenters in theirresponses to the proposed rulespublished on March 8, 1990 at 55 FR8491.

IV. Related Statutes

A. Internal Revenue Code (IRC)

1. OBRA ’86 also amended the IRCto—

• Define ‘‘nonconforming grouphealth plan’’ as a large group healthplan that at any time during a calendaryear takes into account that an activeindividual is eligible for or is receivingMedicare benefits based on entitlementto Social Security disability benefits;and

• Impose, on any employer oremployee organization (other than agovernmental entity) that contributes toa nonconforming LGHP, a tax equal to25 percent of the expenses the employeror employee organization incurredduring the calendar year for each LGHPto which the employer or employeeorganization contributes.

2. OBRA ’89 further amended the IRCto—

• Substitute the following definitionof ‘‘nonconforming group health plan’’to replace the OBRA ’86 definition.

‘‘For purposes of this section, the termnonconforming group health plan means agroup health plan or large group health planthat at any time during a calendar year doesnot comply with the requirements ofsubparagraphs (A) and (C) or subparagraph(B), respectively, of section 1862(b)(1) of theSocial Security Act.’’

• Provide that the tax imposed byOBRA ’86 on employers and employeeorganizations that contribute to or

sponsor LGHPs that do not comply withthe MSP provisions for the disabled alsoapplies with respect to such sponsors orcontributors that do not comply withthe MSP provisions for the workingaged or the MSP provisions for ESRDbeneficiaries.

• OBRA ’93 expanded the definitionof ‘‘nonconforming group health plan’’to include a group health plan or LGHPthat fails to refund to HCFA conditionalprimary Medicare payments.

Under these IRC amendments, HCFAreports to the IRS GHPs and LGHPs thatdo not comply with any of thefollowing:

• The prohibition against taking intoaccount Medicare entitlement whenMedicare is the secondary payer foraged, ESRD, or disabled beneficiaries.

• The requirement that employeesand spouses age 65 or older be givenequal benefits under the sameconditions as those under 65.

• The prohibition againstdifferentiating, in the services coveredand payments made, between personshaving ESRD and other individualscovered by the plan.

• The requirement that GHPs andLGHPs refund conditional primaryMedicare payments.

B. Americans With Disabilities Act

The Americans with Disabilities Actof 1990, Pub. L. 101–336 (42 U.S.C.12101 et seq.) is related to the aims ofthis rule with respect to the MSPprovision for the disabled. Section 102of that statute prohibits discriminationagainst the physically or mentallydisabled in private places ofemployment. This Act is administeredby the Equal Employment OpportunityCommission.

C. COBRA Continuation CoverageAmendments

Title X of the Consolidated OmnibusBudget Reconciliation Act of 1985 (Pub.L. 99–272, commonly referred to asCOBRA) amended the followingstatutes:

• Section 4980B of the IRC (26 U.S.C.4980B).

• Part 6 of title I, subtitle B of theEmployee Retirement Income SecurityAct (ERISA) (29 U.S.C. 1161–1168).

• Title XXII of the Public HealthService Act (42 U.S.C. 300bb–1 et seq.)

Under the COBRA amendments,certain GHPs must offer employees (andtheir dependents), who would otherwiselose coverage under the plan as a resultof any of five specified ‘‘qualifyingevents’’, an opportunity to electcontinuation of the coverage they hadimmediately before the qualifying event.‘‘Qualifying events’’ include termination

of employment (other than for grossmisconduct) and reduction in hours ofwork. Continuation coverage mustextend at least from the date of thequalifying event to the earliest of a listof terminating events. Terminatingevents include entitlement to Medicareand expiration of the maximum periodof continued coverage specified for aparticular qualifying event. Fortermination of employment or reductionof hours of work, the maximumcoverage period is 18 months. This isextended to 29 months in the case of aqualified beneficiary who is determinedto have been disabled at the time of thequalifying event. For other qualifyingevents the maximum is generally 36months.

GHP COBRA continuation coverage isgenerally exempt from the Medicaresecondary payer provisions. Part VII–Eof this preamble contains a detaileddiscussion of the MSP provisions vis-a-vis the COBRA provisions.

V. Provisions of the Proposed Rule

The March 8, 1990, notice ofproposed rulemaking proposed to add anew subpart G to part 411—Exclusionsfrom Medicare and Limitations onMedicare Payment.

At that time, subpart B of part 411 setforth general rules and definitionsapplicable to all of the Medicaresecondary payer provisions. Includedwere rules on recovery and waiver ofrecovery, Medicare secondarypayments, and the effect of third-partypayments on benefit utilization anddeductibles. Accordingly, proposedsubpart G included only those rules thatapply exclusively to LGHPs or thatdiffered to some extent from similarrules applicable to other third partypayers.

A. In Section 411.82, Definitions, weproposed to—

1. Interpret ‘‘typical business day’’ as50 percent or more of the employer’sregular business days during theprevious calendar year; and

2. Define ‘‘employee’’ as an individualwho is actively working or whoserelationship to an employer shows thathe or she has employee status withinthe ordinary understanding of the term‘‘employee.’’ In § 411.83, Determinationof Employee Status, we proposed thatemployee status be established if theindividual met any of the followingconditions:

• Received from an employerpayments that are subject to taxes underthe Federal Insurance Contributions Act(FICA) or would be subject to such taxesexcept for the fact that the payment isexempt from those taxes under the IRC.


• Was termed an employee under aFederal or State law or in accordancewith a court decision.

• Was designated as an employee inthe employer’s records; that is, had nothad his or her employee statusterminated. We proposed thattermination from payroll, in and ofitself, not be considered terminationfrom employee status.

We also gave examples of othercommonly accepted indicators ofemployment status, examples that wedeveloped in consultation with othergovernment agencies, including theDepartment of Labor and the IRS.

We considered adding the followingindicators to the list that appeared inproposed § 411.83(b):

• Accrues years of service credits forpension purposes (that is, theindividual’s age-based pension rightscontinue to increase); and

• May become vested under theemployer’s retirement plan, even thoughhe or she was not vested at the time thedisability was established.

We specifically requested commentson whether to include these twoindicators in the final rule.

B. In Section 411.88, Basis forMedicare primary payments, weproposed that failure to furnishinformation necessary for HCFA todetermine whether an LGHP wasprimary to Medicare could lead todenial of payment of Medicare primarybenefits.

The proposed rule also—1. Defined three key terms as follows:• ‘‘Disabled active individual’’, as an

active individual who has beendetermined to be ‘‘under a disability’’under section 223 of the Act, asevidenced by issuance of an SSAnotification to that effect, and who isnot, and could not upon filing anapplication become, entitled toMedicare on the basis of ESRD.

• ‘‘Nonconforming LGHP’’, as anLGHP that, at any time during acalendar year, discriminates against adisabled active individual who iseligible for, or receives, Medicarebenefits on the basis of disability.

• ‘‘Family member’’, as any personwhose relationship to the activeindividual is the basis for coverageunder an LGHP; for example, therelationship of a divorced or commonlaw spouse or that of an adopted, foster,natural or step-child, parent, or sibling.

2. Specified that a disabled activeindividual could accept or reject theLGHP coverage offered by the employer,and that, if the individual refuses theLGHP, the employer may not offer aplan that pays benefits secondary toMedicare.

3. Provided examples of LGHP actionsthat would be considereddiscriminatory.

4. Indicated the kinds of informationthat HCFA might require to documentan LGHP’s compliance with thenondiscrimination rule.

5. Specified that HCFA would refer tothe IRS any LGHP that it finds to be anonconforming LGHP.

6. Specified that the IRS imposes, onemployers or employee organizationsthat contribute to a nonconformingLGHP, the tax provided for undersection 5000 of the IRC of 1986.

VI. Reorganization of the Rules andConforming Changes

Because of the statutory changesdiscussed above, we needed a newsubpart for the provisions that nowapply generally to all GHP MSPsituations. We also needed to makeroom for incorporating in logical orderany additional regulations that may berequired by future amendments to theAct. Accordingly, this final rule—

• Redesignates subparts E and F as Fand G, respectively;

• Establishes a new subpart E for thegeneral provisions, including appealsprovisions that were not in the NPRM;and

• Designates the special provisionsfor the disabled under a new subpart H.

New subpart E includes—• Most of the definitions that were

previously scattered among severalsubparts (§ 411.101).

• A statement of the basicprohibitions under the ESRD, workingaged, and disability MSP provisions(§ 411.102).

• A statement of the prohibitionagainst employers offering incentives toencourage Medicare beneficiaries not toenroll in or to terminate enrollment ina GHP that would be primary toMedicare (§ 411.103).

• An explanation of the terms‘‘current employment status’’ and‘‘coverage by virtue of currentemployment status’’ (§ 411.104).

• The method for determiningemployer size (§ 411.106).

• Examples of actions that constitute‘‘taking into account’’ Medicareentitlement and of permissible actions(§ 411.108).

• Basis for determination ofnonconformance (§ 411.110).

• Documentation of conformance(§ 411.112).

• Determination of nonconformanceand notice of that determination(§§ 411.114 and 411.115).

• Appeals procedures (§§ 411.120through 411.126).

• Referral to IRS (§ 411.130).The following table shows how the

section numbers in the final rule differfrom the numbers in the NPRM. Therevised designations reflect thereorganization of the text required bythe addition of rules that now apply toall three groups of beneficiaries (aged,disabled, and ESRD) and the new ruleson appeals procedures.

Heading as shown in final rule Proposed rule designa-tion section

Final rule designationsection

Basis and scope ..................................................................................................................... 411.80 ............................ 411.100Definitions ............................................................................................................................... 411.82 ............................ 411.101; 411.201Current employment status ..................................................................................................... 411.83 ............................ 411.104Medicare benefits secondary to LGHP benefits ..................................................................... 411.85 ............................ 411.204Basis for Medicare primary payments and limits on secondary payments ............................ 411.88 ............................ 411.206Recovery of conditional Medicare payments .......................................................................... 411.92 ............................ 411.24Basic prohibitions and requirements ...................................................................................... 411.94(b) ........................ 411.102Taking into account entitlement to Medicare .......................................................................... 411.94(d) ........................ 411.108Basis for determination of nonconformance ........................................................................... 411.94(c) ........................ 411.110Documentation of conformance .............................................................................................. 411.94(e)&(f) .................. 411.112Determination of nonconformance .......................................................................................... 411.94(d) ........................ 411.114Referral to the Internal Revenue Service (IRS) ..................................................................... 411.94(g) ........................ 411.130

Note: The headings are those used in thefinal rule. In referring to the proposed rule

in the preamble discussion, we use the column 1 designations. In referring to thefinal rule, we use the column 2 designations.


The statutory changes, thereorganization of the regulations text,and other changes that have occurredsince these rules were publishedrequired the following conformingchanges in subpart B:

1. Revise § 411.20 (Basis and scope)to—

• Transfer to the new subpart E thestatutory basis for the rules that applyto GHP coverage.

• Reflect this change in the ‘‘Scope’’paragraph of the section.

• Expand references (in this sectionand in § 411.21) to include the newsubpart H.

2. Revise § 411.24 (Amount ofrecovery) as follows:

a. In paragraph (c), to—• Reflect the fact that OBRA ’89

extended to all MSP situations the right(previously limited to MSP for thedisabled) to recover double the amountof damages if it is necessary for HCFAto take legal action in order to recover;

• Remove the parenthetical referenceto the double damages provision andexpressly state the circumstances underwhich HCFA can recover doubledamages; and

• Specify that responsible partiesinclude both third party payers andindividuals or entities that havereceived third party payments that mustbe refunded.

b. In paragraph (e), to make clear thatthird parties against which HCFA maytake action are those that are ‘‘requiredto make’’, as well as those who are‘‘responsible for making’’, primarypayments. This change is necessary toconform to a language change made byOBRA ’89.

c. To add a new paragraph (m)(Interest charges) to specify the explicitauthority provided by the SocialSecurity Act Amendments of 1994,which is in addition to the long-standing authority provided by commonlaw and by HHS regulations (45 CFR30.13) that are consistent with theFederal Claims Collection Act (31 U.S.C.3711), for HCFA to charge interest onamounts that any responsible party doesnot refund timely.

3. Amend § 411.33 (Amount ofMedicare secondary payment) to makeclear that Medicare payment may nowbe based on fee schedules (as well asreasonable charge) and to removeparagraphs (c) and (d), which set fortha special formula for computingMedicare secondary payments under theMSP provisions for ESRD. (OBRA ’89provided a single formula for all MSPsituations.)

VII. Comments on the NPRM of March8, 1990 and Responses to ThoseComments

We received 36 timely letters ofcomment from employers, insurancecompanies, law firms, actuarial firms,individuals, associations (two businessand one medical), and beneficiary rightsorganizations. Following is a discussionof those comments and our responses tothem.

Thirty-three of the comments dealtwith the term ‘‘active individual,’’including the statutory definition of thatterm. Since the term ‘‘active individual’’was deleted from the law by OBRA ’93,effective August 10, 1993, we are notresponding to those comments, exceptfor the comment in A. below.

A. Definitions—(Section 411.82)

The law prior to OBRA ’93 definedthe term ‘‘active individual’’ as ‘‘anemployee (as may be defined inregulations), the employer, self-employed individual (such as theemployer), an individual associatedwith the employer in a businessrelationship, or a member of the familyof any of such persons.’’ We received acomment about one of the categoriesunder this definition; that is,‘‘individual associated with theemployer in a business relationship.’’

Comment: The commenter suggestedthat the rules define the term‘‘individual associated with theemployer in a business relationship.’’The commenter went on to propose thatindividuals who are receiving healthcare coverage through an employer areassociated with the employer in abusiness relationship regardless ofwhether they are employees. Thecommenter suggested that such adefinition would be appropriate becauseemployers provide such benefits as partof a quid pro quo for services.

Response: We do not agree that adefinition of the term ‘‘individualassociated with the employer in abusiness relationship’’ is necessary inthe regulations. Any individual whoqualifies for LGHP coverage because ofa business relationship with theemployer (for example, suppliers andcontractors who do business with theemployer) is included within the term.We also do not agree with thecommenter’s proposed definition of theterm. Defining the term in the mannerproposed would bring many formeremployees, including retirees, whoreceive benefits from an employerwithin the scope of the MSP provisionfor the disabled. The Congress clearlydid not intend the MSP provision forthe disabled to extend to retirees and

other former employees, since the term‘‘former employee under age 65’’ wasspecifically deleted from an early draftof legislation on MSP for the disabledlegislation (Senate Report 99–348 July31, 1986).

Comment: One commenter objected tothe inclusion of ‘‘divorced spouse’’ inthe definition of ‘‘family member’’. Thecommenter contended that the inclusionof that term exceeded HCFA’s authority,since a ‘‘former family member’’ is nota ‘‘family member’’.

Response: We disagree. As used innew subpart H, ‘‘family member’’ meansanyone who has LGHP coverage on thebasis of another person’s enrollment.Spouses, children, parents, and siblingsare merely examples. Any individual towhom a LGHP grants coverage becauseof such an enrollment is a familymember for purposes of subpart H.

Comment: One commenter asked whythe term ‘‘spouse who was married to anactive individual’’ was not included inthe definition of ‘‘family member.’’ Thecommenter also requested clarificationof the status of an ex-spouse who iseligible to receive or is receiving healthcare benefits under the continuation ofcoverage provisions of COBRA and whatis the LGHP’s obligation to such anindividual.

Response: We have revised thedefinition of ‘‘family member’’ toinclude the term ‘‘spouse’’. The matterof an ex-spouse is discussed in responseto the previous comment. The rules thatapply to disabled individuals who haveLGHP benefits as a result of the COBRAcontinuation provisions are discussedunder Part VII–E of this preamble.

Comment: One commenter objected toinclusion of an ‘‘employee-pay-all’’ planin the definition of LGHP in theproposed rule (§ 411.82(4)(ii)) on thebasis that these plans are generally‘‘franchise arrangements’’ in which thecontracts are individually underwrittenand the employer merely performs theministerial role of collecting thepremiums but not enrolling theparticipants.

Response: We have considered thestatus of ‘‘employee-pay-all plans’’ inthe past and addressed the issue in thepreamble to the Medicare regulationspublished on October 11, 1985 (50 FR41503), and in § 411.70(d) of theMedicare regulations published onOctober 11, 1989 (54 FR 41745). Thoseregulations apply to the working agedand make clear that ‘‘employee-pay-all’’plans may satisfy the statutorydefinition of GHP. We apply the sameprinciples in the MSP rules for thedisabled. (See 52 FR 35966, September24, 1987.)


Medicare is secondary to ‘‘employee-pay-all’’ plans if they meet the statutorydefinition of LGHP; that is, plans thatare under the auspices of, or contributedto, by an employer or employeeorganization and that cover at least oneemployer of 100 or more employees.

Comment: One commenter requestedthat the term ‘‘Medicare payment’’ in§ 411.92, Recovery, should be defined toeliminate confusion with another term,‘‘gross amount payable’’, used inMedicare contractor manuals.

Response: The term, ‘‘gross amountpayable’’, is defined at 42 CFR411.33(e)(1) as ‘‘* * * the amountpayable without considering the effectof the Medicare deductible andcoinsurance or the payment by the thirdparty payer * * *.’’

We have revised proposed § 411.92(now § 411.24) to specify that HCFArecovers the Medicare primary paymentamount.

Comment: A commenter objected tothe definition of LGHP, because it caststoo broad a net and captures manyemployers who have fewer than 100employees, but who are required toprovide primary coverage to disabledactive individuals because these ‘‘smallemployers’’ participate in a plan thathas at least one employer of 100 or moreemployees.

Response: The term ‘‘large grouphealth plan’’ is defined in the IRC of1986 as ‘‘a plan of, or contributed to by,an employer or employee organization(including a self-insured plan) toprovide health care (directly orotherwise) to the employees, formeremployees, the employer, othersassociated or formerly associated withthe employer in a business relationship,or their families, that covers employeesof at least one employer that normallyemployed at least 100 employees on atypical business day during the previouscalendar year.’’ HCFA has no discretionto exempt from the Medicare secondarypayer provision for the disabledemployees of employers of fewer than100 employees if they belong to a multi-employer plan that meets the abovedefinition. In the MSP statute, as revisedby OBRA ’89, the Congress could haveprovided an exception for smallemployers that participate in multi-employer or multiple employer plans,similar to the exception that isspecifically provided in the statute withrespect to the working aged. Since theCongress chose to provide the exceptiononly under the working aged provision,we conclude that it was not theCongress’ intent to allow a similarexception under the MSP provision forthe disabled.

B. Indicators of Employee Status

We received 30 comments on§ 411.83, which proposed to incorporateinto the regulations the policy that somedisabled individuals who are notworking are considered to be employeesfor MSP purposes if certain indicators of‘‘employee status’’ are present. Only onecommenter supported the policywithout reservation. The othercommenters expressed either oppositionto the policy as a whole or to one ormore of the indicators used to establishwhether a non-working disabled personhas employee status. We are notaddressing these comments because wehave deleted the policy on indicators ofemployee status, to reflect changesmade by OBRA ’93, effective August 10,1993. In the legislative history thatpreceded enactment of OBRA ’93(Conference Report of the HouseCommittee on the Budget to accompanyH.R. 2264, H.R. Rep. No. 213, 103rdCong. 1st Sess. (1993)), the Congressprovided explicit direction on how itexpected us to construe the new law. Itmade clear on page 805 that the term‘‘current employment status with anemployer’’ should be implemented‘‘consistent with the provision thatapplies to aged beneficiaries (workingaged)’’ and, on page 806, that ‘‘thedefinition of active employee fordisabled beneficiaries (should) conformwith the definition for working agedbeneficiaries.’’

C. Prohibition of Discrimination

Several commenters addressed theprovisions of proposed § 411.94, whichdealt with the prohibition ofdiscrimination by LGHPs againstdisabled active individuals on the basisof Medicare entitlement.

Comment: One commenter requestedthat HCFA discard all of the rules onnondiscrimination on the grounds that‘‘they represent an unjustified andunsupported foray into the role of theCongress.’’ In the event that HCFAdecides to promulgate the proposednondiscrimination rules, the commenterrequested that HCFA conduct publichearings to gauge the effect of the rules.

Response: Under the law in effectbefore August 10, 1993, section1862(b)(1)(B)(i) of the Act prohibitedLGHPs from ‘‘taking into account’’ thatan active individual is entitled toMedicare on the basis of disability. Asamended by OBRA ’93, the lawprohibits LGHPs from taking intoaccount the entitlement to Medicare onthe basis of disability of an individualwho has LGHP coverage by virtue of theindividual’s own or a family member’scurrent employment status. This

provision simultaneously makesMedicare benefits secondary to LGHPcoverage for these individuals andprohibits LGHPs from taking intoaccount that these individuals areentitled to Medicare on the basis ofdisability. For example, without thisprohibition LGHPs could deny, reduce,or restrict coverage or access to coveragefor these individuals and thereby shiftto the Medicare program the primaryresponsibility for payment of theirmedical expenses. This would defeatthe purpose of the MSP provision forthe disabled.

The public has had ampleopportunity to comment on theproposed nondiscrimination rulesduring the public comment period thatfollowed the publication of the notice ofproposed rulemaking. We received anumber of substantive commentsregarding the proposednondiscrimination rules, and we discussthese comments below. We therefore donot believe that there is need for publichearings on the final rules.

Comment: Several commentersobjected that the criteria for prohibiteddiscrimination in proposed § 411.94(d)exceed the statutory requirement. Thesecommenters contended that while thestatute prohibits LGHPs only fromdenying coverage to disabled activeindividuals on account of theirMedicare entitlement, the criteria inproposed § 411.94(d) appear to prohibitLGHPs from terminating disabledindividuals on grounds other thanMedicare entitlement. One commenterexpressed concern that an employerwould be unable to terminate a disabledactive individual’s coverage for anyreason after the individual becomesentitled to Medicare. Anothercommenter recommended that the finalrule specify that prohibiteddiscrimination occurs only when a plantreats disabled active individualsdifferently from ‘‘similarly situated’’individuals not entitled to Medicare.

Response: The statute, as amended byOBRA ’86, prohibited an LGHP fromtaking into account that an activeindividual is entitled to Medicare on thebasis of disability. As amended byOBRA ’93, the statute prohibits LGHPsfrom taking into account entitlement toMedicare on the basis of disability of anindividual who has LGHP coverage byvirtue of the individual’s own or afamily member’s current employmentstatus. The basic rule is that, with regardto individuals entitled to Medicare onthe basis of disability who (1) havecurrent employment status or (2) arefamily members of individuals withcurrent employment status, LGHPs mustoffer the same enrollment opportunities


and the same coverage under the sameconditions as they offer to similarlysituated individuals. In the case ofemployees, all other employees enrolledor seeking to enroll in the plan areconsidered to be similarly situated. Inthe case of each of the other categoriesof individuals who have currentemployment status (such as businessassociates or family members), all otherpersons in those categories areconsidered to be similarly situated.

An LGHP may refuse to providecoverage, terminate enrollment, or limitcoverage (for individuals who areentitled to Medicare on the basis ofdisability) only on grounds that apply toall similarly situated individualsenrolled, or seeking to enroll, in theplan, including individuals not entitledto Medicare. Plan provisions that havethe effect of denying, restricting, orterminating benefits for disabledbeneficiaries who have LGHP coverageby virtue of current employment status,but not for similarly situatedindividuals, are prohibited. An LGHPmay make benefit distinctions amongvarious categories of similarly situatedindividuals, distinctions based, forexample, on length of time employed,employment status, or marital status butnot on disability. If the LGHP makessuch distinctions, it may also makethem among disabled beneficiaries whohave LGHP coverage by virtue of currentemployment status.

Comment: Several commentersobjected that proposed § 411.94(d)appeared to force employers to decide,before an employee who has becomedisabled is determined to be ‘‘under adisability’’ within the meaning ofsection 223 of the Social Security Act,whether to cease covering theindividual under the LGHP or tocontinue providing benefits for as longas benefits are provided to activeemployees. One commenter contendedthat the Congress clearly did not intendto impose such a choice uponemployers. Another commenter notedthat the proposed policy would onlyencourage employers to cut off healthbenefits to injured workers before theindividual receives a determination ofdisability from the Social SecurityAdministration.

Response: In the NPRM, we proposedto compare what an LGHP offers orprovides at or after the point ofdisability determination with what itoffered or provided at or after the pointof Medicare entitlement. The idea wasto prevent employers from avoiding theobligation of providing primary benefitsby terminating coverage during the 29month waiting period between the onsetof disability and Medicare entitlement.

We agree that the proposed policycould be interpreted as encouragingemployers to terminate coverage ofinjured or sick workers prior to thedetermination of disability. In addition,the proposed policy could lead to ananomalous situation in which anLGHP’s changing or termination of adisabled individual’s coverage would bepermissible or impermissible,depending on the variable timing ofdisability determinations.

We are, therefore, not including theproposed policy in the final regulation.The prohibition against taking Medicareentitlement into account does notcompel LGHPs to make an irrevocablechoice, before the determination ofdisability, between discontinuingcoverage of disabled individuals andproviding coverage indefinitely. Rather,as discussed earlier in this preamble,LGHPs are prohibited from treatingindividuals entitled to Medicare on thebasis of disability and covered by virtueof their own or a family member’scurrent employment status differentlyfrom similarly situated individuals (thatis, individuals of the same category suchas spouse, child, or employee) who areenrolled or seeking to enroll in the plan.No change, restriction, or termination ofcoverage may be imposed becauseindividuals are entitled to Medicare onthe basis of disability. Also prohibitedare changes, restrictions, or terminationsof coverage that have the effect oftreating those individuals differentlyfrom similarly situated individuals.

Comment: Several commenters raisedquestions about the application of thenondiscrimination rules to variousemployer health plan provisions.

• Proposed § 411.94(d) appears toprohibit employers from terminating oramending their health benefits plans, ifdoing so would have the effect ofreducing or terminating benefitsprovided under an LGHP to a disabledactive individual.

• Proposed § 411.94(d)(6) (denial ortermination of coverage of a disabledactive individual on the basis ofdisability) would prevent employersfrom offering employees who becomedisabled, coverage under an LGHP for alimited period of time and thenterminating the coverage once thedesignated period has expired. Thiscould be interpreted to prohibitemployers who voluntarily provideextended coverage to disabledindividuals from terminating theextended coverage once the individualbecomes entitled to Medicare benefits.

• The rules prohibitingdiscrimination should not prevent anemployer from changing the status of adisabled individual in a way that

disqualifies the individual for coverageunder the employer’s LGHP. Forexample, an employer should not beconsidered to be discriminating if heremoves a disabled individual from theroster of employees, thus disqualifyingthe individual from coverage under theemployer’s plan.

• Proposed § 411.94(d)(3) appears toprovide that an LGHP is discriminatoryif it has a policy of offering ‘‘disablingcondition-only’’ coverage to employeeswho become disabled, since suchcoverage is less comprehensive thancoverage provided to other individualsunder the plan.

Response: An employer is notprohibited from adopting any of theprovisions described above, providedthat those provisions (1) apply to allenrollees and potential enrollees,without regard to whether they areentitled to Medicare on the basis ofdisability; and (2) do not have the effectof treating disabled Medicarebeneficiaries who have LGHP coverageby virtue of current employment statusdifferently from similarly situatedindividuals.

Thus, a ‘‘disabling condition-only’’provision is prohibited if it has theeffect of restricting coverage forindividuals entitled to Medicare on thebasis of disability but not for similarlysituated individuals who are not soentitled. The regulation does not allowan employer to terminate the LGHPcoverage of those disabled individualsunless the employer also terminatescoverage for similarly situatedindividuals not entitled to Medicare onthe basis of disability.

If an employer voluntarily providesLGHP coverage to an individual who isentitled to Medicare on the basis ofdisability and who has LGHP coverageby virtue of current employment status,that coverage is primary to Medicare.

We do not believe that the statuteprohibits employers from terminating abenefit that they voluntarily provide tothose disabled individuals above thecoverage given to similarly situatedindividuals who are not entitled toMedicare on the basis of disability (seeitem b. of comment).

Section 411.108 of this final rulemakes clear that an LGHP may not, forexample, deny or terminate coverage,offer less comprehensive coverage, orcharge increased premiums forindividuals entitled to Medicare on thebasis of disability and covered by virtueof current employment status unless ittakes the same actions for similarlysituated individuals who are not soentitled. However, as stated above,employers are not required to continueindefinitely LGHP coverage that they


have voluntarily provided to thosedisabled individuals.

Comment: One commenter objectedthat the nondiscrimination criteria ofproposed § 411.94(d) failed to prohibitcost avoidance techniques used byLGHPs and employers to reduce theirexposure. One such tactic is to ‘‘churn’’insurance contracts in order to reimposewaiting periods and pre-existingcondition exclusions on ‘‘high-exposure’’ employees and theirdependents. Another tactic is to pay‘‘high exposure’’ individuals an amountequivalent to the per capita premium ofthe plan so that they can purchasehealth insurance on an individual basis.The commenter recommended that thecriteria in proposed § 411.94(d)specifically prohibit ‘‘the payment ofwages which are to be dedicated towardthe purchase of an individual contractfor the disabled active individual.’’

Response: The Medicare law does notprohibit LGHPs from engaging in cost-avoidance practices and from imposingcost-avoidance provisions such aswaiting periods and pre-existingcondition exclusions, provided thatsuch practices and provisions applyequally to all enrollees and potentialenrollees and do not have the effect oftreating individuals entitled to Medicareon the basis of disability who haveLGHP coverage by virtue of currentemployment status differently fromsimilarly situated individuals.(However, other State or Federal lawsshould be consulted for any effect theymay have on this situation.)

Comment: One commenter asked forguidance about what constitutesadequate notification to activeindividuals of the consequences ofrejecting LGHP coverage, as requiredunder proposed § 411.94(d)(8). Thecommenter specifically suggested thatthe rules include a provision that astatement in a Summary PlanDescription satisfies this requirement.

Response: Beneficiaries need tounderstand the consequences ofrejecting LGHP coverage; that is, thatMedicare will be the primary payer andthe employer will not be permitted topay secondary benefits for Medicare-covered services. In recognition of this,we have provided, in § 411.108, that aplan would be taking into accountMedicare entitlement if it gaveindividuals information on their right toaccept or reject the employer plan butfailed to inform them of theconsequences of rejection.

Comment: One commenterrecommended that proposed § 411.94provide examples of ‘‘taking intoaccount.’’ The commenter offeredseveral examples of ‘‘taking into

account’’ for inclusion in the finalregulation.

Response: The criteria of proposed§ 411.94(d), clarified and expanded onthe basis of the commenter’ssuggestions, appear in the final rule asexamples of ‘‘taking into account’’(§ 411.108).

Comment: One commenterrecommended that the § 411.94 criteriafor determining that an LGHP isdiscriminating explicitly apply toemployees’ spouses and dependents, ifthe LGHP covers them. The commenteralso recommended that an LGHP beconsidered nonconforming if it requiresthat an active individual receive healthcare benefits from a prescribed provider,while other covered individuals are notmandated to receive services from thatprovider.

Response: The criteria in proposed§ 411.94 and the final rules’ examples of‘‘taking into account’’ clearly apply toemployees’ spouses and dependentscovered by an LGHP, since thosepersons are included within themeaning of the term ‘‘family member.’’Therefore, it is not necessary to stateexplicitly in § 411.110 that the criteriathat define a nonconforming GHP applyto LGHP coverage of employees’ spousesand dependents. An LGHP that requireddisabled beneficiaries covered by virtueof current employment status, but notsimilarly situated individuals, to receiveservices from a preferred providerwould clearly be considerednonconforming under the criteria in§ 411.110 of the final rule.

D. Referral to the Internal RevenueService (Section 411.94(g))

Comment: One commenter expressedconcern that proposed § 411.94(g),dealing with the reporting ofnonconforming LGHPs to the IRS,would not achieve the goal of ensuringnondiscriminatory treatment of activeindividuals by LGHPs. The commenterrecommended that sanctions beincorporated into the rules to provideincentives for LGHPs to meet thenondiscrimination requirements.

Response: HCFA reportsnonconforming GHPs and LGHPs to theIRS because the IRS administers section5000 of the IRC, which imposes a tax onemployers and employee organizationsthat contribute to a nonconformingGHP. This provision indicates theCongress’ intent that employers andemployee organizations be ultimatelyheld responsible for the actions of theirhealth plans. We believe that this taxprovides an incentive for employers andemployee organizations to ensure thatthe plans they create, participate in, orcontribute to, comply with the

prohibition against taking into accountMedicare entitlement. We expect thatemployers and employee organizationswill pursue available remedies undercontract or insurance law, if necessary,to assure that their plans comply withthe requirements of the statute and thusavoid imposition of the tax. The tax andthe requirement to reportnonconforming LGHPs were imposedfor the disabled by OBRA ’86 andextended to all GHP situations by OBRA’89.

Comment: One commenterrecommended that insurers of LGHPs bereported to the IRS to provide anincentive for them to conform to therequirements of a nondiscriminatoryLGHP.

Response: See our response to theprevious comment. Under section 5000of the IRC, the tax is imposed only onemployers and employee organizationsthat contribute to nonconforming GHPs.This should discourage employers andemployee organizations from doingbusiness with an underwriting insurerthat does not conform to the prohibitionagainst taking into account the Medicareentitlement of individuals who areentitled on the basis of age, ESRD, ordisability. It should encourageemployers and employee organizationsto enforce their insurance contracts toensure that both the promise and theperformance under the contract conformto the MSP requirements. Insurers thusshould have an incentive to conformwith MSP requirements.

Additional incentives for complianceare provided by the following statutoryprovisions:

• The law provides for a private rightof legal action to collect double damagesfrom any entity (including insurers, andemployers) that fails to provide primarycoverage when required by law.

• The Federal Government has theright to take legal action to collectdouble damages from those entities ifthey fail to provide primary benefits.

E. Relation to COBRA ContinuationCoverage Provisions

Under the COBRA continuationcoverage provisions, an individual (orthe individual’s dependents) whowould otherwise lose coverage under anemployer’s GHP because of specifiedcircumstances that include terminationand reduction in hours of employmentmust be offered continued coverage athis or her own expense for a designatedperiod of time. Under a 1989amendment to the COBRA continuationof coverage provisions, the period ofcontinued coverage is up to 29 monthsfor individuals who were disabled (asdetermined under the Social Security


Act) at the time of their termination ofemployment or reduction of hours ofwork. The COBRA provisions permittermination of continuation coverage atthe point of Medicare entitlement,which, for a disabled person, begins 29months after the onset of disability if theindividual has been entitled to monthlysocial security disability benefits for 24months. Several commenters raised thefollowing issues:

• The effect of the proposedregulations on coverage provided toactive individuals under the COBRAcontinuation coverage provisions wasnot clear.

• Section 411.94(d)(6) of theproposed regulations—

+ Appears to have the effect ofextending COBRA’s limited period ofcontinuation coverage to an unlimitedperiod while an active individualreceives Social Security benefits. (Thatresult would be directly contrary to theintent of the Congress).

+ Appears to prohibit LGHPs fromterminating continuation coverage ofactive individuals who become entitledto Medicare benefits, even thoughCOBRA specifically permits this.

+ Could be interpreted to forbidemployers who voluntarily provideextended coverage beyond themaximum period mandated by COBRAfrom terminating that coverage once theindividual becomes entitled toMedicare.

• HCFA should include in the finalregulation a specific rule to the effectthat the operation of an LGHP in anymanner permitted under the COBRAcontinuation coverage provision willnot be considered discriminatory.

• The proposed regulations create a‘‘very basic conflict’’ with COBRA.COBRA mandates coverage forindividuals who were disabled at thetime of a COBRA ‘‘qualifying event’’ for29 months (which is generally thelength of the waiting period forMedicare entitlement based on receiptof Social Security disability benefits)but permits a plan to terminate coverageat the end of the 29 months, or at thepoint of Medicare entitlement. Theproposed regulations, however, do notrequire coverage during the Medicarewaiting period but appear to mandatecoverage thereafter.

• Proposed § 411.94(d)(7) appears toprohibit charging active individualswho are also COBRA beneficiaries thehigher premiums (up to 150 percent ofthe applicable premium) permittedunder COBRA.

Response: When the proposedregulation was published, it wasHCFA’s position that there was no realconflict between the MSP for the

disabled provision and the COBRAcontinuation of coverage provision,since COBRA permits but does notmandate termination of coverage at thetime of Medicare entitlement. Thestatutes amended by COBRA state thatcontinuation coverage may beterminated upon entitlement toMedicare. The Medicare statute statedthat the LGHP may not take into accountentitlement to Medicare based ondisability. It was HCFA’s policy that theMSP for the disabled provisionprohibited termination of COBRAcontinuation coverage of an activeindividual entitled to Medicare on thebasis of disability if the termination wasbased on that entitlement. Since somepeople who have COBRA continuationcoverage because they have stoppedworking would be considered to beemployees under the indicators ofemployee status, the result would bethat the proposed regulation would haveprohibited what the COBRA lawpermitted.

Blue Cross and Blue Shield of Texasfiled a lawsuit challenging HCFA’s samepolicy with respect to COBRAcontinuation coverage in ESRD MSPcases (Blue Cross and Blue Shield ofTexas v. Sullivan, case No. 3–91 2760–H (N.D. Tex.)). On April 7, 1992, theDistrict Court for the Northern Districtof Texas ruled against the government.The government appealed that ruling tothe Fifth Circuit Court of Appeals. OnJuly 13, 1993, the appeals court heldthat the MSP statute ‘‘does not requirehealth plans to provide continuationcoverage to individuals who becomeentitled to Medicare benefits becausethey have ESRD.’’ Blue Cross and BlueShield of Texas v. Shalala, 995 F.2d 70,74 (5th Cir. 1993). The court held thatthe ESRD MSP provision did notmodify, nor did it preclude, actsspecifically authorized under COBRA.

The issue raised in the Texas casewith respect to ESRD was never raisedwith respect to the MSP provisions forthe aged and the disabled. Underprevious law the issue might have beenraised with respect to the disabledbecause the MSP provision for them didnot require (as it did for the aged) thatGHP coverage be based on ‘‘currentemployment’’.

Under the OBRA ’93 amendments,which were effective one month afterthe appeals court decision, there is noissue for either group because—

• The MSP provisions for both theaged and the disabled apply only whenGHP coverage is ‘‘by virtue of currentemployment status’’; and

• COBRA continuation coverage isbased on termination of employment oron reduction of work hours to the point

where the individual no longer qualifiesfor coverage based on employment.

This final rule provides (in§ 411.161(a)(3)) that a GHP mayterminate COBRA continuation coverageif the individual becomes entitled toMedicare on the basis of ESRD,notwithstanding the general prohibitionagainst taking into account eligibilityfor, or entitlement to, Medicare benefits.Section 411.162(a)(3) makes clear thatMedicare is secondary when the plan isrequired by COBRA to keep thecontinuation coverage in effect afterMedicare entitlement or does sovoluntarily. (Changes to the regulationare discussed under part VIII–I of thispreamble.)

F. Miscellaneous CommentsComment: One commenter asked that

the final rules address the situation inwhich the LGHP paid primary benefitsfor services provided to an activeindividual and later learned that theLGHP was not primary payer for theindividual because, for example, theindividual entitled to Medicare on thebasis of disability also has end-stage-renal disease. In that case, the lawprovides that Medicare is primarypayer. The commenter believed that thefinal rule should provide for HCFA toreimburse the LGHP directly in thesame manner that an LGHP must payHCFA when it failed to make correctprimary payments.

Response: Under current law, HCFAhas an explicit right to recoverconditional primary payments from anLGHP. There is no equivalent statutoryprovision for an LGHP seeking torecover its mistaken payments. HCFAand its intermediaries and carriers donot have authority to pay insurers andother third party payers. Sections1815(c) and 1842(b)(6) of the Act,respectively, generally precludepayment for provider services to anyonebut the provider and preclude paymentfor services of physicians and othersuppliers to anyone other than thesupplier or the beneficiary. The limitedexceptions allowed do not includepayment to LGHPs. Section 3491.15 ofthe Medicare Intermediary Manual andsection 3336.16 of the Medicare CarrierManual contain instructions for dealingwith situations in which third partypayers have made mistaken primarypayments. The person or entity thatreceives HCFA’s primary Medicarepayment would make the refund to theLGHP. If no Medicare claim wasoriginally filed, the provider, supplier orbeneficiary may file one, within thetime limits specified in §§ 424.44 and424.45 of the regulations. We note thatthe situation cited by the commenter


(Medicare is primary payer because theindividual is entitled on the basis ofdisability and also has ESRD) has adifferent outcome under OBRA ’93. Forsuch a dually entitled beneficiary,Medicare is now ordinarily secondaryfor the first 18 months of ESRD-basedeligibility or entitlement.

Comment: Two commentersexpressed concern that the proposedrules give HCFA the right to recovertwice the amount payable by the LGHPas primary payer if HCFA has madeconditional primary payments and theLGHP is later determined to have beenthe primary payer. One of thecommenters stated that the proposedrule did not take into account thepossibility that the disabled employeemay have never filed a claim with theLGHP and only with Medicare. Thecommenter suggested that LGHP’s beexempt from the double damagesprovision, since the LGHP would beunaware of the existence of a claim forprimary benefits. Medicare shouldinstruct beneficiaries to file claims firstwith the LGHP.

Response: The MSP statute providesno authority for us to exempt LGHPsfrom the double damages provision.However, we have the right to recoverdouble damages only if the LGHPrefuses to make appropriatereimbursement. Before instituting legalaction to recover our conditionalpayments, we make every attempt toinform the LGHP of its obligationsunder the law and of the consequencesof failure to comply. We also provideample time for the LGHP to reimbursethe Medicare payments.

We routinely remind beneficiariesand providers and suppliers to fileclaims first with other insurance andthen with Medicare. Medicareintermediaries and carriers denypayment on claims when they havereason to believe that there is anotherpayer responsible for primary paymentand instruct the claimant to seekpayment from that other source beforefiling claims under Medicare. Sinceclaims are often filed by the provider orphysician or other supplier, we alsoremind them of their responsibility todetermine whether their claims shouldbe filed with entities other than HCFA.In addition, we encourage GHPs andother insurers who are obligated to payprimary to Medicare to inform theirMedicare-eligible participants thatclaims should first be submitted to theresponsible primary plan.

Comment: One commenter suggestedthat the employer or other entity not besubject to double damages or to referralto the IRS as a nonconforming GHP if—

• The facts and circumstances showthat any noncompliance with the law orregulations was unintentional; or

• The employer relied in good faithon third party administrators, insurers,or other entities to administer orprovide health benefits.

Another commenter recommendedthat, until the final regulations becomeeffective, an employer or planadministrator be protected if he or sheacted on the basis of a reasonable goodfaith interpretation of the statute.

Response: There is no provision in thelaw to extend protection to employers orplan administrators, who act on thebasis of a reasonable good faith (albeiterroneous) interpretation of the law, ifthe GHP or LGHP is found to be anonconforming GHP. The individualsinvolved could have sought advicedirectly from the Medicare contractorsor from HCFA. We have in place acomprehensive program to inform thepublic of its obligations under the MSPprovisions. Since the passage of theMSP statute, we have made available tointerested parties a variety ofinformational materials to assist them incomplying with this provision. TheMedicare intermediaries and carriersand the HCFA regional offices areavailable to answer questions about theresponsibility of employers, insurers,and other entities subject to the MSPprovisions.

Comment: One commenter noted thatMedicare currently makes conditionalpayments when parties fail to respondto information requests on disabledbeneficiaries. The commenter supportscontinuation of this policy.

Response: The basic rule, as set forthin §§ 411.165, 411.175, and 411.206, isthat if a provider, supplier, beneficiary,or other party fails to provideinformation necessary to process aclaim, HCFA may deny the claim.However, in order not to disadvantage abeneficiary who may not be responsiblefor providing the needed information,HCFA considers the specificcircumstances of each failure to provideinformation. Depending on thosecircumstances, HCFA has in the pastmade, and may continue to make,conditional payments in some cases forwhich information is not submitted inresponse to HCFA’s request.

Comment: One commenterrecommended that provision for anexpedited compliance procedure beadded to proposed §§ 411.92(a) and411.94(g) in order to reduce theadministrative burden and expense ofenforcement. The commenterspecifically mentioned the expeditedcompliance procedure established inHCFA Program Memorandum AB–88–9

(August 1988). That procedure wasdesigned for LGHPs that wish toexpedite payments to reimburse HCFAfor Medicare conditional primarypayments.

Response: The expedited complianceprocedure established by ProgramMemorandum AB–88–9 was basedspecifically on the concept of ‘‘activeindividual’’. Since OBRA ’93 abolishedthis concept, the procedure is obsolete.LGHPs that identify mistaken Medicareprimary payments should send theirrepayments to the Medicare contractorthat made the mistaken payment.

Comment: One commenter expressedconcern that if an active individual iscovered as a dependent by his spouse’sLGHP, and his employer is not largeenough for the employer’s GHP to beconsidered an LGHP and the employerdoes not participate in a multi-employerLGHP, then the order of payment basedon the MSP regulations would be thespouse’s LGHP as primary payer,Medicare second, and the health plan ofthe disabled person’s employer last. Thecommenter pointed out that theproposed rule is not in accordance withthe normal ‘‘coordination of benefits’’rules. Under those rules, if the disabledperson is still actively employed, hisown health plan would be primary andthe spouse’s health plan would besecondary. The commenterrecommended that the MSP rulesdetermine only whether Medicare, orthe plan covering the disabled person asan employee, should be primary. In anyevent, the plan covering the individualas a dependent should be secondary toMedicare. Employers should not bepenalized for extending health coverageto dependents.

Response: Section 1862(b) of the Act,and the regulations, alter State andprivate coordination of benefit rules sothat GHPs and LGHPs are made primaryto Medicare under certaincircumstances, regardless of whether theindividual is employed or is adependent. When the health plan of afamily member is primary payer underthe MSP law, that payer must pay beforeMedicare even if the coordination ofbenefits rules established under Statelaw or private contract call for adifferent order of payment. The GroupCoordination of Benefits ModelRegulation adopted by the NationalAssociation of Insurance Commissioners(NAIC) specifically recognizes that theusual order of payment for dependentand nondependent coverage is reversedunder the circumstances described bythe commenter. This means that, in thesituation described above, the spouse’sLGHP pays first if the spouse hascoverage by virtue of current


1 This exemption, enacted by OBRA ’89 andeffective October 1, 1989, was extended by OBRA’93 to cover services furnished before October 1,1989. Section 3121(r) of the IRC limits election toorders that require their members to take a vow ofpoverty.

employment status, Medicare second,and the disabled person’s employer planlast. However, when the disabledperson’s health plan coordinatespayment with the spouse’s LGHP in theway described in the comment, that is,where the disabled person’s plan paysprimary to the spouse’s LGHP, thecombined payments of both plansconstitute the primary payment towhich Medicare payment is secondary.(Further information regarding themodel regulation may be obtained bywriting to the NAIC, 120 W. 12th St.,Kansas City, MO 64105; phone (816)842–3600.)

Comment: One commenter suggestedthat HCFA should apply thenondiscrimination rules on aprospective basis after the date they areadopted in final form and that HCFAshould refrain from initiating anynondiscrimination provisioncompliance requests until after adoptionof the final rules. Another commenterrecommended that the final regulationsbe made effective with plan years thatbegin at least six months after the dateof publication.

Response: HCFA does not have theauthority to delay enforcement of thenondiscrimination provisions. Section9319 of OBRA ’86, which included thenondiscrimination provision, waseffective for items and servicesfurnished on or after January 1, 1987. Asindicated in the general notice wepublished on September 24, 1987 (52 FR35966), this provision was self-implementing. It did not provide anywaiver under which we could delay theeffective date.

We will enforce these provisions inaccordance with our statutoryresponsibility. If it is alleged that anLGHP took into account Medicareentitlement on the basis of disabilitybefore the effective date of this finalrule, we will base our decision on thestatute. This final rule will be effective30 days after publication in accordancewith the usual rulemaking procedures.

Comment: One commenter suggestedthat provisions be added to the finalregulation to ensure a formal review andappeals procedure before HCFA takesany action adverse to an employer.

Response: Sections 411.120 through411.126 of the new subpart E set forthappeals procedures with respect to anyGHP that HCFA has determined to benonconforming. These sections specifythe parties and explain the various stepsin the appeals process and the rights ofthe plans and of the employers andemployee organizations that contributeto the plans, including the following:

• How to request a hearing(§ 411.120).

• Provision for on-the-record reviewor oral hearing (at the request of a partyor on the hearing officer’s own motion)and the procedures that the hearingofficer follows at an oral hearing withrespect to notice, prehearing discovery,evidence, subpoenas, etc., and record ofthe hearing (§ 411.121).

• Timing, content, distribution, andeffect of the hearing officer’s decision(§ 411.122).

• Administrator’s review of thehearing decision, including basis fordecision to review, basis for remand,and finality of the review or remanddecision (§ 411.124).

• Reopening of determinations ordecisions (§ 411.126).

These procedures are very similar tothose in effect for other determinationsthat adversely affect providers orsuppliers of Medicare services. Webelieve that, by making them availablebefore referral to the IRS, we ensure dueprocess.

Comment: One commenterencouraged HCFA to adopt a policy ofapplying ‘‘Alternative DisputeResolution (ADR)’’ techniques in MSPcases before proceeding with litigationor referrals to the IRS. The commentercontended that such techniques couldlead to fairer and more effectiveimplementation of the MSP law thanprotracted and expensive litigation.

Response: The commenter did notidentify specifically the techniques ofdispute resolution to which he wasreferring. As indicated above, this finalrule provides appeal rights if HCFAdetermines that a GHP is anonconforming GHP.

VIII. Final Rule Provisions thatImplement or Reflect StatutoryAmendments

A. Medicare Secondary to GHPsRedesignated §§ 411.162 and 411.172

and new § 411.204 specify thatMedicare benefits are secondary to GHPbenefits under specific circumstancesthat vary depending on the basis forMedicare eligibility or entitlement.

1. Under § 411.172, aged individualsand spouses (entitled on the basis ofage), the MSP provision applies—

• For plans of employers of at least 20employees; and

• For individuals covered ‘‘by virtueof current employment status’’.

2. Under § 411.204, individualsentitled on the basis of disability, theMSP provision applies—

• For plans of employers of at least100 employees; and

• For individuals covered ‘‘by virtueof current employment status’’.

3. Under § 411.162, individualseligible or entitled on the basis of ESRD,

the MSP provision applies to employerplans, including retirement plans,regardless of employer size and theindividual’s employment status.

We note that OBRA ’93 changed thecoordination of benefits rules for ESRDbeneficiaries who are also entitled toMedicare on the basis of age ordisability. This change is discussedunder section VIII–G of this preamble.

B. Current Employment Status

New § 411.104 explains the term andsets forth general and special rules.

Under the general rule, an individualis considered to have currentemployment status if he or she (1) isactively working or (2) is not activelyworking but meets all of the followingconditions:

• Retains employment rights in theindustry;

• Has not had his or her employmentterminated by the employer, if theemployer provides the coverage, or hasnot had his or her membership in theemployee organization terminated, if theemployee organization provides thecoverage.

• Is not receiving disability paymentsfrom an employer for more than 6months;

• Is not receiving social securitydisability benefits; and

• Has employment-based GHPcoverage that is not COBRAcontinuation coverage.

Examples of individuals who fall inthe second group are teachers,employees who are on furlough or sickleave, and active union membersbetween jobs. Also, self-employedpersons are considered to have currentemployment status only if their annualearnings related to the employer thatoffers the GHP coverage equal at leastthe specified statutory amount insection 211(b)(2) of the Act (currentlythat amount is $400).

Members of a religious order whohave taken a vow of poverty are notconsidered to have current employmentstatus if the services they perform asmembers of the order are consideredemployment solely because the orderhas elected (under section 3121(r) of theIRC) to have those services consideredas employment for social securitypurposes.1

Members of religious orders who havenot taken a vow of poverty areconsidered to have current employmentstatus with the religious order if (1) the


religious order pays FICA taxes onbehalf of that member, or (2) theindividual is receiving from thereligious order cash remuneration forservices rendered.

Members of the clergy are consideredto have current employment status witha church or other religious organizationif the individual is receiving from thechurch or other religious organizationcash remuneration for servicesrendered.

• Receipt of delayed compensationfor work performed in previous timeperiods does not confer ‘‘currentemployment status’’ on an individualwho is not working.

The new § 411.104 is consistent withCongressional direction regarding themanner in which coverage ‘‘by virtue ofcurrent employment status’’ is to beconstrued.

The first time Congress used the term‘‘current employment’’ with respect toworking aged individuals was in section2338 of the Deficit Reduction Act of1984 (DEFRA), Pub. L. 98–369. DEFRAestablished in the Act a new section1837(i), which provided for a specialPart B enrollment period for individuals‘‘enrolled in a group health plan * * *by reason of the individual’s (or theindividual’s spouse’s) currentemployment * * * *’’ Section 1837(i)expressly referred to individuals whomeet ‘‘the conditions described inclauses (i) and (iii) of section1862(b)(3)(A);’’ that is, working agedindividuals and their spouses. In thelegislative report that accompanied theDEFRA, the Congress explained what itmeant by the term ‘‘by reason of currentemployment:

The use of the phrase ‘‘by reason of currentemployment’’ was meant to distinguish thosepersons who are receiving health benefitsbased on employment and are actuallyemployed from those persons who arereceiving benefits based on employment, butwho are now retired. (Supplemental Reportof the Committee on Ways and Means, U.S.House of Representatives on H.R. 4170, Rept.98–432 Part 2, March 5, 1984, 1662,emphasis added.)

This explanation encompassedindividuals for whom Medicare wassecondary payer at that time undersection 1862(b)(3)(A); that is,individuals who were ‘‘employed at thetime (the) item or service is furnished.’’

By distinguishing in the DEFRAlegislative report between ‘‘persons whoare receiving health benefits based onemployment’’ and individuals who are‘‘retired,’’ the Congress demonstratedthat it is not concerned about finedistinctions regarding ‘‘when’’employment-based coverage wasearned; that is, whether, for instance,

present coverage of an employedindividual is based on a certain numberof hours worked, or a certain level ofcommissions earned, during thepreceding months, quarters, or years ofemployment. Rather, the Congress isonly interested in the broad distinctionbetween plan coverage of individualswho have coverage based on ‘‘currentemployment’’ and plan coverage ofthose who are retired.

In OBRA ’89, the Congress conformedthe language of the secondary payerprovision to that of the special Part Benrollment provision for working agedindividuals. The phrase ‘‘by reason ofthe current employment of theindividual (or the individual’s spouse)’’replaced the phrase ‘‘employed at thetime (the) item or service is furnished.’’By eliminating the provision that theindividual actually be working whenthe services were furnished, theCongress made clear its intent thatMedicare be secondary payer toemployment based coverage in allcircumstances except retirement.

The OBRA ’93 amendments thatsubstituted ‘‘by virtue of currentemployment status’’ for ‘‘by reason ofcurrent employment,’’ and defined theterm ‘‘current employment status,’’reinforced Congressional intent in thisregard. OBRA ’93 (section13561(e)(1)(H)) added a new section1862(b)(1)(E)(ii) to the Medicare law,which expressly defines the term‘‘current employment status’’:

(ii) CURRENT EMPLOYMENTSTATUS DEFINED.—An individual has‘‘current employment status’’ with anemployer if the individual is anemployee, is the employer, or isassociated with the employer in abusiness relationship.

The inclusion of individuals‘‘associated with the employer in abusiness relationship’’ (that is,individuals whose relationship to theemployer is based on business ratherthan on work) demonstrates that theCongress intended that the term‘‘current employment status’’ be giventhe broadest possible application. Itencompasses not only individuals whoare actively working but alsoindividuals under contract with theemployer whether or not they actuallyperform services for the employer, suchas attorneys on retainer, tradesmen andinsurance agents. Also, an independentinsurance agent who is licensed to sellinsurance for a particular insurancecompany has ‘‘current employmentstatus’’ with that company by virtue ofhis ‘‘business relationship.’’ If an agentage 65 or older has plan coveragethrough that company based on this‘‘current employment status’’, the

coverage is primary to Medicare (unlessspecific statutory exceptions apply,such as the 20 employee rule) withoutregard to the extent to which the agentis presently selling policies on behalf ofthe company. Only when the agentretires (that is, no longer is authorizedto sell policies on behalf of thecompany) would the ‘‘businessrelationship’’ with the employer besevered. However, Medicare would bethe primary payer, if the companyimposes earnings thresholds or otherrequirements for qualifying for healthbenefits that the agent does not meetbased on this ‘‘current employmentstatus’’.

(As provided by OBRA ’93, the‘‘current employment status’’ criterionalso applies to the disability MSPprovision.)

C. Prohibition against Taking intoAccount Medicare Entitlement

This prohibition was imposed byOBRA ’86 for the disabled, andextended to ESRD and the aged byOBRA ’89. On January 11, 1991, wepublished a Federal Register noticeexplaining the import of these self-executing provisions.

1. New § 411.102 and redesignated§ 411.161 specify that a GHP may nottake into account an individual’s ESRD-based Medicare eligibility or entitlementduring the 18-month coordination ofbenefits period, which coincides withthe first 18 months of eligibility orentitlement.

2. New § 411.102 and redesignated§ 411.170 specify that a GHP of anemployer of 20 or more employees maynot take into account age-basedMedicare entitlement of an individualor spouse age 65 or older who is covered(or seeks to be covered) under the planby virtue of the individual’s currentemployment status with an employer.

3. New §§ 411.102 and 411.200specify that an LGHP (a plan thatincludes at least one employer of 100 ormore employees) may not take intoaccount the disability-based Medicareentitlement of an individual who iscovered (or seeks to be covered) underthe plan by virtue of the individual’s ora family member’s current employmentstatus with an employer.

D. Nondifferentiation in ProvidingBenefits

New § 411.102 and redesignated§ 411.161 specify that, in providingbenefits to individuals with ESRD andthose who do not have ESRD, a GHPmay not differentiate on the basis of theexistence of ESRD, or the need fordialysis, or in any other manner. Thesesections further provide that plans may


pay benefits secondary to Medicare afterthe 18-month coordination of benefitsperiod.

E. Equal Benefits

New § 411.102 and redesignated§ 411.170 specify that, regardless ofwhether they are entitled to Medicare,individuals and spouses age 65 or older,who are covered under the plan byvirtue of current employment status, areentitled to the same plan benefits, underthe same conditions, as individuals andspouses under 65. (These limitations,imposed by OBRA ’89, were alsodescribed in the January 1991 noticereferred to above. OBRA ’93 imposedthe added requirement of plan coveragebased on current employment status.)

F. Definitions

In § 411.101—1. The definition of ‘‘group health

plan’’ is revised to reflect that plans ofgovernmental employers are includedwithin the meaning of the term. Thishas always been so but was clarified byOBRA ’93. The definition also expresslyclarifies that union plans and employeehealth and welfare fund plans areincluded as employee organizationplans.

2. The definition of ‘‘employer’’ nowincludes self-employed persons.

3. The definition of ‘‘employee’’eliminates the ‘‘indicator’’ concept andreferences the special rules for the self-employed, for members of religiousorders, and for delayed compensation,already noted under section VIII–B.

G. Coordination of Benefits: DualEligibility/Entitlement

New § 411.163 implements the OBRA’93 amendments (sections 13561(c)(2)and (c)(3)) that established special rulesfor the 18-month coordination ofbenefits period. These apply tobeneficiaries who are eligible for, orentitled to Medicare on the basis ofESRD, and are also entitled on the basisof age or disability.

We consider the OBRA ’93 changes tobe self-implementing and thereforeeffective August 10, 1993, the date ofenactment. However, a lawsuit was filedin United States District Court for theDistrict of Columbia on May 5, 1995(National Medical Care, Inc. v. Shalala,Civil Action No. 95–0860), challengingimplementation of one aspect of theseprovisions with respect to group healthplan retirement coverage.

In what we describe below as the‘‘fourth rule,’’ under OBRA ’93,Medicare remains the primary payer ifa group health plan was alreadysecondary payer for an individualentitled on the basis of age or disability

when the individual becomes eligibleon the basis of end-stage renal disease.Section 411.163(b)(4) reflects this rule.At first HCFA believed, in error, thatOBRA ’93 required a private plan tobecome primary payer under thesecircumstances, but HCFA later correctedits construction of the statute, andissued guidance on April 24, 1995,stating that Medicare remains theprimary payer.

On June 6, 1995, the court issued apreliminary injunction order precludingHCFA from implementing its correctedconstruction for items and servicesfurnished between August 10, 1993 andApril 24, 1995, pending the court’sdecision on the merits. HCFA willmodify the rules, if required, based onthe final ruling by the court.

Before enactment of OBRA ’93, theESRD MSP provision applied only whenthe individual was entitled solely on thebasis of ESRD. For example, if anindividual, who retired at age 58 andwas covered under a retirement planthrough the former employer, developedESRD at age 60, the retirement plan wasprimary to Medicare during the first 18months of ESRD-based eligibility orentitlement. However, if the individualattained age 65 before the end of the 18-month period, the ESRD MSP provisionceased to apply, and Medicare becamethe primary payer because, uponattaining age 65, the individual becameentitled also on the basis of age and nolonger met the ‘‘solely’’ requirement.

Similarly, the working aged anddisability MSP provisions did not applyto anyone who was eligible for orentitled to Medicare based on ESRD.Therefore, those provisions ceased toapply, and Medicare became theprimary payer when an aged or disabledindividual became eligible for Medicarebased on ESRD. The OBRA ’93amendments rectified these situations.Section 13561(c)(2) provides that theESRD MSP provision applies in lieu ofthe working aged and disability MSPprovisions when an aged or disabledindividual subject to those provisionsbecomes eligible for Medicare based onESRD. Thus, the plan must continue topay primary to Medicare throughout an18-month ESRD MSP coordinationperiod. Section 13561(c)(3), whichremoved the word ‘‘solely’’ from theESRD MSP provision, provides that theESRD MSP provision remains in effectfor the full 18-month period, even if anindividual becomes entitled to Medicarebased on age or disability during thatperiod. The specific rules, which are setforth in § 411.163 and referenced in§ 411.172(g) (for the aged) and§ 411.204(b) (for the disabled), aresummarized below.

The first rule in § 411.163, governedexclusively by previous law, is that, ifthe 18-month period ended beforeAugust 1993, Medicare is primary payerfrom the first month of dual eligibility/entitlement.

The second rule, for situationsgoverned partly by previous law andpartly by the OBRA ’93 amendment, isthat if the first month of ESRD-basedeligibility or entitlement and the firstmonth of dual eligibility/entitlementboth fall after February 1992 and beforeAugust 10, 1993, Medicare is—

• Primary payer from the first monthof dual eligibility/entitlement throughAugust 9, 1993;

• Secondary payer from August 10,1993 through the 18th month of ESRD-based eligibility or entitlement; and

• Primary payer again after the 18thmonth of ESRD-based eligibility orentitlement.

The third rule, for situations governedexclusively by the OBRA ’93amendment, is that, if the first month ofESRD-based eligibility or entitlement isafter February 1992, and the first monthof dual eligibility or entitlement is afterAugust 9, 1993, Medicare is—

• Secondary during the first 18months of ESRD-based eligibility orentitlement; and

• Primary after the 18th month ofESRD-based eligibility or entitlement.

The fourth rule pertains to dualentitlement situations in which—

• Age-based or disability-basedentitlement precedes ESRD-basedeligibility; and

• The GHP was not precluded fromtaking into account Medicareentitlement based on age or disability(because the individual was not coveredunder the plan ‘‘by virtue of currentemployment status’’ or because theemployer had fewer than 20 or 100employees, in the case of the aged anddisabled, respectively) and was payingbenefits secondary to Medicare.

Medicare eligibility based on ESRDoccurs automatically as of the fourthcalendar month of dialysis, and earlierunder certain circumstances, withoutregard to whether an individual isalready entitled to Medicare based onage or disability.

Under prior law, Medicare benefitswere secondary to GHP benefits for aperiod of 18 months for an individualeligible for or entitled to Medicare based‘‘solely’’ on ESRD. If that individual alsobecame entitled to Medicare based onage or disability during the 18-monthcoordination period, Medicare becamethe primary payer because the ESRDMSP provision did not apply; that is,plans were permitted to take intoaccount ESRD-based entitlement that


was not the sole basis of Medicareentitlement.

Also under prior law, Medicarebenefits were secondary to plan benefitsfor certain individuals entitled toMedicare based on age or disabilitywhen their plan coverage was based onactive employment status, including theemployment of a spouse in the case ofaged beneficiaries, or the employment ofa family member in the case of disabledbeneficiaries. If the aged or disabledbeneficiary subsequently becameeligible for Medicare based on ESRD,Medicare became the primary payerbecause the working aged and disabilityMSP provisions stipulated that they didnot apply to anyone with ESRD-basedeligibility.

The OBRA ’93 amendments rectifythese situations. However, they do notaffect benefit coordination whereMedicare is primary and a GHPsecondary for reasons wholly unrelatedto ESRD. The ESRD MSP provision, asamended by OBRA ’93, expresslyprohibits plans during the first 18months of ESRD-based eligibility orentitlement from taking into accountMedicare eligibility or entitlement‘‘under section 226A’’ of the SocialSecurity Act; that is, on the basis ofESRD. Thus, the plain language of thestatute permits a plan to pay secondaryto Medicare for reasons unrelated toESRD.

In other words, if prior to theoccurrence of ESRD-based eligibility aplan was legitimately secondary toMedicare, the plan clearly was nottaking into account ESRD-basedeligibility, because a plan could nothave taken into account eligibility thatdid not exist. Merely continuing suchauthorized action, when an individualbecomes eligible based on ESRD,obviously does not take into account thelater eligibility or violate the MSPprovisions. In sum, the subsequentoccurrence of ESRD-based eligibility, inand of itself, does not establish that aGHP is taking that eligibility orentitlement into account.

In contrast, a plan that is payingprimary benefits takes into accountESRD-based eligibility if it attempts toshift that primary paymentresponsibility to Medicare when anindividual becomes eligible forMedicare based on ESRD, or when anindividual is always eligible forMedicare based on ESRD but has notcompleted of the 18-month coordinationperiod. (It goes without saying thatcessation of plan benefits for reasonsthat would apply to any plan enrollee,such as an individual’s failure to payplan premiums, would not be construed

as taking into account ESRD-basedeligibility.)

In arriving at this synergisticconstruction of the whole Medicarestatute we were mindful that nothing inthe legislative history of OBRA ’93indicates that Congress intended thedual entitlement amendments to reversethe order of payment where plansalready are permissibly paying benefitssecondary to Medicare at the timeESRD-based eligibility or entitlementoccurs. In addition, the court in BlueCross Blue Shield of Texas v. Shalala,995 F.2d 70 (5th Cir. 1993), construedthe ESRD MSP provision as notmodifying other provisions of law thatauthorize plan actions. HCFA’sconstruction is consistent with thiscourt decision.

Read together, the OBRA ’93 changesrequire GHPs that are already payingprimary to Medicare under the workingaged or disability MSP provisions tocontinue to pay primary to Medicare fora full 18-month coordination periodwhen an aged or disabled individualalso becomes eligible for or entitled toMedicare based on ESRD. Similarly,when an individual’s ESRD-basedeligibility or entitlement is not precededby age or disability-based entitlement,the plan, including a retirement plan, isobligated to pay primary to Medicarethroughout the entire 18-monthcoordination period.

With respect to retirement plans, theapplicability of the ESRD MSPprovision has never been limited to plancoverage based on active employment.The OBRA ’93 amendments made nochange in this regard. Accordingly,when a retirement plan is a primarypayer prior to the occurrence of ESRD-based eligibility, the plan must payprimary to Medicare during an 18-month coordination period, even if theindividual also becomes entitled toMedicare based on age or disabilityduring that period.

However, as we have stated, when aplan has already permissibly taken intoaccount age or disability-basedMedicare entitlement, and does nothingmore, the plan is not taking into accountsubsequently acquired ESRD-basedeligibility. Therefore, Medicare remainsprimary for an aged or disabledindividual who subsequently acquiredESRD-based eligibility when Medicareis paying primary because theindividual is not covered by virtue ofcurrent employment status, or an MSPexemption applies, such as when anemployer employs fewer than 20 or 100employees (in the case of the aged anddisabled, respectively).

Note: A suit was filed in United StatesDistrict Court for the District of Columbia onMay 5, 1995 (National Medical Care, Inc. v.Shalala, Civil Action No. 95–0860),challenging the application of § 411.63 withrespect to group health plan retirementcoverage. Absent further action by Congress,the court will resolve the matter. HCFA willpublish a notice in the Federal Registerregarding the court’s ruling, and will makechanges to § 411.63 if required by the court.

New § 411.163 replaces § 411.62(e),Effect of changed basis for Medicareentitlement, which was renderedobsolete by OBRA ’93.

H. Basis for Primary PaymentsNew § 411.206 specifies that with

respect to the disabled, Medicare isprimary payer for services that are notcovered under the plan for the disabledor for similarly situated individuals or,although covered under the plan, arenot available to particular disabledindividuals because they haveexhausted their benefits under the plan.(Similar rules for ESRD and aged werealready in effect.)

I. Interface With COBRA ContinuationCoverage Provisions

As a result of the ‘‘currentemployment status’’ concept establishedby OBRA ’93 for the aged and thedisabled and the court rulings in theESRD case discussed under parts VII–Eand VIII–G of this preamble—

1. New § 411.161(a)(3) andredesignated § 411.162(a)(3) specify,respectively, that for ESRDbeneficiaries—

• A plan may terminate COBRAcontinuation coverage of an enrolleewho becomes entitled to Medicare ifexpressly permitted under the COBRAprovisions; and

• Medicare benefits are secondary toCOBRA continuation benefits onlywhen the plan—

+ Is required (under COBRA) tocontinue COBRA coverage afterMedicare entitlement (applicable toretirees who retired before the employereffectively terminates regular plancoverage by filing for bankruptcy); or

+ Continues coverage voluntarilyeven though not required to do so underthe COBRA provisions.

2. Redesignated § 411.175 and new§ 411.206 specify that HCFA makesMedicare primary payments for servicesfurnished to aged individuals anddisabled individuals whose benefits areterminated under the COBRA provisionsthat permit termination upon Medicareentitlement and when benefits aremaintained under the COBRAprovisions, notwithstanding anindividual’s Medicare entitlement. (Anindividual who is eligible for COBRA


continuation coverage because hisworking hours have been reduced belowthe minimum necessary to qualify forregular plan coverage has ‘‘currentemployment status’’. However,Medicare is the primary payer becausethe plan coverage is not ‘‘by virtue of’’that status.)

J. Aggregation RulesNew § 411.106 sets forth the rules

established by OBRA ’93 fordetermining the number and size ofemployers, as required by the ‘‘at least20 employees’’ provision for the agedand the ‘‘at least 100 employees’’provision for the disabled.

These rules provide for—• Treating as a single employer all

employers that are so treated undersection 53 of the IRC of 1986;

• Treating as employed by a singleemployer all employees of an affiliatedservice group, as defined in section414(m) of the IRC; and

• Treating leased employees asemployees of the person for whom theyperform services, to the extent providedin section 414(n) of the IRC.

K. Prohibitions Against Incentives

New § 411.103 reflects the provisionsof OBRA’ 90 (section 4203(g)) and thechanges made by section 157(b)(7) (C)and (D) of the SSAA ’94 with respect toprohibition of incentives and impositionof civil money penalties for violation.Amended section 1862(b)(3)(C) providesthat it is unlawful for an employer orother entity such as an insurer to offerMedicare beneficiaries financial or otherbenefits as incentives not to enroll in, orto terminate enrollment in, a GHP thatis, or would be, primary to Medicare,even if the payments or benefits areoffered to all other individuals who areeligible for coverage under the plan.This prohibition precludes offering toMedicare beneficiaries an alternative tothe employer’s primary plan (forexample, coverage of prescription drugs)unless the beneficiary has primarycoverage other than Medicare. Anexample would be primary plancoverage through his own or a spouse’semployer. An entity that violates thisprohibition is subject to a civil moneypenalty of up to $5000 for eachviolation. Certain provisions of section1128A of the Act would apply to thecivil money penalty.

L. Assessment of Interest

New paragraph (m) of § 411.24 reflectsthe additional authority to assessinterest provided by SSA ’94 and statesthe rules applicable to interest charges.HCFA has long been authorized undercommon law and Departmental

regulations (45 CFR 30.13), consistentwith the Federal Claims Collection Act(31 U.S.C. 3711), to charge interest onamounts that any responsible party doesnot timely refund to HCFA. The SSAA’94 (section 151(b)(3) revised theMedicare law to state specifically thatHCFA may charge interest if theresponsible party does not refund HCFAwithin 60 days of the date HCFAreceives notice or other information thatreimbursement is owed to HCFA.Amended section 1862(b)(2)(B)(i)provides that we may charge interestbeginning with the date of that notice orother information. The rate of interestprovided in section 1862(b)(2)(B)(i) isthe same as in sections 1815(d) and(1833), which is reflected in regulationsat 42 CFR 405.376(d). This is also therate that is charged when HCFAexercises its common law authority.

M. Plan Secondary Payments After 18-Month Coordination of Benefits Period

Section 411.102(a)(2) reflects thechange made by 151(c)(5) of the SocialSecurity Act Amendments of 1994 tolimit what a plan may do after the endof the coordination period.

IX. Technical Amendments

A. Nomenclature ChangesThe following are in addition to those

described in section VI of this preamble:1. To conform to the statutory

language, ‘‘employer plan’’ and‘‘employer group health plan’’ arechanged to ‘‘group health plan’’.

2. To conform to the new rules thatapply in dual eligibility/entitlementsituations, the word ‘‘solely’’ is removedfrom the phrase ‘‘entitled solely on thebasis of ESRD’’.

B. Date and Duration ChangesVarious dates cited in paragraphs (c)

and (d) of redesignated § 411.162 havebeen revised to conform to the OBRA’93 amendment that changed to October1, 1998, the date on which the 18-monthESRD coordination of benefits period isscheduled to revert to a 12-monthperiod.

X. Waiver of Proposed RulemakingWe ordinarily publish a notice of

proposed rulemaking in the FederalRegister and invite prior publiccomment on proposed rules. The noticeof proposed rulemaking includes areference to the legal authority underwhich the rule is proposed and theterms and substance of the proposedrule or a description of the subjects andissues involved. This procedure can bewaived, however, if an agency findsgood cause that a notice-and-publiccomment procedure is impractible,

unnecessary, or contrary to the publicinterest and incorporates a statement ofthe finding and its reasons in the ruleissued.

The proposed rule of March 1990dealt only with the provisions of OBRA’86 which pertain to the disabled and toLGHPs that cover them. Under that rule,certain nonworking disabled personswould have been considered employeesfor Medicare secondary payer purposes.Most of the public comments wereceived (discussed in section VII of thispreamble) objected to that policy.

Under the OBRA ’93 amendmentsdiscussed in Section IV of thispreamble, the MSP provision for thedisabled applies only to persons whosehealth care coverage is based on theirown current employment status or thecurrent employment status of a familymember. Since the law and theaccompanying legislative history madeclear that an individual must have‘‘current employment status’’ forpurposes of the MSP provisions, theproposed policy is not included in thefinal rule.

This final rule also implements theMSP provisions of OBRA ’89. TheOBRA ’89 amendments (discussedunder section II–C)—

• Prohibited GHPs from taking intoaccount Medicare entitlement of agedMedicare beneficiaries and theeligibility or entitlement of beneficiarieswith ESRD. (Previously, the prohibitionagainst taking into account Medicareentitlement applied only to disabledindividuals.)

• Required GHPs of employers of 20or more employees to provide toemployees and spouses age 65 or overthe same benefits under the sameconditions as they provide to employeesand spouses under age 65;

• Prohibited GHPs fromdifferentiating, in the benefits theyprovide, between individuals withESRD and other individuals coveredunder the plan;

• Exempted from the MSP provisionsservices which members of a religiousorder who have taken a vow of povertyperform as members of the order; and

• Extended to all MSP situations theFederal Government’s rights to takelegal action and recover double damagesfrom any entity that is required orresponsible to pay primary benefits.

These OBRA ’89 amendments wereself-implementing and as such werereflected in a notice published onJanuary 11, 1991 (at 56 FR 1200–1202).The notice explained the newrequirements and stated that they couldbe put into effect without issuingregulations because the statutoryamendments and the Congressional


intent were clear. Most of the changeswere applicable to services furnished onor after December 20, 1989 and are,thus, already in effect.

This final rule includes appealsprocedures that were not in the March1990 proposal for appealingdeterminations of nonconformance.These provisions, which have beenadded as a result of comments on theproposed rule and apply to all threeMSP situations, include the following:

• The rules under which HCFAdetermines that a plan is not inconformance.

• The appeals procedures for plansfound to be nonconforming.

• Referral to the IRS.• Rules for recovery of conditional or

mistaken payments.Although notice and comment on the

portions of this rule that reflect the self-implementing statutory changes arebeing waived, we will consider timelycomments from anyone who believesthat in issuing these regulations we havegone beyond what the statute requires orpermits. We also welcome comments onthe appeals procedures.

Since the public has already hadopportunity to comment on the OBRA’86 amendments, the OBRA ’89amendments were self-executing andwent into effect several years ago, andthe OBRA ’90 and the OBRA ’93amendments and the Social SecurityAct Amendments of 1994 addressed inthese regulations are self-implementingand clear on their face as toCongressional intent, we find that noticeand opportunity for comment (except asprovided in the preceding paragraph)are unnecessary and that there is goodcause to waive notice of proposedrulemaking.

XI. Public CommentsAlthough this is a final rule, we will

consider comments that we receive bythe date and time specified in the DATESsection of this preamble. Because of thelarge number of letters of comment thatwe generally receive, we cannot respondto them individually. However, if werevise these rules as a result ofcomments, we will discuss all timelycomments in the preamble to therevised rules.

XII. Paperwork Reduction ActSections 411.112 and 411.115 of this

rule contain information collectionrequirements that are subject to reviewby the Office of Management andBudget under the Paperwork ReductionAct of 1980. Under § 411.112, HCFAmay require a GHP to demonstrate thatit has complied with the MSPprovisions and to submit documentation

showing that it has not taken intoaccount that any of its enrollees isentitled to Medicare on the basis of ageor disability or eligible or entitled on thebasis of ESRD. The estimated burden is10 hours per response. Under § 411.115,a plan that has been determined to benonconforming is required to provide toHCFA the names and addresses of allemployers and employee organizationsthat contributed to the plan during theyear for which it was nonconforming.Since this merely requires copies ofexisting data, the time required isconsidered negligible.

XIII. Regulatory Impact Statement

A. Executive Order 12866These changes are already in place,

and became effective on the statutorydates indicated in the preamble of thisrule. The discretionary portions of thisregulation will not affect these changesby more than a few million dollars atthe margin. Therefore, while thestatutory changes will have economiceffects in excess of $100 million, thisfinal rule with comment period is not aneconomically significant rule under E.O.12866. In order for the public tounderstand the magnitude of thestatutory changes we have prepared thefollowing voluntary analysis of theeffects of these changes on programcosts.

1. Current Employment StatusSection 13561(e) of OBRA ’93 deletes

the concept of ‘‘active individual’’ andapplies the MSP disability provisiononly to individuals who are coveredunder a large group health plan byreason of their current employmentstatus or that of a family member.

Since disabled persons generally arenot working (and therefore do not havecurrent employment status), fewerindividuals will be subject to the MSPprovisions and Medicare will beprimary payer for more disabledbeneficiaries. We estimate that theMedicare program will have thefollowing costs as a result of thischange.

MEDICARE PROGRAM COSTS RESULT-ING FROM NO LONGER TREATINGCERTAIN DISABLED PERSONS ASEMPLOYEES

[In million of dollars]

Fiscal year:1995 ...................................................... 31996 ...................................................... 31997 ...................................................... 21998 ...................................................... 11999 ...................................................... 0

2. Dual Eligibility/Entitlement

Before enactment of OBRA ’93, if anindividual was eligible for or entitled toMedicare on the basis of ESRD and wasalso entitled on the basis of age ordisability, Medicare was the primarypayer. This is because the ESRD MSPprovision only applied with respect toindividuals who were eligible for orentitled to Medicare solely on the basisof ESRD. However, section 13561(c) (2)and (3) of OBRA ’93 provides that therewill be an 18-month coordinationperiod during which employersponsored insurance plans must payprimary benefits even if an individualwho is eligible for or entitled toMedicare based on ESRD is also entitledto Medicare on another basis.

We estimate that the followingsavings will accrue to the Medicareprogram as a result of this change.

MEDICARE PROGRAM SAVINGS RE-SULTING FROM ESRD DUAL ELIGI-BILITY PROVISIONS

[In millions of dollars]

Fiscal year:1995 ............................................... 711996 ............................................... 831997 ............................................... 971998 ............................................... 1141999 ............................................... 98

3. IRS Aggregation Rules

The MSP provisions for the workingaged apply to employers with 20 ormore employees. The MSP provisionsfor the disabled apply to GHPscontributed to by at least one employerwith 100 or more employees. Largeemployers have been able to avoidhaving the MSP rules apply to them bysimply organizing themselves into smallfirms. Section 13561(d) of OBRA ’93requires the use of IRS aggregation rulesto determine employer size for MSPpurposes. Employers treated as singleemployers under section 52 (a) or (b) ofthe IRC of 1986 are treated as singleemployers for purposes of MSP. Allemployees of the members of anaffiliated service group are treated asemployed by a single employer. Leasedemployees (as defined in section 414(m)of the IRC) are treated as employees ofthe person for whom they performservices to the same extent as they aretreated under section 414(n) of the IRC.

We estimate that the followingsavings will accrue to the Medicareprogram as a result of this change.


MEDICARE PROGRAM SAVINGS RE-SULTING FROM USE OF IRS AGGRE-GATION RULES TO DETERMINE FIRMSIZE

[in million of dollars]

Fiscal year:1995 ............................................... 801996 ............................................... 1001997 ............................................... 1151998 ............................................... 1251999 ............................................... 80

In accordance with the provisions ofExecutive Order 12866, this final rulewith comment period was not reviewedby the Office of Management andBudget.

B. Regulatory Flexibility Analysis

Consistent with the RegulatoryFlexibility Act (RFA) and section1102(b) of the Social Security Act, weprepare a regulatory flexibility analysisfor each rule, unless the Secretarycertifies that the particular rule will nothave a significant economic impact ona substantial number of small entities ora significant impact on the operation ofa substantial number of small ruralhospitals.

The RFA defines ‘‘small entity’’ as asmall business, a nonprofit enterprise,or a governmental jurisdiction (such asa county, city, or township) with apopulation of less than 50,000. We alsoconsider all providers and suppliers ofservices to be small entities. Forpurposes of section 102(b) of the Act,we define small rural hospital as ahospital that has fewer than 50 beds andis located anywhere but in ametropolitan statistical area.

As noted earlier, this ruleincorporates changes enacted by variousstatutes that already are effective.Discretionary portions of the rule areminimal and, of themselves, have nomore than an incidental effect.Therefore, we have not prepared aregulatory flexibility analysis becausewe have determined, and we certify,that these rules will not have asignificant economic impact on asubstantial number of small entities ora significant impact on the operation ofa substantial number of small ruralhospitals.

List of Subjects

42 CFR Part 400

Grant programs—health, Healthfacilities, Health maintenanceorganizations (HMO), Medicaid,Medicare, Reporting and recordkeepingrequirements.

42 CFR Part 411

Exclusions from Medicare,Limitations on Medicare payments,Medicare, Recovery against thirdparties. Reporting and recordkeepingrequirements.

42 CFR Chapter IV is amended as setforth below.

PART 400—INTRODUCTION;DEFINITIONS

A. The authority citation for part 400continues to read as follows:

Authority: Secs. 1102 and 1871 of theSocial Security Act (42 U.S.C. 1302 and1395hh) and 44 U.S.C. Chapter 35.

§ 400.310 [Amended]B. In § 400.310, in the table, ‘‘411.65’’

is revised to read ‘‘411.165’’.

PART 411—EXCLUSIONS FROMMEDICARE AND LIMITATIONS ONMEDICARE PAYMENT

A. The authority citation for part 411is revised to read as follows:

Authority: Secs. 1102 and 1871 of theSocial Security Act (42 U.S.C. 1302 and1395hh).

B. Subpart A is amended as set forthbelow.

Subpart A—General Exclusions andExclusion of Particular Services

1. Section 411.1 is amended byadding the following sentence at the endof paragraph (a):

§ 411.1 Basis and scope.(a) Statutory basis. * * * Sections

1842(l) and 1879 of the Act provide forrefund to, or indemnification of, abeneficiary who has paid a provider orsupplier for certain services that theprovider or supplier knew wereexcluded from Medicare coverage.* * * * *

C. Subpart B is amended as follows:

Subpart B—Insurance Coverage ThatLimits Medicare Payment: GeneralProvisions

1. Section 411.20 is revised to read asfollows:

§ 411.20 Basis and scope.(a) Statutory basis—(1) Section

1862(b)(2)(A)(i) of the Act precludesMedicare payment for services to theextent that payment has been made orcan reasonably be expected to be madeunder a group health plan with respectto—

(i) A beneficiary entitled to Medicareon the basis of ESRD during the first 18months of that entitlement;

(ii) A beneficiary who is age 65 orover, entitled to Medicare on the basisof age, and covered under the plan byvirtue of his or her current employment

status or the current employment statusof a spouse of any age; or

(iii) A beneficiary who is under age65, entitled to Medicare on the basis ofdisability, and covered under the planby virtue of his or her currentemployment status or the currentemployment status of a family member.

(2) Section 1862(b)(2)(A)(ii) of the Actprecludes Medicare payment forservices to the extent that payment hasbeen made or can reasonably beexpected to be made promptly underany of the following:

(i) Workers’ compensation.(ii) Liability insurance.(iii) No-fault insurance.(b) Scope. This subpart sets forth

general rules that apply to the types ofinsurance specified in paragraph (a) ofthis section. Other general rules thatapply to group health plans are set forthin subpart E of this part.

§ 411.21 [Amended]2. In § 411.21, the following changes

are made:(a) The introductory text is revised

and a definition of ‘‘monthly capitationpayment’’ is added, to read as set forthbelow.

(b) In the definition of ‘‘conditionalpayment’’, ‘‘for which another insurer isprimary payer’’ is revised to read ‘‘forwhich another payer is responsible’’,and ‘‘subparts C through G’’ is revisedto read ‘‘subparts C through H’’.

§ 411.21 Definitions.In this subpart B and in subparts C

through H of this part, unless thecontext indicates otherwise—* * * * *

Monthly capitation payment means acomprehensive monthly payment thatcovers all physician services associatedwith the continuing medicalmanagement of a maintenance dialysispatient who dialyses at home or as anoutpatient in an approved ESRD facility.* * * * *

3. Section 411.24 is amended to reviseparagraph (c) to read as follows:

§ 411.24 Recovery of conditionalpayments.

* * * * *(c) Amount of recovery—(1) If it is not

necessary for HCFA to take legal actionto recover, HCFA recovers the lesser ofthe following:

(i) The amount of the Medicareprimary payment.

(ii) The full primary payment amountthat the primary payer is obligated topay under this part without regard toany payment, other than a full primarypayment that the primary payer haspaid or will make, or, in the case of a


third party payment recipient, theamount of the third party payment.

(2) If it is necessary for HCFA to takelegal action to recover from the primarypayer, HCFA may recover twice theamount specified in paragraph (c)(1)(i)of this section.* * * * *

4. Section 411.24 is amended byadding a new paragraph (m) to read asfollows:* * * * *

(m) Interest charges.(1) With respectto recovery of payments for items andservices furnished before October 31,1994, HCFA charges interest, exercisingcommon law authority in accordancewith 45 CFR 30.13, consistent with theFederal Claims Collection Act (31 U.S.C.3711).

(2) In addition to its common lawauthority with respect to recovery ofpayments for items and servicesfurnished on or after October 31, 1994,HCFA charges interest in accordancewith section 1862(b)(2)(B)(i) of the Act.Under that provision—

(i) HCFA may charge interest ifreimbursement is not made to theappropriate trust fund before theexpiration of the 60-day period thatbegins on the date on which notice orother information is received by HCFAthat payment has been or could be madeunder a primary plan;

(ii) Interest may accrue from the datewhen that notice or other information isreceived by HCFA and is charged untilreimbursement is made; and

(iii) The rate of interest is thatprovided at 42 CFR 405.376(d).

§ 411.33 [Amended]

5. In § 411.33, the following changesare made:

a. The heading and introductory textof paragraph (a) are revised to read asset forth below.

b. In paragraph (a)(1), ‘‘(or the amountthe supplier is obligated to accept aspayment in full if that is less than thecharges)’’ is inserted immediately after‘‘the supplier’’.

c. In paragraph (a)(3), ‘‘Medicare feeschedule,’’ is inserted before ‘‘Medicarereasonable charge’’ and a comma isinserted after ‘‘reasonable charge’’.

d. In paragraph (b) introductory textand paragraph (b)(3), ‘‘reasonablecharge’’ is revised to read ‘‘feeschedule’’.

e. Paragraphs (c) and (d) are removedand reserved.

f. In the heading of paragraph (e), ‘‘feeschedule,’’ is inserted before‘‘reasonable charge’’, and a comma isinserted after ‘‘reasonable charge’’.

§ § 411.33 Amount of Medicare secondarypayment.

(a) Services for which HCFA pays ona Medicare fee schedule or reasonablecharge basis. The Medicare secondarypayment is the lowest of the following:* * * * *

(c) [Reserved](d) [Reserved]

* * * * *D. Subparts E and F are redesignated

as subparts F and G, respectively, inaccordance with the redesignationtables set forth below, and throughoutpart 411, internal cross references arerevised to reflect these changes.Old section (subpart E): New section

(subpart F)411.60 ................................ 411.160411.62 ................................ 411.162411.65 ................................ 411.165

Old section (subpart F): New section(subpart G)

411.70 ................................ 411.170411.72 ................................ 411.172411.75 ................................ 411.175

E. A new subpart E is added, to readas follows:

Subpart E—Limitations on Payment forServices Covered Under Group HealthPlans: General Provisions

Sec.411.100 Basis and scope.411.101 Definitions.411.102 Basic prohibitions and

requirements.411.103 Prohibition against financial and

other incentives.411.104 Current employment status.411.106 Aggregation rules.411.108 Taking into account entitlement to

Medicare.411.110 Basis for determination of

nonconformance.411.112 Documentation of conformance.411.114 Determination of nonconformance.411.115 Notice of determination of

nonconformance.411.120 Appeals.411.121 Hearing procedures.411.122 Hearing officer’s decision.411.124 Administrator’s review of hearing

decision.411.126 Reopening of determinations and

decisions.411.130 Referral to Internal Revenue

Service (IRS).

Subpart E—Limitations on Payment forServices Covered Under Group HealthPlans: General Provisions

§ 411.100 Basis and scope.(a) Statutory basis.—(1) Section

1862(b) of the Act provides in part thatMedicare is secondary payer, underspecified conditions, for servicescovered under any of the following:

(i) Group health plans of employersthat employ at least 20 employees and

that cover Medicare beneficiaries age 65or older who are covered under the planby virtue of the individual’s currentemployment status with an employer orthe current employment status of aspouse of any age. (Section1862(b)(1)(A))

(ii) Group health plans (withoutregard to the number of individualsemployed and irrespective of currentemployment status) that coverindividuals who have ESRD. Except asprovided in § 411.163, group healthplans are always primary payersthroughout the first 18 months of ESRD-based Medicare eligibility orentitlement. (Section 1862(b)(1)(C))

(iii) Large group health plans (that is,plans of employers that employ at least100 employees) and that cover Medicarebeneficiaries who are under age 65,entitled to Medicare on the basis ofdisability, and covered under the planby virtue of the individual’s or a familymember’s current employment statuswith an employer. (Section1862(b)(1)(B))

(2) Sections 1862(b)(1) (A), (B), and(C) of the Act provide that group healthplans and large group health plans maynot take into account that theindividuals described in paragraph(a)(1) of this section are entitled toMedicare on the basis of age ordisability, or eligible for, or entitled toMedicare on the basis of ESRD.

(3) Section 1862(b)(1)(A)(i)(II) of theAct provides that group health plans ofemployers of 20 or more employeesmust provide to any employee or spouseage 65 or older the same benefits, underthe same conditions, that it provides toemployees and spouses under 65. Therequirement applies regardless ofwhether the individual or spouse 65 orolder is entitled to Medicare.

(4) Section 1862(b)(1)(C)(ii) of the Actprovides that group health plans maynot differentiate in the benefits theyprovide between individuals who haveESRD and other individuals coveredunder the plan on the basis of theexistence of ESRD, the need for renaldialysis, or in any other manner.Actions that constitute ‘‘differentiating’’are listed in § 411.161(b).

(b) Scope. This subpart sets forthgeneral rules pertinent to—

(1) Medicare payment for services thatare covered under a group health planand are furnished to certainbeneficiaries who are entitled on thebasis of ESRD, age, or disability.

(2) The prohibition against taking intoaccount Medicare entitlement based onage or disability, or Medicare eligibilityor entitlement based on ESRD.

(3) The prohibition againstdifferentiation in benefits between


individuals who have ESRD and otherindividuals covered under the plan.

(4) The requirement to provide tothose 65 or over the same benefits underthe same conditions as are provided tothose under 65.

(5) The appeals procedures for grouphealth plans that HCFA determines arenonconforming plans.

§ 411.101 Definitions.As used in this subpart and in

subparts F through H of this part—COBRA stands for Consolidated

Omnibus Budget Reconciliation Act of1985.

Days means calendar days.Employee (subject to the special rules

in § 411.104) means an individualwho—

(1) Is working for an employer; or(2) Is not working for an employer but

is receiving payments that are subject toFICA taxes, or would be subject to FICAtaxes except that the employer isexempt from those taxes under theInternal Revenue Code.

Employer means, in addition toindividuals (including self-employedpersons) and organizations engaged in atrade or business, other entities exemptfrom income tax such as religious,charitable, and educational institutions,the governments of the United States,the individual States, Puerto Rico, theVirgin Islands, Guam, American Samoa,the Northern Mariana Islands, and theDistrict of Columbia, and the agencies,instrumentalities, and politicalsubdivisions of these governments.

FICA stands for the Federal InsuranceContributions Act, the law that imposessocial security taxes on employers andemployees under section 21 of theInternal Revenue Code.

Group health plan (GHP) means anyarrangement made by one or moreemployers or employee organizations toprovide health care directly or throughother methods such as insurance orreimbursement, to current or formeremployees, the employer, othersassociated or formerly associated withthe employer in a business relationship,or their families, that—

(1) Is of, or contributed to by, one ormore employers or employeeorganizations.

(2) If it involves more than oneemployer or employee organization,provides for common administration.

(3) Provides substantially the samebenefits or the same benefit options toall those enrolled under thearrangement.

The term includes self-insured plans,plans of governmental entities (Federal,State and local), and employeeorganization plans; that is, union plans,

employee health and welfare funds orother employee organization plans. Theterm also includes employee-pay-allplans, which are plans under theauspices of one or more employers oremployee organizations but whichreceive no financial contributions fromthem. The term does not include a planthat is unavailable to employees; forexample, a plan only for self-employedpersons.

IRC stands for Internal Revenue Code.IRS stands for Internal Revenue

Service.Large group health plan (LGHP)

means a GHP that covers employees ofeither—

(1) A single employer or employeeorganization that employed at least 100full-time or part-time employees on 50percent or more of its regular businessdays during the previous calendar year;or

(2) Two or more employers, oremployee organizations, at least one ofwhich employed at least 100 full-time orpart-time employees on 50 percent ormore of its regular business days duringthe previous calendar year.

MSP stands for Medicare secondarypayer.

Multi-employer plan means a planthat is sponsored jointly by two or moreemployers (sometimes called a multiple-employer plan) or by employers andunions (sometimes under the Taft-Hartley law).

Self-employed person encompassesconsultants, owners of businesses, anddirectors of corporations, and membersof the clergy and religious orders whoare paid for their services by a religiousbody or other entity.

Similarly situated individual means—(1) In the case of employees, other

employees enrolled or seeking to enrollin the plan; and

(2) In the case of other categories ofindividuals, other persons in any ofthose categories who are enrolled orseeking to enroll in the plan.

§ 411.102 Basic prohibitions andrequirements.

(a) ESRD—(1) A group health plan ofany size—(i) May not take into accountthe ESRD-based Medicare eligibility orentitlement of any individual who iscovered or seeks to be covered under theplan; and

(ii) May not differentiate in thebenefits it provides between individualswith ESRD and other individualscovered under the plan, on the basis ofthe existence of ESRD, or the need fordialysis, or in any other manner.

(2) The prohibitions of paragraph (a)of this section do not prohibit a planfrom paying benefits secondary to

Medicare after the first 18 months ofESRD-based eligibility or entitlement.

(b) Age. A GHP of an employer oremployee organization of at least 20employees—

(1) May not take into account the age-based Medicare entitlement of anindividual or spouse age 65 or olderwho is covered (or seeks to be covered)under the plan by virtue of currentemployment status; and

(2) Must provide, to employees age 65or older and to spouses age 65 or olderof employees of any age, the samebenefits under the same conditions as itprovides to employees and spousesunder age 65.

(c) Disability. A GHP of an employeror employee organization of at least 100employees may not take into accountthe disability-based Medicareentitlement of any individual who iscovered (or seeks to be covered) underthe plan by virtue of currentemployment status.

§ 411.103 Prohibition against financial andother incentives.

(a) General rule. An employer or otherentity (for example, an insurer) isprohibited from offering Medicarebeneficiaries financial or other benefitsas incentives not to enroll in, or toterminate enrollment in, a GHP that is,or would be, primary to Medicare. Thisprohibition precludes offering toMedicare beneficiaries an alternative tothe employer primary plan (for example,coverage of prescription drugs) unlessthe beneficiary has primary coverageother than Medicare. An example wouldbe primary coverage through his own ora spouse’s employer.

(b) Penalty for violation.—(1) Anyentity that violates the prohibition ofparagraph (a) of this section is subject toa civil money penalty of up to $5,000 foreach violation; and

(2) The provisions of section 1128A ofthe Act (other than subsections (a) and(b)) apply to the civil money penalty ofup to $5,000 in the same manner as theprovisions apply to a penalty orproceeding under section 1128A(a).

§ 411.104 Current employment status.(a) General rule. An individual has

current employment status if—(1) The individual is actively working

as an employee, is the employer(including a self-employed person), or isassociated with the employer in abusiness relationship; or

(2) The individual is not activelyworking and—

(i) Is receiving disability benefits froman employer for up to 6 months (the first6 months of employer disability benefitsare subject to FICA taxes); or


(ii) Retains employment rights in theindustry and has not had hisemployment terminated by theemployer, if the employer provides thecoverage (or has not had hismembership in the employeeorganization terminated, if the employeeorganization provides the coverage), isnot receiving disability benefits from anemployer for more than 6 months, is notreceiving disability benefits from SocialSecurity, and has GHP coverage that isnot pursuant to COBRA continuationcoverage (26 U.S.C. 4980B; 29 U.S.C.1161–1168; 42 U.S.C. 300bb–1 et seq.).Whether or not the individual isreceiving pay during the period ofnonwork is not a factor.

(b) Persons who retain employmentrights. For purposes of paragraph (a)(2)of this section, persons who retainemployment rights include but are notlimited to—

(1) Persons who are furloughed,temporarily laid off, or who are on sickleave;

(2) Teachers and seasonal workerswho normally do not work throughoutthe year; and

(3) Persons who have health coveragethat extends beyond or between activeemployment periods; for example, basedon an hours bank arrangement. (Activeunion members often have hours bankcoverage.)

(c) Coverage by virtue of currentemployment status. An individual hascoverage by virtue of currentemployment status with an employerif—

(1) the individual has GHP or LGHPcoverage based on employment,including coverage based on a certainnumber of hours worked for thatemployer or a certain level ofcommissions earned from work for thatemployer at any time; and

(2) the individual has currentemployment status with that employer,as defined in paragraph (a) of thissection.

(d) Special rule: Self-employedperson. A self-employed individual isconsidered to have GHP or LGHPcoverage by virtue of currentemployment status during a particulartax year only if, during the precedingtax year, the individual’s net earnings,from work in that year related to theemployer that offers the group healthcoverage, are at least equal to theamount specified in section 211(b)(2) ofthe Act, which defines ‘‘self-employment income’’ for social securitypurposes.

(e) Special Rule: members of religiousorders and members of clergy—(1)Members of religious orders who havenot taken a vow of poverty. A member

of a religious order who has not takena vow of poverty is considered to havecurrent employment status with thereligious order if—

(a) The religious order pays FICAtaxes on behalf of that member; or

(b) The individual is receiving cashremuneration from the religious order.

(2) Members of religious orders whohave taken a vow of poverty. A memberof a religious order whose members arerequired to take a vow of poverty is notconsidered to be employed by the orderif the services he or she performs as amember of the order are consideredemployment only because the orderelects social security coverage undersection 3121(r) of the IRC. Thisexemption applies retroactively toservices performed as a member of theorder, beginning with the effective datesof the MSP provisions for the aged andthe disabled, respectively. Theexemption does not apply to servicesperformed for employers outside of theorder.

(3) Members of the clergy. A memberof the clergy is considered to havecurrent employment status with achurch or other religious organization ifthe individual is receiving cashremuneration from the church or otherreligious organization for servicesrendered.

(f) Special rule: Delayedcompensation subject to FICA taxes. Anindividual who is not working is notconsidered an employee solely on thebasis of receiving delayed compensationpayments for previous periods of workeven if those payments are subject toFICA taxes (or would be subject to FICAtaxes if the employer were not exemptfrom paying those taxes). For example,an individual who is not working in1993 and receives payments subject toFICA taxes for work performed in 1992is not considered to be an employee in1993 solely on the basis of receivingthose payments.

§ 411.106 Aggregation rules.The following rules apply in

determining the number and size ofemployers, as required by the MSPprovisions for the aged and disabled:

(a) All employers that are treated as asingle employer under subsection (a) or(b) of section 52 of the Internal RevenueCode (IRC) of 1986 (26 U.S.C. 52 (a) and(b)) are treated as a single employer.

(b) All employees of the members ofan affiliated service group (as defined insection 414(m) of the IRC (26 U.S.C.414m)) are treated as employed by asingle employer.

(c) Leased employees (as defined insection 414(n)(2) of the IRC (26 U.S.C.414(n)(2)) are treated as employees of

the person for whom they performservices to the same extent as they aretreated under section 414(n) of the IRC.

(d) In applying the IRC provisionsidentified in this section, HCFA reliesupon regulations and decisions of theSecretary of the Treasury respectingthose provisions.

§ 411.108 Taking into account entitlementto Medicare.

(a) Examples of actions that constitute‘‘taking into account’’. Actions by GHPsor LGHPs that constitute taking intoaccount that an individual is entitled toMedicare on the basis of ESRD, age, ordisability (or eligible on the basis ofESRD) include, but are not limited to,the following:

(1) Failure to pay primary benefits asrequired by subparts F, G, and H of thispart 411.

(2) Offering coverage that is secondaryto Medicare to individuals entitled toMedicare.

(3) Terminating coverage because theindividual has become entitled toMedicare, except as permitted underCOBRA continuation coverageprovisions (26 U.S.C. 4980B(f)(2)(B)(iv);29 U.S.C. 1162.(2)(D); and 42 U.S.C.300bb–2.(2)(D)).

(4) In the case of a LGHP, denying orterminating coverage because anindividual is entitled to Medicare on thebasis of disability without denying orterminating coverage for similarlysituated individuals who are notentitled to Medicare on the basis ofdisability.

(5) Imposing limitations on benefitsfor a Medicare entitled individual thatdo not apply to others enrolled in theplan, such as providing lesscomprehensive health care coverage,excluding benefits, reducing benefits,charging higher deductibles orcoinsurance, providing for lower annualor lifetime benefit limits, or morerestrictive pre-existing illnesslimitations.

(6) Charging a Medicare entitledindividual higher premiums.

(7) Requiring a Medicare entitledindividual to wait longer for coverage tobegin.

(8) Paying providers and suppliers nomore than the Medicare payment ratefor services furnished to a Medicarebeneficiary but making payments at ahigher rate for the same services to anenrollee who is not entitled to Medicare.

(9) Providing misleading orincomplete information that would havethe effect of inducing a Medicareentitled individual to reject theemployer plan, thereby makingMedicare the primary payer. Anexample of this would be informing the


beneficiary of the right to accept orreject the employer plan but failing toinform the individual that, if he or sherejects the plan, the plan will not bepermitted to provide or pay forsecondary benefits.

(10) Including in its health insurancecards, claims forms, or brochuresdistributed to beneficiaries, providers,and suppliers, instructions to billMedicare first for services furnished toMedicare beneficiaries withoutstipulating that such action may betaken only when Medicare is theprimary payer.

(11) Refusing to enroll an individualfor whom Medicare would be secondarypayer, when enrollment is available tosimilarly situated individuals for whomMedicare would not be secondary payer.

(b) Permissible actions—(1) If a GHPor LGHP makes benefit distinctionsamong various categories of individuals(distinctions unrelated to the fact thatthe individual is disabled, based, forinstance, on length of time employed,occupation, or marital status), the GHPor LGHP may make the samedistinctions among the same categoriesof individuals entitled to Medicarewhose plan coverage is based on currentemployment status. For example, if aGHP or LGHP does not offer coverage toemployees who have worked less thanone year and who are not entitled toMedicare on the basis of disability orage, the GHP or LGHP is not required tooffer coverage to employees who haveworked less than one year and who areentitled to Medicare on the basis ofdisability or age.

(2) A GHP or LGHP may pay benefitssecondary to Medicare for an aged ordisabled beneficiary who has currentemployment status if the plan coverageis COBRA continuation coveragebecause of reduced hours of work.Medicare is primary payer for thisbeneficiary because, although he or shehas current employment status, the GHPcoverage is by virtue of the COBRA lawrather than by virtue of the currentemployment status.

(3) A GHP may terminate COBRAcontinuation coverage of an individualwho becomes entitled to Medicare onthe basis of ESRD, when permittedunder the COBRA provisions.

§ 411.110 Basis for determination ofnonconformance.

(a) A ‘‘determination ofnonconformance’’ is a HCFAdetermination that a GHP or LGHP is anonconforming plan as provided in thissection.

(b) HCFA makes a determination ofnonconformance for a GHP or LGHPthat, at any time during a calendar year,

fails to comply with any of thefollowing statutory provisions:

(1) The prohibition against taking intoaccount that a beneficiary who iscovered or seeks to be covered under theplan is entitled to Medicare on the basisof ESRD, age, or disability, or eligible onthe basis of ESRD.

(2) The nondifferentiation clause forindividuals with ESRD.

(3) The equal benefits clause for theworking aged.

(4) The obligation to refundconditional Medicare primarypayments.

(c) HCFA may make a determinationof nonconformance for a GHP or LGHPthat fails to respond to a request forinformation, or to provide correctinformation, either voluntarily or inresponse to a HCFA request, on theplan’s primary payment obligation withrespect to a given beneficiary, if thatfailure contributes to either or both ofthe following:

(1) Medicare erroneously making aprimary payment.

(2) A delay or foreclosure of HCFA’sability to recover an erroneous primarypayment.

§ 411.112 Documentation of conformance.

(a) Acceptable documentation. HCFAmay require a GHP or LGHP todemonstrate that it has complied withthe Medicare secondary payerprovisions and to submit supportingdocumentation by an official authorizedto act on behalf of the entity, underpenalty of perjury. The following areexamples of documentation that may beacceptable:

(1) A copy of the employer’s plan orpolicy that specifies the servicescovered, conditions of coverage, benefitlevels and limitations with respect topersons entitled to Medicare on thebasis of ESRD, age, or disability ascompared to the provisions applicableto other enrollees and potentialenrollees.

(2) An explanation of the plan’sallegation that it does not owe HCFAany amount HCFA claims the plan owesas repayment for conditional ormistaken Medicare primary payments.

(b) Lack of acceptable documentation.If a GHP or LGHP fails to provideacceptable evidence or documentationthat it has complied with the MSPprohibitions and requirements set forthin § 411.110, HCFA may make adetermination of nonconformance forboth the year in which the services werefurnished and the year in which therequest for information was made.

§ 411.114 Determination ofnonconformance.

(a) Starting dates for determination ofnonconformance. HCFA’s authority todetermine nonconformance of GHPsbegins on the following dates:

(1) On January 1, 1987 for MSPprovisions that affect the disabled.

(2) On December 20, 1989 for MSPprovisions that affect ESRD beneficiariesand the working aged.

(3) On August 10, 1993 for failure torefund mistaken Medicare primarypayments.

(b) Special rule for failure to repay. AGHP that fails to comply with § 411.110(a)(1), (a)(2), or (a)(3) in a particular yearis nonconforming for that year. If, in asubsequent year, that plan fails to repaythe resulting mistaken primarypayments (in accordance with§ 411.110(a)(4)), the plan is alsononconforming for the subsequent year.For example, if a plan paid secondaryfor the working aged in 1991, that planwas nonconforming for 1991. If in 1994HCFA identifies mistaken primarypayments attributable to the 1991violation, and the plan refuses to repay,it is also nonconforming for 1994.

§ 411.115 Notice of determination ofnonconformance.

(a) Notice to the GHP or LGHP—(1) IfHCFA determines that a GHP or anLGHP is nonconforming with respect toa particular calendar year, HCFA mailsto the plan written notice of thefollowing:

(i) The determination.(ii) The basis for the determination.(iii) The right of the parties to request

a hearing.(iv) An explanation of the procedure

for requesting a hearing.(v) The tax that may be assessed by

the IRS in accordance with section 5000of the IRC.

(vi) The fact that if none of the partiesrequests a hearing within 65 days fromthe date of its notice, the determinationis binding on all parties unless it isreopened in accordance with § 411.126.

(2) The notice also states that the planmust, within 30 days from the date onits notice, submit to HCFA the namesand addresses of all employers andemployee organizations that contributedto the plan during the calendar year forwhich HCFA has determinednonconformance.

(b) Notice to contributing employersand employee organizations. HCFAmails written notice of thedetermination, including all theinformation specified in paragraph (a)(1)of this section, to all contributingemployers and employee organizationsalready known to HCFA or identified by


the plan in accordance with paragraph(a)(2) of this section. Employers andemployee organizations have 65 daysfrom the date of their notice to requesta hearing.

§ 411.120 Appeals.(a) Parties to the determination. The

parties to the determination are HCFA,the GHP or LGHP for which HCFAdetermined nonconformance, and anyemployers or employee organizationsthat contributed to the plan during thecalendar year for which HCFAdetermined nonconformance.

(b) Request for hearing.—(1) A party’srequest for hearing must be in writing(not in facsimile or other electronicmedium) and in the manner stipulatedin the notice of nonconformance; itmust be filed within 65 days from thedate on the notice.

(2) The request may include rationaleshowing why the parties believe thatHCFA’s determination is incorrect andsupporting documentation.

(3) A request is considered filed onthe date it is received by the appropriateoffice, as shown by the receipt datestamped on the request.

§ 411.121 Hearing procedures.(a) Nature of hearing.—(1) If any of

the parties requests a hearing within 65days from the date on the notice of thedetermination of nonconformance, theHCFA Administrator appoints a hearingofficer.

(2) If no party files a request withinthe 65-day period, the initialdetermination of nonconformance isbinding upon all parties unless it isreopened in accordance with § 411.126.

(3) If more than one party requests ahearing the hearing officer conducts asingle hearing in which all parties mayparticipate.

(4) On the record review. Ordinarily,the hearing officer makes a decisionbased upon review of the data anddocuments on which HCFA based itsdetermination of nonconformance andany other documentation submitted byany of the parties within 65 days fromthe date on the notice.

(5) Oral hearing. The hearing officermay provide for an oral hearing eitheron his or her own motion or in responseto a party’s request if the partydemonstrates to the hearing officer’ssatisfaction that an oral hearing isnecessary. Within 30 days of receipt ofthe request, the hearing officer gives allknown parties written notice of therequest and whether the request for oralhearing is granted.

(b) Notice of time and place of oralhearing. If the hearing officer providesan oral hearing, he or she gives all

known parties written notice of the timeand place of the hearing at least 30 daysbefore the scheduled date.

(c) Prehearing discovery.—(1) Thehearing officer may permit prehearingdiscovery if it is requested by a party atleast 10 days before the scheduled dateof the hearing.

(2) If the hearing officer approves therequest, he or she—

(i) Provides a reasonable time forinspection and reproduction ofdocuments; and

(ii) In ruling on discovery matters, isguided by the Federal Rules of CivilProcedure. (28 U.S.C.A. Rules 26–37)

(3) The hearing officer’s orders on alldiscovery matters are final.

(d) Conduct of hearing. The hearingofficer determines the conduct of thehearing, including the order in whichthe evidence and the allegations arepresented.

(e) Evidence at hearing.—(1) Thehearing officer inquires into the mattersat issue and may receive from all partiesdocumentary and other evidence that ispertinent and material, including thetestimony of witnesses, and evidencethat would be inadmissible in a court oflaw.

(2) Evidence may be received at anytime before the conclusion of thehearing.

(3) The hearing officer gives theparties opportunity for submission andconsideration of evidence andarguments and, in ruling on theadmissibility of evidence, excludesirrelevant, immaterial, or undulyrepetitious evidence.

(4) The hearing officer’s ruling onadmissibility of evidence is final andnot subject to further review.

(f) Subpoenas.—(1) The hearingofficer may, either on his or her ownmotion or upon the request of any party,issue subpoenas for either or both of thefollowing if they are reasonablynecessary for full presentation of thecase:

(i) The attendance and testimony ofwitnesses.

(ii) The production of books, records,correspondence, papers, or otherdocuments that are relevant andmaterial to any matter at issue.

(2) A party that wishes the issuanceof a subpoena must, at least 10 daysbefore the date fixed for the hearing, filewith the hearing officer a writtenrequest that identifies the witnesses ordocuments to be produced anddescribes the address or location insufficient detail to permit the witnessesor documents to be found.

(3) The request for a subpoena muststate the pertinent facts that the partyexpects to establish by the witnesses or

documents and whether those factscould be established by other evidencewithout the use of a subpoena.

(4) The hearing officer issues thesubpoenas at his or her discretion, andHCFA assumes the cost of the issuanceand the fees and mileage of anysubpoenaed witness, in accordance withsection 205(d) of the Act (42 U.S.C.405(d)).

(g) Witnesses. Witnesses at the hearingtestify under oath or affirmation, unlessexcused by the hearing officer for cause.The hearing officer may examine thewitnesses and shall allow the parties toexamine and cross-examine witnesses.

(h) Record of hearing. A completerecord of the proceedings at the hearingis made and transcribed in all cases. Itis made available to the parties uponrequest. The record is not closed untila decision has been issued.

(i) Sources of hearing officer’sauthority. In the conduct of the hearing,the hearing officer complies with all theprovisions of title XVIII of the Act andimplementing regulations, as well aswith HCFA Rulings issued under§ 401.108 of this chapter. The hearingofficer gives great weight to interpretiverules, general statements of policy, andrules of agency organization, procedure,or practice established by HCFA.

§ 411.122 Hearing officer’s decision.(a) Timing.—(1) If the decision is

based on a review of the record, thehearing officer mails the decision to allknown parties within 120 days from thedate of receipt of the request for hearing.

(2) If the decision is based on an oralhearing, the hearing officer mails thedecision to all known parties within 120days from the conclusion of the hearing.

(b) Basis, content, and distribution ofhearing decision.—(1) The writtendecision is based on substantialevidence and contains findings of fact,a statement of reasons, and conclusionsof law.

(2) The hearing officer mails a copy ofthe decision to each of the parties, bycertified mail, return receipt requested,and includes a notice that theadministrator may review the hearingdecision at the request of a party or onhis or her own motion.

(c) Effect of hearing decision. Thehearing officer’s decision is the finalDepartmental decision and is bindingupon all parties unless theAdministrator chooses to review thatdecision in accordance with § 411.124or it is reopened by the hearing officerin accordance with § 411.126.

§ 411.124 Administrator’s review ofhearing decision.

(a) Request for review. A party’srequest for review of a hearing officer’s


decision must be in writing (not infacsimile or other electronic medium)and must be received by theAdministrator within 25 days from thedate on the decision.

(b) Office of the Attorney Advisorresponsibility. The Office of theAttorney Advisor examines the hearingofficer’s decision, the requests made byany of the parties or HCFA, and anysubmission made in accordance withthe provisions of this section in order toassist the Administrator in decidingwhether to review the decision.

(c) Administrator’s discretion. TheAdministrator may—

(1) Review or decline to review thehearing officer’s decision;

(2) Exercise this discretion on his orher own motion or in response to arequest from any of the parties; and

(3) Delegate review responsibility tothe Deputy Administrator. (As used inthis section, the term ‘‘Administrator’’includes ‘‘Deputy Administrator’’ ifreview responsibility has beendelegated.)

(d) Basis for decision to review. Indeciding whether to review a hearingofficer’s decision, the Administratorconsiders—

(1) Whether the decision—(i) Is based on a correct interpretation

of law, regulation, or HCFA Ruling;(ii) Is supported by substantial

evidence;(iii) Presents a significant policy issue

having a basis in law and regulations;(iv) Requires clarification,

amplification, or an alternative legalbasis for the decision; and

(v) Is within the authority provided bystatute, regulation, or HCFA Ruling; and

(2) Whether review may lead to theissuance of a HCFA Ruling or otherdirective needed to clarify a statute orregulation.

(e) Notice of decision to review or notto review. (1) The Administrator givesall parties prompt written notice of hisor her decision to review or not toreview.

(2) The notice of a decision to reviewidentifies the specific issues theAdministrator will consider.

(f) Response to notice of decision toreview. (1) Within 20 days from the dateon a notice of the Administrator’sdecision to review a hearing officer’sdecision, any of the parties may filewith the Administrator any or all of thefollowing:

(i) Proposed findings and conclusions.(ii) Supporting views or exceptions to

the hearing officer’s decision.(iii) Supporting reasons for the

proposed findings and exceptions.(iv) A rebuttal to another party’s

request for review or to other

submissions already filed with theAdministrator.

(2) The submissions must be limitedto the issues the Administrator hasdecided to review and confined to therecord established by the hearingofficer.

(3) All communications from theparties concerning a hearing officer’sdecision being reviewed by theAdministrator must be in writing (not infacsimile or other electronic medium)and must include a certification thatcopies have been sent to all otherparties.

(4) The Administrator does notconsider any communication that doesnot meet the requirements of thisparagraph.

(g) Administrator’s review decision.(1) The Administrator bases his or herdecision on the following:

(i) The entire record developed by thehearing officer.

(ii) Any materials submitted inconnection with the hearing or underparagraph (f) of this section.

(iii) Generally known facts not subjectto reasonable dispute.

(2) The Administrator mails copies ofthe review decision to all parties within120 days from the date of the hearingofficer’s decision.

(3) The Administrator’s reviewdecision may affirm, reverse, or modifythe hearing decision or may remand thecase to the hearing officer.

(h) Basis and effect of remand—(1)Basis. The bases for remand do notinclude the following:

(i) Evidence that existed at the time ofthe hearing and that was known orcould reasonably have been expected tobe known.

(ii) A court case that was either notavailable at the time of the hearing orwas decided after the hearing.

(iii) Change of the parties’representation.

(iv) An alternative legal basis for anissue in dispute.

(2) Effect of remand. (i) TheAdministrator may instruct the hearingofficer to take further action withrespect to the development of additionalfacts or new issues or to consider theapplicability of laws or regulations otherthan those considered during thehearing.

(ii) The hearing officer takes theaction in accordance with theAdministrator’s instructions in theremand notice and again issues adecision.

(iii) The Administrator may review ordecline to review the hearing officer’sremand decision in accordance with theprocedures set forth in this section.

(i) Finality of decision. TheAdministrator’s review decision, or the

hearing officer’s decision followingremand, is the final Departmentaldecision and is binding on all partiesunless the Administrator chooses toreview the decision in accordance withthis section, or the decision is reopenedin accordance with § 411.126.

§ 411.126 Reopening of determinationsand decisions.

(a) A determination that a GHP orLGHP is a nonconforming GHP or thedecision or revised decision of a hearingofficer or of the HCFA Administratormay be reopened within 12 monthsfrom the date on the notice ofdetermination or decision or reviseddecision, for any reason by the entitythat issued the determination ordecision.

(b) The decision to reopen or not toreopen is not appealable.

§ 411.130 Referral to Internal RevenueService (IRS).

(a) HCFA responsibility. After HCFAdetermines that a plan has been anonconforming GHP in a particularyear, it refers its determination to theIRS, but only after the parties haveexhausted all HCFA appeal rights withrespect to the determination.

(b) IRS responsibility. The IRSadministers section 5000 of the IRC,which imposes a tax on employers(other than governmental entities) andemployee organizations that contributeto a nonconforming GHP. The tax isequal to 25 percent of the employer’s oremployee organization’s expenses,incurred during the calendar year inwhich the plan is a nonconformingGHP, for each GHP, both conformingand nonconforming, to which theemployer or employee organizationcontributes.

D. Newly designated subpart F isamended as set forth below.

1. The heading, and § 411.160 arerevised to read as follows:

Subpart F—Special Rules: IndividualsEligible or Entitled on the Basis ofESRD, Who Are Also Covered UnderGroup Health Plans

§ 411.160 Scope.

This subpart sets forth special rulesthat apply to individuals who areeligible for, or entitled to, Medicare onthe basis of ESRD. (Section 406.13 ofthis chapter contains the rules foreligibility and entitlement based onESRD.)

2. A new § 411.161 is added to readas follows:


2 COBRA requires that certain group health plansoffer continuation of plan coverage for 18 to 36months after the occurrence of certain ‘‘qualifyingevents,’’ including loss of employment or reductionof employment hours. Those are events thatotherwise would result in loss of group health plancoverage unless the individual is given theopportunity to elect, and does so elect, to continueplan coverage at his or her own expense. With oneexception, the COBRA amendments expresslypermit termination of continuation coverage uponentitlement to Medicare. The exception is that theplan may not terminate continuation coverage of anindividual (and his or her qualified dependents) ifthe individual retires on or before the date theemployer substantially eliminates regular plancoverage by filing for Chapter 11 bankruptcy (26U.S.C. 4980B(g)(1)(D) and 29 U.S.C. 1167.(3)(C)).

§ 411.161 Prohibition against taking intoaccount Medicare eligibility or entitlementor differentiating benefits.

(a) Taking into account—(1) Basicrule. A GHP may not take into accountthat an individual is eligible for orentitled to Medicare benefits on thebasis of ESRD during the coordinationperiod specified in § 411.162 (b) and (c).Examples of actions that constitutetaking into account Medicareentitlement are listed in § 411.108(a).

(2) Applicability. This prohibitionapplies for ESRD-based Medicareeligibility to the same extent as forESRD-based Medicare entitlement. Anindividual who has ESRD but who hasnot filed an application for entitlementto Medicare on that basis is eligible forMedicare based on ESRD for purposes ofparagraphs (b)(2) and (c)(2) through(c)(4) of § 411.162 if the individualmeets the other requirements of § 406.13of this chapter.

(3) Relation to COBRA continuationcoverage. This rule does not prohibit thetermination of GHP coverage under titleX of COBRA when termination of thatcoverage is expressly permitted, uponentitlement to Medicare, under 26U.S.C. 4980B(f)(2)(B)(iv); 29 U.S.C.1162.(2)(D); or 42 U.S.C. 300bb–2.(2)(D).2 (Situations in which Medicareis secondary to COBRA continuationcoverage are set forth in § 411.162(a)(3).)

(b) Nondifferentiation.—(1) A GHPmay not differentiate in the benefits itprovides between individuals who haveESRD and others enrolled in the plan,on the basis of the existence of ESRD,or the need for renal dialysis, or in anyother manner.

(2) GHP actions that constitutedifferentiation in plan benefits (and thatmay also constitute ‘‘taking intoaccount’’ Medicare eligibility orentitlement) include, but are not limitedto the following:

(i) Terminating coverage ofindividuals with ESRD, when there isno basis for such termination unrelatedto ESRD (such as failure to pay planpremiums) that would result in

termination for individuals who do nothave ESRD.

(ii) Imposing on persons who haveESRD, but not on others enrolled in theplan, benefit limitations such as lesscomprehensive health plan coverage,reductions in benefits, exclusions ofbenefits, a higher deductible orcoinsurance, a longer waiting period, alower annual or lifetime benefit limit, ormore restrictive preexisting illnesslimitations.

(iii) Charging individuals with ESRDhigher premiums.

(iv) Paying providers and suppliersless for services furnished to individualswho have ESRD than for the sameservices furnished to those who do nothave ESRD, such as paying 80 percentof the Medicare rate for renal dialysis onbehalf of a plan enrollee who has ESRDand the usual, reasonable andcustomary charge for renal dialysis onbehalf of an enrollee who does not haveESRD.

(v) Failure to cover routinemaintenance dialysis or kidneytransplants, when a plan covers otherdialysis services or other organtransplants.

(c) Uniform Limitations on particularservices permissible. A plan is notprohibited from limiting coveredutilization of a particular service as longas the limitation applies uniformly to allplan enrollees. For instance, if a planlimits its coverage of renal dialysissessions to 30 per year for all planenrollees, the plan would not bedifferentiating in the benefits it providesbetween plan enrollees who have ESRDand those who do not.

(d) Benefits secondary to Medicare. (1)The prohibition against differentiationof benefits does not preclude a planfrom paying benefits secondary toMedicare after the expiration of thecoordination period described in§ 411.162 (b) and (c), but a plan may nototherwise differentiate, as described inparagraph (b) of this section, in thebenefits it provides.

(2) Example—Mr. Smith works for employer A, and he

and his wife are covered through employerA’s GHP (Plan A). Neither is eligible forMedicare nor has ESRD. Mrs. Smith worksfor employer B, and is also covered byemployer B’s plan (Plan B). Plan A is morecomprehensive than Plan B and coverscertain items and services which Plan B doesnot cover, such as prescription drugs. If Mrs.Smith obtains a medical service, Plan B paysprimary and Plan A pays secondary. That is,Plan A covers Plan B copayment amountsand items and services that Plan A covers butthat Plan B does not.

Mr. Jones also works for employer A, andhe and his wife are covered by Plan A. Mrs.Jones does not have other GHP coverage. Mrs.

Jones develops ESRD and becomes entitled toMedicare on that basis. Plan A pays primaryto Medicare during the first 18 months ofMedicare entitlement based on ESRD. WhenMedicare becomes the primary payer, theplan converts Mrs. Jones’ coverage to aMedicare supplement policy. That policypays Medicare deductible and coinsuranceamounts but does not pay for items andservices not covered by Medicare, whichplan A would have covered. That conversionis impermissible because the plan isproviding a lower level of coverage for Mrs.Jones, who has ESRD, than it provides forMrs. Smith, who does not. In other words, ifPlan A pays secondary to primary payersother than Medicare, it must provide thesame level of secondary benefits whenMedicare is primary in order to comply withthe nondifferentiation provision.

§ 411.162 [Amended]3. In newly designated § 411.162, the

following changes are made:a. The section heading and paragraph

(a) are revised to read as set forth below.b. In the following paragraphs,

‘‘solely’’ is removed:Paragraphs (b)(2)(i), (b)(2)(ii),

(c)(2)(iii), (c)(2)(iv), (c)(3)(i), (c)(3)(ii),(c)(4)(i), (c)(4)(ii), and (f).

c. In the following paragraphs,‘‘employer plan’’ and ‘‘employer grouphealth plan’’ are revised to read ‘‘grouphealth plan’’: The section heading andparagraphs (a)(1), (a)(2)(i)(A), (a)(2)(i)(B),(a)(2)(i)(C), (a)(2)(ii), (d)(7), (d)(8), and(d)(9).

d. In paragraphs (c)(2)(iii) and(c)(2)(iv), ‘‘January 1995’’ is revised toread ‘‘September 1997’’.

e. In paragraphs (c)(3)(i) and (c)(3)(ii),‘‘July 1994’’ is revised to read ‘‘April1997’’.

f. In paragraph (c)(4), introductorytext, ‘‘January 1, 1996’’ is revised to read‘‘September 30, 1998’’.

g. In paragraphs (c)(4)(i) and (c)(4)(ii),‘‘August 1994 through January 1, 1995’’is revised to read ‘‘May 1997 throughSeptember 1997’’.

h. In paragraph (d)(9), ‘‘January 1,1995’’ is revised to read ‘‘December 1,1997’’; ‘‘January 1, 1995 through January1, 1996, a period of 12 months plus 1day.’’ is revised to read ‘‘December 1,1997 through November 30, 1998, aperiod of 12 months.’’; ‘‘January 2,1996’’ is revised to read ‘‘December 1,1998’’ and ‘‘on or before January 1,1996’’ is revised to read ‘‘before October1, 1998’’.

i. In paragraph (d)(10), ‘‘September 1,1995’’ is revised to read ‘‘August 1,1997’’; ‘‘September 1, 1995 throughAugust 31, 1996’’ is revised to read‘‘August 1, 1997 through September 30,1998’’; ‘‘September 1, 1996’’ is revisedto read October 1, 1998’’; and ‘‘12months’’ is revised to read ‘‘14 months’’.

j. Paragraph (e) is removed andreserved.


3 HCFA does not pay if noncoverage of servicesconstitutes differentiation as prohibited by§ 411.161(b).

4 A lawsuit was filed in United States DistrictCourt for the District of Columbia on May 5, 1995(National Medical Care, Inc. v. Shalala, CivilAction No. 95–0860), challenging theimplementation of one aspect of the OBRA ’93provisions with respect to group health planretirement coverage. The court issued a preliminaryinjunction order on June 6, 1995, which enjoins theSecretary from applying the rule contained in§ 411.163(b)(4) for items and services furnishedbetween August 10, 1993 and April 24, 1995,pending the court’s decision on the merits. HCFAwill modify the rules, if required, based on the finalruling by the court.

§ 411.162 Medicare benefits secondary togroup health plan benefits.

(a) General provisions—(1) Basic rule.Except as provided in § 411.163 (withrespect to certain individuals who arealso entitled on the basis of age ordisability), Medicare is secondary to anyGHP (including a retirement plan), withrespect to benefits that are payable to anindividual who is entitled to Medicareon the basis of ESRD, for servicesfurnished during any coordinationperiod determined in accordance withparagraphs (b) and (c) of this section.(No Medicare benefits are payable onbehalf of an individual who is eligiblebut not yet entitled.)

(2) Medicare benefits secondarywithout regard to size of employer andbeneficiary’s employment status. Thesize of employer and employment statusrequirements of the MSP provisions forthe aged and disabled do not apply withrespect to ESRD beneficiaries.

(3) COBRA continuation coverage.Medicare is secondary payer for benefitsthat a GHP—

(i) Is required to keep in effect underCOBRA continuation requirements (asexplained in the footnote to§ 411.161(a)(3)), even after theindividual becomes entitled toMedicare; or

(ii) Voluntarily keeps in effect afterthe individual becomes entitled toMedicare on the basis of ESRD, eventhough not obligated to do so under theCOBRA provisions.

(4) Medicare payments during thecoordination period. During thecoordination period, HCFA makesMedicare payments as follows:

(i) Primary payments only forMedicare covered services that are—

(A) Furnished to Medicarebeneficiaries who have declined toenroll in the GHP;

(B) Not covered under the plan; 3

(C) Covered under the plan but notavailable to particular enrollees becausethey have exhausted their benefits; or

(D) Furnished to individuals whoseCOBRA continuation coverage has beenterminated because of the individual’sMedicare entitlement.

(ii) Secondary payments, within thelimits specified in §§ 411.32 and 411.33,to supplement the amount paid by theGHP if that plan pays only a portion ofthe charge for the services.* * * * *

(e) [Reserved]* * * * *

4. A new § 411.163 is added, to readas follows:

§ 411.163 Coordination of benefits: Dualentitlement situations.

(a) Basic rule. Coordination of benefitsis governed by this section if anindividual is eligible for or entitled toMedicare on the basis of ESRD and alsoentitled on the basis of age or disability.

(b) Specific rules 4—(1) Coordinationperiod ended before August 1993. If thefirst 18 months of ESRD-based eligibilityor entitlement ended before August1993, Medicare was primary payer fromthe first month of dual eligibility orentitlement, regardless of when dualeligibility or entitlement began.

(2) First month of ESRD-basedeligibility or entitlement and first monthof dual eligibility/entitlement afterFebruary 1992 and before August 10,1993. If the first month of ESRD-basedeligibility or entitlement and first monthof dual eligibility/entitlement were afterFebruary 1992 and before August 10,1993, Medicare—

(i) Is primary payer from the firstmonth of dual eligibility/entitlementthrough August 9, 1993;

(ii) Is secondary payer from August10, 1993, through the 18th month ofESRD-based eligibility or entitlement;and

(iii) Again becomes primary payerafter the 18th month of ESRD-basedeligibility or entitlement.

(3) First month of ESRD-basedeligibility or entitlement after February1992 and first month of dual eligibility/entitlement after August 9, 1993. If thefirst month of ESRD-based eligibility orentitlement is after February 1992, andthe first month of dual eligibility/entitlement is after August 9, 1993, therules of § 411.162 (b) and (c) apply; thatis, Medicare—

(i) Is secondary payer during the first18 months of ESRD-based eligibility orentitlement; and

(ii) Becomes primary after the 18thmonth of ESRD-based eligibility orentitlement.

(4) Medicare continues to be primaryafter an aged or disabled beneficiarybecomes eligible on the basis of ESRD.—(i) Applicability of the rule. Medicareremains the primary payer when anindividual becomes eligible for

Medicare based on ESRD if all of thefollowing conditions are met:

(A) The individual is already entitledon the basis of age or disability when heor she becomes eligible on the basis ofESRD.

(B) The MSP prohibition against‘‘taking into account’’ age-based ordisability-based entitlement does notapply because plan coverage was not‘‘by virtue of current employmentstatus’’ or the employer had fewer than20 employees (in the case of the aged)or fewer than 100 employees (in thecase of the disabled).

(C) The plan is paying secondary toMedicare because the plan hadjustifiably taken into account the age-based or disability-based entitlement.

(ii) Effect of the rule. The plan maycontinue to pay benefits secondary toMedicare under paragraph (b)(4)(i) ofthis section. However, the plan may notdifferentiate in the services covered andthe payments made between personswho have ESRD and those who do not.

(c) Examples. (1) (Rule (b)(1).) Mr. A,who is covered by a GHP, becameentitled to Medicare on the basis ofESRD in January 1992. On December 20,1992, Mr. A attained age 65 and becameentitled on the basis of age. Since priorlaw was still in effect (OBRA ’93amendment was effective in August1993), Medicare became primary payeras of December 1992, when dualentitlement began.

(2) (Rule (b)(2).) Miss B, who has GHPcoverage, became entitled to Medicareon the basis of ESRD in July 1992, andalso entitled on the basis of disability inJune 1993. Medicare was primary payerfrom June 1993 through August 9, 1993,because the plan permissibly took intoaccount the ESRD-based entitlement(ESRD was not the ‘‘sole’’ basis ofMedicare entitlement); secondary payerfrom August 10, 1993, throughDecember 1993, the 18th month ofESRD-based entitlement (the plan is nolonger permitted to take into accountESRD-based entitlement that is not the‘‘sole’’ basis of Medicare entitlement);and again became primary payerbeginning January 1994.

(3) (Rule (b)(3).) Mr. C, who is 67years old and entitled to Medicare onthe basis of age, has GHP coverage byvirtue of current employment status. Mr.C is diagnosed as having ESRD andbegins a course of maintenance dialysison June 27, 1993. Effective September 1,1993, Mr. C. is eligible for Medicare onthe basis of ESRD. Medicare, which wassecondary because Mr. C’s GHPcoverage was by virtue of currentemployment, continues to be secondarypayer through February 1995, the 18thmonth of ESRD-based eligibility, and


becomes primary payer beginningMarch 1995.

(4) (Rule (b)(3).) Mr. D retired at age62 and maintained GHP coverage as aretiree. In January 1994, at the age of 64,Mr. D became entitled to Medicarebased on ESRD. Seven months into the18-month coordination period (July1994) Mr. D turned age 65. Thecoordination period continues withoutregard to age-based entitlement, withthe retirement plan continuing to payprimary benefits through June 1995, the18th month of ESRD-based entitlement.Thereafter, Medicare becomes theprimary payer.

(5) (Rule (b)(3).) Mrs. E retired at age62 and maintained GHP coverage as aretiree. In July 1994, she simultaneouslybecame eligible for Medicare based onESRD (maintenance dialysis began inApril 1994) and entitled based on age.The retirement plan must pay benefitsprimary to Medicare from July 1994through December 1995, the first 18months of ESRD-based eligibility.Thereafter, Medicare becomes theprimary payer.

(6) (Rule (b)(3).) Mr. F, who is 67years of age, is working and has GHPcoverage because of his employmentstatus, subsequently develops ESRD,and begins a course of maintenancedialysis in October 1994. He becomeseligible for Medicare based on ESRDeffective January 1, 1995. Under theworking aged provision, the plancontinues to pay primary to Medicarethrough December 1994. On January 1,1995, the working aged provision ceasesto apply and the ESRD MSP provisiontakes effect. In September 1995, Mr. Fretires. The GHP must ignore Mr. F’sretirement status and continue to payprimary to Medicare through June 1996,the end of the 18-month coordinationperiod.

(7) (Rule (b)(4).) Mrs. G, who is 67years of age, is retired. She has GHPretirement coverage through her formeremployer. Her plan permissibly tookinto account her age-based Medicareentitlement when she retired and ispaying benefits secondary to Medicare.Mrs. G subsequently develops ESRD andbegins a course of maintenance dialysisin October 1995. She automaticallybecomes eligible for Medicare based onESRD effective January 1, 1996. Theplan continues to be secondary on thebasis of Mrs. G’s age-based entitlementas long as the plan does not differentiatein the services it provides to Mrs. G anddoes not do anything else that wouldconstitute ‘‘taking into account’’ herESRD-based eligibility.

§ 411.165 [Amended]

5. In newly designated § 411.165, thefollowing changes are made:

(a) In paragraph (a) the superscript inthe heading and the correspondingfootnote are removed.

(b) In paragraphs (a)(1), (b)(1)(i),(b)(1)(ii) and (b)(2), ‘‘employer plan’’ isrevised to read ‘‘group health plan’’.

E. Newly designated subpart G isamended as set forth below.

1. The heading is revised to read asfollows:

Subpart G—Special Rules: AgedBeneficiaries and Spouses Who AreAlso Covered Under Group HealthPlans

2. Nomenclature changes.(a) In the following locations, ‘‘an

employer plan’’ and ‘‘an employergroup health plan’’ are revised to read‘‘a group health plan’’:

§ 411.172 section heading andparagraphs (c).

§ 411.172(d) introductory text and (e).§ 411.175(b)(1), (c)(1)(i), (c)(1)(iii) and

(c)(2).(b) In § 411.172(d), introductory text,

‘‘by reason of employment’’ is revised toread ‘‘by virtue of current employment’’.

3. Section 411.170 is amended torevise paragraph (a), remove and reserveparagraph (b), and remove paragraphs(d) through (f) to read as follows:

§ 411.170 General provisions.

(a) Basis. (1) This subpart is based oncertain provisions of section 1862(b) ofthe Act, which impose specificrequirements and limitations withrespect to—

(i) Individuals who are entitled toMedicare on the basis of age; and

(ii) GHPs of at least one employer of20 or more employees that cover thoseindividuals.

(2) Under these provisions, thefollowing rules apply:

(i) An employer is considered toemploy 20 or more employees if theemployer has 20 or more employees foreach working day in each of 20 or morecalendar weeks in the current calendaryear or the preceding calendar year.

(ii) The plan may not take intoaccount the Medicare entitlement of—

(A) An individual age 65 or older whois covered or seeks to be covered underthe plan by virtue of currentemployment status; or

(B) The spouse, including divorced orcommon-law spouse age 65 or older ofan individual (of any age) who iscovered or seeks to be covered by virtueof current employment status. (Section411.108 gives examples of actions thatconstitute ‘‘taking into account.’’)

(iii) Regardless of whether entitled toMedicare, employees and spouses age65 or older, including divorced orcommon-law spouses of employees ofany age, are entitled to the same planbenefits under the same conditions asemployees and spouses under age 65.

(b) [Reserved]* * * * *

(d) through (e) [Removed]4. Newly designated 411.172 is

amended to revise paragraphs (a), (b),and (d) and add a new paragraph (g) toread as follows:

§ 411.172 Medicare benefits secondary togroup health plan benefits.

(a) Conditions that the individualmust meet. Medicare Part A and Part Bbenefits are secondary to benefitspayable by a GHP for services furnishedduring any month in which theindividual—

(1) Is aged;(2) Is entitled to Medicare Part A

benefits under § 406.10 of this chapter;and

(3) Meets one of the followingconditions:

(i) Is covered under a GHP of anemployer that has at least 20 employees(including a multi-employer plan inwhich at least one of the participatingemployers meets that condition), andcoverage under the plan is by virtue ofthe individual’s current employmentstatus.

(ii) Is the aged spouse (including adivorced or common-law spouse) of anindividual (of any age) who is coveredunder a GHP described in paragraph(a)(3)(i) of this section by virtue of theindividual’s current employment status.

(b) Special rule for multi-employerplans. The requirements and limitationsof paragraph (a) of this section do notapply with respect to individualsenrolled in a multi-employer plan if—

(1) The individuals are covered byvirtue of current employment statuswith an employer that has fewer than 20employees; and

(2) The plan requests an exceptionand identifies the individuals for whomit requests the exception as meeting theconditions specified in paragraph (b)(1)of this section.* * * * *

(d) Reemployed retiree or annuitant.A reemployed retiree or annuitant whois covered by a GHP and who performssufficient services to qualify forcoverage on that basis (that is, otheremployees in the same category areprovided health benefits) is consideredcovered ‘‘by reason of currentemployment status’’ even if:

(1) The employer provides the sameGHP coverage to retirees; or


(2) The premiums for the plan arepaid from a retirement or pension fund.* * * * *

(g) Individuals entitled to Medicare onthe basis of age who are also eligible foror entitled to Medicare on the basis ofESRD. If an aged individual is, or couldupon filing an application become,entitled to Medicare on the basis ofESRD, the coordination of benefits rulesof subpart F of this part apply.

5. Newly designated § 411.175 isamended to revise paragraph (a), theheadings of paragraphs (b) and (c), andparagraph (c)(1)(iii) to read as follows:

§ 411.175 Basis for Medicare primarypayments.

(a) General rule. HCFA makesMedicare primary payments for coveredservices that are—

(1) Furnished to Medicarebeneficiaries who have declined toenroll in the GHP;

(2) Not covered by the plan for anyindividuals or spouses who are enrolledby virtue of the individual’s currentemployment status;

(3) Covered under the plan but notavailable to particular individuals orspouses enrolled by virtue of currentemployment status because they haveexhausted their benefits under the plan;

(4) Furnished to individuals whoseCOBRA continuation coverage has beenterminated because of the individual’sMedicare entitlement; or

(5) Covered under COBRAcontinuation coverage notwithstandingthe individual’s Medicare entitlement.* * * * *

(b) Conditional Medicare payments:Basic rule. * * *

(c) Conditional primary payments:Exception. * * *

(1) * * *(iii) The plan covers the services for

individuals or spouses who are enrolledin the plan by virtue of currentemployment status and are under age 65but not for individuals and spouses whoare enrolled on the same basis but areage 65 or older.* * * * *

F. A new subpart H is added, to readas set forth below.

Subpart H—Special Rules: DisabledBeneficiaries Who Are Also Covered UnderLarge Group Health Plans

Sec.411.200 Basis.411.201 Definitions.411.204 Medicare benefits secondary to

LGHP benefits.411.206 Basis for Medicare primary

payments and limits on secondarypayments.

Subpart H—Special Rules: DisabledBeneficiaries Who Are Also CoveredUnder Large Group Health Plans

§ 411.200 Basis.

(a) This subpart is based on certainprovisions of section 1862(b) of the Act,which impose specific requirements andlimitations with respect to—

(1) Individuals who are entitled toMedicare on the basis of disability; and

(2) Large group health plans (LGHPs)that cover those individuals.

(b) Under these provisions, the LGHPmay not take into account the Medicareentitlement of a disabled individualwho is covered (or seeks to be covered)under the plan by virtue of his or herown current employment status or thatof a member of his or her family.(§ 411.108 gives examples of actions thatconstitute taking into account.)

§ 411.201 Definitions.

As used in this subpart—Entitled to Medicare on the basis of

disability means entitled or deemedentitled on the basis of entitlement tosocial security disability benefits orrailroad retirement disability benefits.(Section 406.12 of this chapter explainsthe requirements an individual mustmeet in order to be entitled or deemedto be entitled to Medicare on the basisof disability.)

Family member means a person whois enrolled in an LGHP based on anotherperson’s enrollment; for example, theenrollment of the named insuredindividual. Family members mayinclude a spouse (including a divorcedor common-law spouse), a natural,adopted, foster, or stepchild, a parent, ora sibling.

§ 411.204 Medicare benefits secondary toLGHP benefits.

(a) Medicare benefits are secondary tobenefits payable by an LGHP forservices furnished during any month inwhich the individual—

(1) Is entitled to Medicare Part Abenefits under § 406.12 of this chapter;

(2) Is covered under an LGHP; and(3) Has LGHP coverage by virtue of

his or her own or a family member’scurrent employment status.

(b) Individuals entitled to Medicare onthe basis of disability who are alsoeligible for, or entitled to, Medicare onthe basis of ESRD. If a disabledindividual is, or could upon filing anapplication become, entitled toMedicare on the basis of ESRD, thecoordination of benefits rules of subpartF of this part apply.

§ 411.206 Basis for Medicare primarypayments and limits on secondarypayments.

(a) General rule. HCFA makesMedicare primary payments for servicesfurnished to disabled beneficiariescovered under the LGHP by virtue oftheir own or a family member’s currentemployment status if the services are—

(1) Furnished to Medicarebeneficiaries who have declined toenroll in the GHP;

(2) Not covered under the plan for thedisabled individual or similarly situatedindividuals;

(3) Covered under the plan but notavailable to particular disabledindividuals because they haveexhausted their benefits under the plan;

(4) Furnished to individuals whoseCOBRA continuation coverage has beenterminated because of the individual’sMedicare entitlement; or

(5) Covered under COBRAcontinuation coverage notwithstandingthe individual’s Medicare entitlement.

(b) Conditional primary payments:Basic rule. Except as provided inparagraph (c) of this section, HCFA maymake a conditional Medicare primarypayment for any of the followingreasons:

(1) The beneficiary, the provider, orthe supplier that has acceptedassignment has filed a proper claimwith the LGHP and the LGHP hasdenied the claim in whole or in part.

(2) The beneficiary, because ofphysical or mental incapacity, failed tofile a proper claim.

(c) Conditional primary payments:Exceptions. HCFA does not makeconditional Medicare primary paymentsif—

(1) The LGHP denies the claim inwhole or in part for one of the followingreasons:

(i) It is alleged that the LGHP issecondary to Medicare.

(ii) The LGHP limits its paymentswhen the individual is entitled toMedicare.

(iii) The LGHP does not provide thebenefits to individuals who are entitledto Medicare on the basis of disabilityand covered under the plan by virtue ofcurrent employment status but doesprovide the benefits to other similarlysituated individuals enrolled in theplan.

(iv) The LGHP takes into accountentitlement to Medicare in any otherway.

(v) There was failure to file a properclaim for any reason other than physicalor mental incapacity of the beneficiary.

(2) The LGHP, an employer oremployee organization, or thebeneficiary fails to furnish information


that is requested by HCFA and that isnecessary to determine whether theLGHP is primary to Medicare.

(d) Limit on secondary payments. Theprovisions of § 411.172(e) also apply toservices furnished to the disabled underthis subpart.(Catalog of Federal Domestic AssistanceProgram No. 93.773, Medicare—HospitalInsurance; and Program No. 93.774,Medicare—Supplementary MedicalInsurance Program)

Dated: July 12, 1995.Bruce C. Vladeck,Administrator, Health Care FinancingAdministration.[FR Doc. 95–21265 Filed 8–30–95; 8:45 am]BILLING CODE 4120–01–P

42 CFR Part 417

[OMC–022–F]

Full Reporting by Health MaintenanceOrganizations (HMOs) and CompetitiveMedical Plans (CMPs) Paid on a CostBasis

AGENCY : Health Care FinancingAdministration (HCFA), HHS.ACTION : Correction notice.

SUMMARY: Federal Register documentNo. 95–16411, beginning on page 34885of the issue of July 5, 1995 amendedpart 417 of the HCFA regulations torequire full reporting by HMOs andCMPs of the costs of all servicesfurnished to their Medicare enrollees. Inthat final rule we amended § 417.546 toremove paragraph (b). However, wefailed to remove, from the introductorytext of the section, a reference to theparagraph (b) that we removed. Thisnotice corrects our oversight.EFFECTIVE DATE: August 4, 1995.FOR FURTHER INFORMATION CONTACT:Luisa V. Iglesias, (202) 690–6383

CorrectionOn page 34887, column 3, the

amendment to § 417.546 is corrected toread as follows:

3. In § 417.546, the following changesare made:

a. Paragraph (b) and the Editorial noteare removed.

b. In paragraph (a), ‘‘Except asspecified in paragraph (b) of thissection,’’ is removed; ‘‘the’’ preceding‘‘amount paid’’ is revised to read ‘‘The’’;the ‘‘(a)’’ designation is removed; andthe ‘‘(1)’’ and ‘‘(2)’’ designations arerevised to read ‘‘(a)’’ and ‘‘(b)’’,respectively.(Catalog of Federal Domestic AssistanceProgram No. 13773, Medicare—HospitalInsurance; Program No. 13.774, Medicare—Supplementary Medical Insurance)

Dated: August 22, 1995.Neil J. Stillman,Deputy Assistant Secretary for InformationResources Management.[FR Doc. 95–21542 Filed 8–30–95; 8:45 am]BILLING CODE 4120–01–P

DEPARTMENT OF THE INTERIOR

Bureau of Land Management

43 CFR Public Land Order 7157

[ID–943–1430–01; IDI–08955–01, IDI–08932–02, IDI–14647–02]

Partial Revocation of Public LandOrder Nos. 1992 and 2588, and Bureauof Land Management Order DatedJanuary 28, 1952; Idaho

AGENCY: Bureau of Land Management,Interior.ACTION: Public land order.

SUMMARY: This order revokes two publicland orders and one Bureau of LandManagement order insofar as they affect4,522.17 acres of public landswithdrawn for the Bureau ofReclamation’s Snake River andMountain Home Reclamation Projects.The lands are no longer needed for thispurpose, and the revocation is needed topermit disposal of the lands throughsale and exchange. This action willopen the lands to surface entry andmining. The lands have been and willremain open to mineral leasing.EFFECTIVE DATE: October 2, 1995.FOR FURTHER INFORMATION CONTACT:Larry R. Lievsay, BLM Idaho StateOffice, 3380 Americana Terrace, Boise,Idaho 83706–2500, 208–384–3166.

By virtue of the authority vested inthe Secretary of the Interior by Section204 of the Federal Land Policy andManagement Act of 1976, 43 U.S.C.1714 (1988), it is ordered as follows:

1. Public Land Order No. 1992, whichwithdrew public lands for the Bureau ofReclamation’s Snake River project, ishereby revoked insofar as it affects thefollowing described lands:

Boise Meridian

T. 5 S., R. 3 E.,Sec. 4, lot 5;Sec. 9, lots 4, 9, and 10, and NE1⁄4SE1⁄4.The area described contains 165.32 acres in

Elmore County.

2. Public Land Order No. 2588, whichwithdrew public lands for the Bureau ofReclamation’s Snake River Project, ishereby revoked insofar as it affects thefollowing described lands:

Boise Meridian

T. 2 S., R. 4 E.,

Sec. 3, lots 2 to 4, inclusive, SW1⁄4NE1⁄4,S1⁄2NW1⁄4 and E1⁄2SE1⁄4.

The area described contains 262.10 acres inElmore County.

3. The Bureau of Land ManagementOrder dated January 28, 1952, whichwithdrew public lands for the Bureau ofReclamation’s Mountain Home Project,is hereby revoked insofar as it affects thefollowing described lands:

Boise MeridianT. 1 N., R. 1 W.,

Sec. 1, SW1⁄4;Sec. 2, lot 1;Sec. 3, lots 2 to 4, inclusive;Sec. 4, lots 1 to 6, inclusive, SW1⁄4NE1⁄4

and SE1⁄4NW1⁄4.T. 1 N., R. 1 E.,

Sec. 6, lots 6 and 7, W1⁄2E1⁄2W1⁄2SE1⁄4 andW1⁄2W1⁄2SE1⁄4;

Sec. 27, W1⁄2;Sec. 35, S1⁄2.

T. 2 S., R. 4 E.,Sec. 11, SE1⁄4;Sec. 12, SE1⁄4;Sec. 13, N1⁄2;Sec. 14, NW1⁄4;Sec. 15, N1⁄2 and SE1⁄4.

T. 3 S., R. 4 E.,Sec. 1, lots 6 and 7, SW1⁄4NE1⁄4 and

W1⁄2SE1⁄4;Sec. 12, lots 1 to 4, inclusive, W1⁄2E1⁄2 and

NW1⁄4;Sec. 13, NW1⁄4NE1⁄4.

T. 1 S., R. 5 E.,Sec. 29, W1⁄2SW1⁄4;Sec. 30, S1⁄2SE1⁄4;Sec. 31, N1⁄2SE1⁄4;Sec. 32, SW1⁄4.

T. 3 S., R. 5 E.,Sec. 7, lots 3 and 4.The area described contains 4,094.75 acres

in Ada and Elmore Counties.The total areas described aggregate

4,522.17 acres in Ada and Elmore Counties.4. At 9 a.m. on October 2, 1995, the

lands described above will be opened tothe operation of the public land lawsgenerally, subject to valid existingrights, the provisions of existingwithdrawals, other segregations ofrecord, and the requirements ofapplicable law. All valid applicationsreceived at or prior to 9 a.m. on October2, 1995, shall be considered assimultaneously filed at that time.

5. At 9 a.m. on October 2, 1995, thelands will be opened to location andentry under the United States mininglaws, subject to valid existing rights, theprovisions of existing withdrawals,other segregations of record, and therequirements of applicable law.Appropriation of any of the landsdescribed in this order under thegeneral mining laws prior to the dateand time of restoration is unauthorized.Any such attempted appropriation,including attempted adverse possessionare governed by State law where not inconflict with Federal law. The Bureau of