Some Group Health Plan Penalties Increased

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On Aug. 8, 2024, the U.S. Department of Health and Human Services (HHS) issued a final rule increasing key penalties for group health plans. The amounts are adjusted annually for inflation to improve their effectiveness and maintain their deterrent effect. Employers should review their benefit plan administration protocols for compliance.

Summary of Benefits and Coverage (SBC)

Under the Affordable Care Act, it is mandatory for group health plans and health insurance providers to furnish participants and beneficiaries with a comprehensive summary of benefits and coverage (SBC). Failure to deliver this summary may now incur a penalty of up to $1,406 per participant or beneficiary.

Medicare Secondary Payer (MSP)

When Medicare serves as the secondary payer, employers are prohibited from discouraging employees from enrolling in their group health plan or offering any form of "financial or other incentive" to prevent an individual eligible for Medicare from enrolling or discontinuing enrollment in a group health plan that should be primary. Penalties for violations have increased to $11,524, and failing to identify primary coverage situations incurs a penalty of $1,474.

HIPAA Privacy and Security Rules

Penalties for violations of the Health Insurance Portability and Accountability Act’s (HIPAA) privacy and security rules by covered entities or business associates are determined based on the nature of the violation. These penalties are categorized into different "tiers" that correspond to varying levels of awareness of the violation. Each tier specifies a range of penalties, with a minimum and maximum amount, and an annual limit, all of which have been increased as follows:

• Tier One: In cases where the covered entity or business associate was unaware of the violation (and could not have known about it with reasonable diligence), the penalty ranges from $141 to $71,162 per violation, with an annual cap of $2,134,831.
• Tier Two: If the violation is due to reasonable cause, the penalty ranges from $1,424 to $71,162 per violation, with an annual cap of $2,134,831.
• Tier Three: For violations corrected after being identified as willful neglect, the penalty ranges from $14,232 to $71,162 per violation, with an annual cap of $2,134,831.
• Tier Four: In cases of uncorrected violations due to willful neglect, the penalty is $71,162 per violation, with an annual cap of $2,134,831.

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