JUNE 25, 2001
By Mark R. Chulick
I. Important Time Factors:
A) 21 days: Prescription benefit claims electronically transmitted to carrier shall be paid or denied, in whole or in part.
B) 45 Days: Carrier must pay or deny claim in its entirety; audit claim in its entirety; pay undisputed part of claim, and deny disputed part of claim, or audit disputed part of claim. If claim is deficient, Carrier must notify Provider of deficiency within 45 calendar days of receipt of claim.
C) 30 Days: Within 30 days of completing an audit of a claim, Carrier must pay remaining balance; if claim overpaid by Carrier, Provider must refund overpayment within 30 days of the later of receiving notification of overpayment, or 30 days after exhaustion of any subscriber or patient appeal rights.
D) 60 Days: Notice requirement when Carrier changes claims processing procedure and/or address where claims are to be sent; disclosure requirement for changing necessary attachments, additional clean claims elements, and revision of data elements or additional clean claims elements.
II. When is a Claim Considered Received by the Carrier: A claim is considered received by the Carrier upon receipt by the Carrier of the claim at the address designated in the disclosure of processing procedures. Address can be designated as the address of the HMO, Preferred Provider Carrier or Delegated Claims Processor.
III. Effect of Receipt of Claim by the Carrier: Statutory period (21 or 45 calendar days to pay, deny or audit) begins to run.
IV. When is a Claim Considered Paid:
- The date of the U.S. Postmark if delivered to U.S. Postal Service; or
- Electronic transmission; or
- Delivery of the claim payment to a commercial carrier, such as UPS or Federal Express; or
- Receipt of payment by Provider.
V. Communications to Provider: Must be in writing anytime Carrier takes action in relation to the Important Time Factors described above.
VI. Auditing a Claim: Whenever Carrier decides to audit a claim, whether in whole or in part, 85% of the contracted rate of the disputed portion of the claim shall be paid to the Provider within the 45 day statutory time period.
VII. Effect of Missing any of the Time Limits Described Above: Carrier is in violation of the Prompt Payment Statute and Rules. Delayed claims payment may also constitute a violation of Art. 21.21 §4(10)(ii).
VIII. Sanctions That Can Be Imposed for Any Violation of the Prompt Payment Statute and Rules:
- Art. 20A.18B(h)*: In addition to any other sanction provided in the Texas Insurance Code, the carrier can be penalized up to $1000 per day for each day a claim remains unpaid in violation of subsections (c) and (e) of Art. 20A.18B. Carrier also owes the contracted penalty rate for late payment of a claim, or the full amount billed on the claim.
- Cancellation or Revocation of Certificate of Authority.
- Suspend Authorization for one year.
- Issue a Cease and Desist Order
- Administrative Penalty separate from Art. 20A.18B. (i.e. Art. 21.21 §7.)
- Order Restitution within a specified period to any person or entity harmed.
- Informal disposition: Consent Order, Agreed Settlement, Stipulation or Default.
- Formulate Corrective Action Plans.
- Reporting and Monitoring Requirements
- Joint Target Exam by Financial and HMO.
- Quality of Care Exam by HMO.
- Letters and Management Conference.
- Place Carrier into Administrative Oversight, Supervision, or Conservation.
- Any combination of the above.
(*Note: Art. 20A.18B, which regulates prompt payment of claims by HMO´s, is being used interchangeably with Art. 3.70-3C §3A, which is the prompt payment statute for Preferred Providers.)
XI. Hypothetical Problems:
A) Carrier receives $100 claim from Provider. Carrier decides to pay $90 of the claim and audit the remaining $10. On day 45 after receiving the claim, Carrier mails a check for $90, postmarked by the U.S. postal service on day 45, to Provider without any explanation regarding why $10 of the claim was withheld. Carrier then completes its audit on day 55 after receipt of original claim, and decides that there was no coverage for the remaining $10 balance, and sends a letter to Provider on day 75 after receipt of original claim. Is Carrier in violation of any statute and/or rule, and if so, what are the potential penalties under Art. 20A.18B?
Answer: Carrier is in violation of Art. 20A.18B. (e). Carrier should have sent an additional $8.50 (85% of the unpaid portion) and a written explanation to Provider on day 45 advising Provider that it was auditing $10 of the claim. The fact that Carrier completed its audit and mailed the results of the audit to Provider timely (on day 75) does not exonerate Carrier from the violation. As a result, Carrier owes the contracted penalty rate or the full amount billed ($10) for not complying with subsection (e). In addition, an administrative penalty up to $30,000 can be assessed against Carrier. ($1000 X 30 days)
B) Let´s assume that in Hypothetical A the parties contracted for a penalty of $5000 per day for every day that payment of the claim remained unpaid after the statutory deadline was exceeded by Carrier. What would the consequences be to Carrier?
Answer: Since the statutory deadline of 45 days was exceeded by Carrier by 30 days, Carrier would not only be subject to an administrative penalty of up to $30,000, but would owe Provider $150,000. ($5000 X 30 days)
C) Carrier sends a change of address notice to Provider. In its contract with Provider, Carrier does not have to pay a claim that is submitted more than 60 days after a service is provided. On day 45 after Carrier mails its change of address to Provider, Provider treats insured for a condition covered under the policy. That same day, Provider mails a $100 claim to Carrier´s old address. Carrier does not receive the claim until 110 days after it notified Provider of its change of address. On day 160, Carrier denies the claim as untimely filed. Is this a violation of Art. 20A.18B, and if so, what are the potential penalties under Art. 20A.18B?
Answer: Yes, this is a violation. Provider was not required to submit the claim to Carrier´s new address because Carrier did not give Provider at least 60 days notice of the address change. Carrier should have paid the claim within 45 days after receiving it. In this case, the claim should have been paid by day 155. Carrier owes the contracted penalty rate, or amount billed, and can be assessed an administrative penalty up to $5000. ($1000 X 5 days)
D) Provider sends $100 claim to Carrier. Carrier decides to pay $50 of the claim and deny the remaining $50 because the benefit rendered was excluded by the policy. On day 45 after receipt of the claim, Carrier sends a $50 check to Provider. On day 140, Provider sends a letter to Carrier asking for an explanation as to why Carrier only sent $50. On day 145 Carrier responds in writing to Provider, and advises that the benefit was excluded under the policy. On day 245, Provider files a complaint with TDI. TDI then contacts the Carrier, and Carrier then sends a payment of $50 to Provider. Is this a violation of Art. 20A.18B, and if so, what are the potential penalties under Art. 20A.18B?
Answer: Yes, this is a violation because Carrier is required to give the Provider within 45 days, written notice explaining why $50 of the claim was denied. As a result of violating Art. 20A.18B, Carrier owes either the contracted penalty rate for not properly advising Provider about the denial, or the amount billed. Assuming there was no contracted penalty rate in the contract, Carrier would only be required to pay $50 to the Provider. Carrier, however, would be subject to an administrative penalty of up to $200,000. (200 days claim went unpaid X $1000)
E) Provider submits a claim for $10,000 to Carrier. Carrier decides to pay the claim. On day 45, Carrier gives the payment check to his Clerk, and instructs the clerk to deliver the payment check immediately to Provider. Clerk looks at the amount of the check and decides to impersonate the Provider, and cash it. After successfully cashing the check, Clerk absconds with the money and takes the first plane to Tahiti. 60 days later, Provider contacts Carrier and demands payment of the claim. Carrier explains that it cut the check and gave it to Clerk to deliver. Thereafter, Clerk mysteriously disappeared. Carrier refuses to pay the claim, and argues that the claim was deemed paid when the original check was cut, and given to Clerk for delivery. Is this a violation of Art. 20A.18B, and if so, what are the potential penalties under Art. 20A.18B?
Answer: Yes, this is a violation because the claim was not deemed paid when the check was cut and given to Clerk. A claim is deemed paid only if it meets one of the forms of payment prescribed in 28 TAC §21.2810. Not only does the Carrier owe the contracted penalty or billed amount, Carrier can also be assessed an administrative penalty of up to $1000 for each day that the claim remains unpaid. In the hypothetical above, Carrier could be assessed an administrative penalty up to $60,000, and in addition, up to $1000 per day continues to accrue until the claim is finally paid.
For more information contact:
Last updated: 11/20/2009