28 TAC §21.2815
1. INTRODUCTION. The Commissioner of Insurance adopts amendments to §21.2815, concerning failure to meet the statutory health care clean claims payment period for health care clean claims. The amendments are adopted with nonsubstantive changes to the proposed text published in the November 30, 2007 issue of the Texas Register (32 TexReg 8679). Pursuant to the request of the Texas Register staff, the adoption order also includes changes to the text in §21.2815(a) - (c) and (e) relating to the format of numbers and percentages, which were not a part of the published proposal, for consistency with the nonsubstantive changes proposed in subsection (d).
2. REASONED JUSTIFICATION. The amendments are necessary to implement SB 1884, enacted by the 80th Legislature, Regular Session, and effective September 1, 2007. SB 1884 amends the Insurance Code §843.342(g) and (h), and §1301.137(g) and (h).
The Department posted an informal working draft of the proposed amendments on the Department's internet website from September 18 to September 26, 2007, and invited public input. The Department received no comments on the informal working draft proposal. In accordance with the Insurance Code §1212.002(b), the Department also discussed the informal working draft of the proposed amendments at the September 20, 2007 meeting of the Technical Advisory Committee on Claims Processing (TACCP), and received favorable comment from TACCP members. The TACCP is appointed pursuant to the Insurance Code Chapter 1212. Section 1212.002(b) requires the Commissioner to consult the TACCP before adopting any rule related to the technical aspects of the coding of health care services and claims development, submission, processing, adjudication, and payment by insurers and health maintenance organizations (HMO's) for medical care and health care services provided to patients. The Department formally proposed the amendments in the November 30, 2007 issue of the Texas Register (32 TexReg 8679). The Department received no comments and no requests for a hearing on the proposal.
SB 1884 revises the basis for calculating the "underpaid amount" component of the formula for determining penalty amounts for certain underpaid claims in the Insurance Code §843.342(g) and §1301.137(g). Prior to the enactment of SB 1884, the underpayment penalty formula was calculated on the ratio of the amount underpaid on the contracted rate to the contracted rate as applied to the billed charges as submitted on the claim. The formula resulted in a penalty that was disproportionate to the underpayment in certain situations. Under SB 1884, the amended formula is calculated on the ratio of the amount underpaid on the contracted rate to the contracted rate as applied to an amount equal to the billed charges as submitted on the claim minus the contracted rate.
Accordingly, this adoption order amends the basis for calculating the "underpaid amount" component of the formula for determining penalty amounts for certain underpaid claims in §21.2815(d) for consistency with the SB 1884 amendments. This adoption order also amends the calculation example in §21.2815(d) for consistency with the amended formula.
SB 1884 also revises certain time frames that affect an HMO's or preferred provider benefit plan (PPBP) carrier's liability for underpaid claim penalties. Prior to SB 1884, an HMO or PPBP carrier was not liable for penalties for an underpaid claim if: (i) the claim was paid in accordance with the subchapter; (ii) the physician or provider notified the HMO or insurer of the underpayment after the 180th day after the date the underpayment was received; and (iii) the HMO or insurer paid the balance of the claim on or before the 45th day after the date the HMO or insurer received the notice. Under the Insurance Code §843.342(h)(2) and §1301.137(h)(2), as amended by SB 1884, an HMO or PPBP carrier is not liable for penalties for an underpaid claim if: (i) the claim is paid in accordance with the subchapter; (ii) the physician or provider notifies the HMO or insurer of the underpayment after the 270th day after the date the underpayment was received; and (iii) the HMO or insurer pays the balance of the claim on or before the 30th day after the date the HMO or insurer receives the notice.
Accordingly, this adoption order amends the time frames in §21.2815(f)(2) for consistency with the SB 1884 changes. In addition to amendments to §21.2815(d) and (f) to implement SB 1884, this adoption order makes nonsubstantive changes to the format of numbers and percentages within §21.2815(a) - (e) for purposes of conformity to agency style and internal consistency. However, these nonsubstantive changes do not introduce new subject matter or affect persons in addition to those subject to the proposal as published.
3. HOW THE SECTION WILL FUNCTION. The adopted amendments to §21.2815(d) revise the "underpaid amount" component of the formula for calculating the penalty amounts for certain underpaid claims, and also amend the calculation example. The adopted amendments to §21.2815(f) revise the time frames that affect an HMO's or PPBP carrier's liability for underpaid claim penalties. Additionally, adopted amendments to §21.2815(a) - (e) make nonsubstantive changes to the format of numbers and percentages for purposes of conformity to agency style and internal consistency.
4. SUMMARY OF COMMENTS AND AGENCY RESPONSE. The Department did not receive any comments on the proposed amendments.
5. STATUTORY AUTHORITY. The amendments are adopted pursuant to the Insurance Code §§843.342, 1301.137, 1212.002, 843.151, 1301.007, and 36.001. Section 843.342(g) and §1301.137(g) state that, for the purposes of the Insurance Code §843.342(d) and (e), and §1301.137(d) and (e), the underpaid amount is calculated on the ratio of the amount underpaid on the contracted rate to the contracted rate as applied to an amount equal to the billed charges as submitted on the claim minus the contracted rate. Section 843.342(h)(2) and §1301.137(h)(2) state that an HMO or insurer is not liable for a penalty under §843.342 or §1301.137 if the claim was paid in accordance with Chapter 843, Subchapter J or Chapter 1301, Subchapter C, but for less than the contracted rate, and: (A) the physician or preferred (provider) notifies the HMO or insurer of the underpayment after the 270th day after the date the underpayment was received; and (B) the HMO or insurer pays the balance of the claim on or before the 30th day after the date the HMO or insurer receives the notice. Section 1212.002(b) requires the Commissioner to consult the Technical Advisory Committee on Claims Processing, appointed under the Insurance Code Chapter 1212, before adopting any rule related to the technical aspects of the coding of health care services and claims development, submission, processing, adjudication, and payment by insurers and health maintenance organizations (HMO's) for medical care and health care services provided to patients. Section 843.151 authorizes the Commissioner to adopt reasonable rules as necessary and proper to implement the Insurance Code Chapter 843. Section 1301.007 authorizes the Commissioner to adopt rules as necessary to implement Insurance Code Chapter 1301. Section 36.001 authorizes the Commissioner of Insurance to adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.
6. TEXT.
§21.2815. Failure to Meet the Statutory Claims Payment Period.
(a) An HMO or preferred provider carrier that determines under §21.2807 of this title (relating to Effect of Filing a Clean Claim) that a claim is payable shall:
(1) if the claim is paid on or before the 45th day after the end of the applicable 21-, 30- or 45-day statutory claims payment period, pay to the preferred provider, in addition to the contracted rate owed on the claim, a penalty in the amount of the lesser of:
(A) 50 percent of the difference between the billed charges and the contracted rate; or
(B) $100,000.
(2) If the claim is paid on or after the 46th day and before the 91st day after the end of the applicable 21-, 30- or 45-day statutory claims payment period, pay to the preferred provider, in addition to the contracted rate owed on the claim, a penalty in the amount of the lesser of:
(A) 100 percent of the difference between the billed charges and the contracted rate; or
(B) $200,000.
(3) If the claim is paid on or after the 91st day after the end of the applicable 21-, 30- or 45-day statutory claims payment period, pay to the preferred provider, in addition to the contracted rate owed on the claim, a penalty computed under paragraph (2) of this subsection plus 18 percent annual interest on the penalty amount. Interest under this subsection accrues beginning on the date the HMO or preferred provider carrier was required to pay the claim and ending on the date the claim and the penalty are paid in full.
(b) The following examples demonstrate how to calculate penalty amounts under subsection (a) of this section:
(1) If the contracted rate, including any patient financial responsibility, is $10,000 and the billed charges are $15,000, and the HMO or preferred provider carrier pays the claim on or before the 45th day after the end of the applicable statutory claims payment period, the HMO or preferred provider carrier shall pay, in addition to the amount owed on the claim, 50 percent of the difference between the billed charges ($15,000) and the contracted rate ($10,000) or $2,500. The basis for the penalty is the difference between the total contracted amount, including any patient financial responsibility, and the provider's billed charges;
(2) if the claim is paid on or after the 46th day and before the 91st day after the end of the applicable statutory claims payment period, the HMO or preferred provider carrier shall pay, in addition to the contracted rate owed on the claim, 100 percent of the difference between the billed charges and the contracted rate or $5,000; and
(3) if the claim is paid on or after the 91st day after the end of the applicable statutory claims payment period, the HMO or preferred provider carrier shall pay, in addition to the contracted rate owed on the claim, $5,000, plus 18 percent annual interest on the $5,000 penalty amount accruing from the statutory claim payment deadline.
(c) Except as provided by this section, an HMO or preferred provider carrier that determines under §21.2807 of this title that a claim is payable, pays only a portion of the amount of the claim on or before the end of the applicable 21-, 30- or 45-day statutory claims payment period, and pays the balance of the contracted rate owed for the claim after that date shall:
(1) If the balance of the claim is paid on or before the 45th day after the applicable 21-, 30- or 45-day statutory claims payment period, pay to the preferred provider, in addition to the contracted amount owed, a penalty on the amount not timely paid in the amount of the lesser of:
(A) 50 percent of the underpaid amount; or
(B) $100,000.
(2) If the balance of the claim is paid on or after the 46th day and before the 91st day after the end of the applicable 21-, 30- or 45-day statutory claims payment period, pay to the preferred provider, in addition to the contracted amount owed, a penalty in the amount of the lesser of:
(A) 100 percent of the underpaid amount; or
(B) $200,000.
(3) If the balance of the claim is paid on or after the 91st day after the end of the applicable 21-, 30- or 45-day statutory claims payment period, pay to the preferred provider, in addition to the contracted amount owed, a penalty computed under paragraph (2) of this subsection plus 18 percent annual interest on the penalty amount. Interest under this subsection accrues beginning on the date the HMO or preferred provider carrier was required to pay the claim and ending on the date the claim and the penalty are paid in full.
(d) For the purposes of subsection (c) of this section, the underpaid amount is calculated on the ratio of the balance owed by the carrier to the total contracted rate, including any patient financial responsibility, as applied to an amount equal to the billed charges minus the contracted rate. For example, a claim for a contracted rate of $1,000 and billed charges of $1,500 is initially underpaid at $600, with the insured owing $200 and the HMO or preferred provider carrier owing a balance of $200. The HMO or preferred provider carrier pays the $200 balance on the 30th day after the end of the applicable statutory claims payment period. The amount the HMO or preferred provider carrier initially underpaid, $200, is 20 percent of the contracted rate. To determine the penalty, the HMO or preferred provider carrier must calculate 20 percent of the billed charges minus the contracted rate, which is $100. This amount represents the underpaid amount for subsection (c)(1) of this section. Therefore, the HMO or preferred provider carrier must pay, as a penalty, 50 percent of $100, or $50.
(e) For purposes of calculating a penalty when an HMO or preferred provider carrier is a secondary carrier for a claim, the contracted rate and billed charges must be reduced in accordance with the percentage of the entire claim that is owed by the secondary carrier. The following example illustrates this method: Carrier A pays 80 percent of a claim for a contracted rate of $1,000 and billed charges of $1,500, leaving $200 unpaid as the patient's financial responsibility. The patient has coverage through Carrier B that is secondary and Carrier B will owe the $200 balance pursuant to the coordination of benefits provision of Carrier B's policy. If Carrier B fails to pay the $200 within the applicable statutory claims payment period, Carrier B will pay a penalty based on the percentage of the claim that it owed. The contracted rate for Carrier B will therefore be $200 (20 percent of Carrier A's $1,000 contracted rate), and the billed charges will be $300 (20 percent of $1,500). Although Carrier B may have a contracted rate with the provider that is different than Carrier A's contracted rate, it is Carrier A's contracted rate that establishes the entire claim amount for the purpose of calculating Carrier B's penalty.
(f) An HMO or preferred provider carrier is not liable for a penalty under this section:
(1) if the failure to pay the claim in accordance with the applicable statutory claims payment period is a result of a catastrophic event that the HMO or preferred provider carrier certified according to the provisions of §21.2819 of this title (relating to Catastrophic Event); or
(2) if the claim was paid in accordance with §21.2807 of this title, but for less than the contracted rate, and:
(A) the preferred provider notifies the HMO or preferred provider carrier of the underpayment after the 270th day after the date the underpayment was received; and
(B) the HMO or preferred provider carrier pays the balance of the claim on or before the 30th day after the date the insurer receives the notice of underpayment.
(g) Subsection (f) of this section does not relieve the HMO or preferred provider carrier of the obligation to pay the remaining unpaid contracted rate owed the preferred provider.
(h) An HMO or preferred provider carrier that pays a penalty under this section shall clearly indicate on the explanation of payment the amount of the contracted rate paid, the amount of the billed charges as submitted by the physician or provider and the amount paid as a penalty. A non-electronic explanation of payment complies with this requirement if it clearly and prominently identifies the notice of the penalty amount.