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You are here: Home . rules . 2007 . 1119B-059

SUBCHAPTER T. Submission of Clean Claims

28 TAC §21.2815

1. INTRODUCTION. The Texas Department of Insurance proposes amendments to §21.2815(d) and (f), concerning failure to meet the statutory health care clean claims payment period for health care clean claims. The proposal is necessary to implement SB 1884, enacted by the 80th Legislature, Regular Session, and effective September 1, 2007. SB 1884 amended 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. 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.

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 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, the proposal 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. The proposal also amends the calculation example in §21.2815(d).

SB 1884 also revises certain time frames that affect a health maintenance organization's (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, the proposal 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, the proposal makes nonsubstantive revisions to the format of numbers and percentages within §21.2815(d) for purposes of conformity to agency style and internal consistency.

The proposed amendments to §21.2815(d) amend the "underpaid amount" component of the formula for calculating the penalty amounts for certain underpaid claims, and also amend the calculation example. The proposed amendments to §21.2815(f) amend the time frames that affect an HMO's or PPBP carrier's liability for underpaid claim penalties.

2. FISCAL NOTE. Jennifer Ahrens, Senior Associate Commissioner for the Life, Health & Licensing Division, has determined that for each year of the first five years the proposed amendments will be in effect, there will be no fiscal impact to state government as a result of the enforcement or administration of the proposal. There may be possible start-up costs associated with revising or re-programming existing processes and procedures to accommodate the amended version of the underpayment penalty, as well as the amended time frames, for local governmental units that file health care claims that are subject to the statutory requirements in the Insurance Code §843.342 and §1301.137, which require use of the amended underpayment penalty formula and time frames. Such costs, however, are the result of the statutory requirements and not the result of the adoption, administration, or enforcement of the proposed amendments to §21.2815(d) and (f). There will be no measurable effect on local employment or the local economy as a result of the proposal.

3. PUBLIC BENEFIT/COST NOTE. Ms. Ahrens also has determined that for each year of the first five years the proposed amendments are in effect, the public benefit anticipated as a result of the proposed amendments will be Department rules that are consistent with the statutory changes made by SB 1884 to the Insurance Code §843.342(g) and (h), and §1301.137(g) and (h). Any costs required to comply with the proposed amendments result from the legislative enactment of SB 1884 and not as a result of the adoption, enforcement, or administration of this proposal.

4. ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL AND MICRO BUSINESSES. In accordance with the Government Code §2006.002(c), the Department has determined that the proposed amendments in §21.2815(d) and (f), concerning failure to meet the statutory claims payment period for health care clean claims, will not have an adverse economic effect on small businesses or micro businesses that are required to comply with the proposal. This is because the proposal does not add any new requirements or costs with which businesses, regardless of size, must comply that are not already required by the statutory changes made by SB 1884 to the Insurance Code §843.342(g) and (h), and §1301.137(g) and (h). SB 1884 revises the basis for calculating the "underpaid amount" component of the formula for determining penalty amounts for certain underpaid claims, and revises certain time frames that affect an HMO's or PPBP carrier's liability for underpaid claim penalties. Accordingly, the only purpose of the proposal is to amend §21.2815(d) and (f) to comply with the SB 1884 amendments. In accordance with the Government Code §2006.002(c), the Department has, therefore, determined that the proposal does not require a regulatory flexibility analysis because the proposal will not have an adverse impact on small or micro businesses.

5. TAKINGS IMPACT ASSESSMENT. The Department has determined that no private real property interests are affected by this proposal, and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under the Government Code §2007.043.

6. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on December 31, 2007 to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be simultaneously submitted to Katrina Daniel, Special Advisor for Policy Development, Life, Health & Licensing Division, Mail Code 107-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. Any request for a public hearing should be submitted separately to the Office of the Chief Clerk before the close of the public comment period. If a hearing is held, written and oral comments at the hearing will be considered.

7. STATUTORY AUTHORITY. The amendments are proposed 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 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.

8. CROSS REFERENCE TO STATUTE. The following statutes are affected by this proposal:

Rule Statute

§21.2815 Insurance Code §843.342 and §1301.137

9. TEXT.

§21.2815. Failure to meet Statutory Claims Payment Period.

(a) - (c) (No change.)

(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[ $1,000.00] and billed charges of $1,500[ $1,500.00] is initially underpaid at $600[ $600.00], with the insured owing $200[ $200.00] and the HMO or preferred provider carrier owing a balance of $200[ $200.00]. The HMO or preferred provider carrier pays the $200[ $200.00] 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[ $200.00], is 20 percent[ 20%] of the contracted rate. To determine the penalty, the HMO or preferred provider carrier must calculate 20 percent[ 20%] of the billed charges minus the contracted rate, which is $100[ $300.00]. 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% of $100[ $300.00], or $50[ $150.00].

(e) (No Change.)

(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[ 180th] 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[ 45th] day after the date the insurer receives the notice of underpayment.

(g) - (h) (No change.)



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