SUBCHAPTER T. Submission of Clean Claims

28 TAC §§21.2802, 21.2807, 21.2815 and 21.2821

1. INTRODUCTION.

2. REASONED JUSTIFICATION. These amendments are necessary to ensure that carriers are aware of the responsibility to process a clean claim submitted together with deficient claims; to ensure that penalties for failure to meet the statutory claims payment period are calculated consistently and in accordance with statutory requirements; and to provide consistency between the date for quarterly reporting of claims data and the date for the annual reporting of the number of declinations of requests for verification and clarify the reporting period for the required verification data report.

The department held a hearing on the proposed amendments on September 7, 2005. Prior to the hearing, the department received comments from interested parties. In response to the written comments and comments from the hearing, the department has modified some of the proposed amendments in the adopted text of the rule. Many of the changes requested in the comments received would require statutory changes and were not made a part of the final adopted rules. Of the changes made as a result of comments, none introduce a new subject matter or affect persons in addition to those subject to the proposal as originally published.

Definition of "patient responsibility." The department has changed the proposed term "patient responsibility" in §21.2802(18) to "patient financial responsibility" and has changed the proposed definition in response to comments to more specifically reflect that "patient financial responsibility," as used in this rule, derives from the terms of the patient's health benefit plan. Patient financial responsibility does not include amounts due from a patient, if any, that are not included as part of the fee schedule or contracted reimbursement amount. The department is aware that some carriers structure provider fee agreements in such a way that a copayment amount may be in addition to the amount listed in the fee schedule. In such a case, the contracted amount is the fee schedule amount, and any portion of the fee schedule amount that the patient owes is classified as "patient financial responsibility" under the rule. The copayment amount that does not make up a part of the fee schedule amount is not a part of "patient financial responsibility." When carriers structure provider fee agreements in such a way as to include copayment requirements to be a part of the fee schedule amount, the copayment amount would correctly be classified as "patient financial responsibility" under the rule. The department has also changed, as necessary, references to the term "patient responsibility" throughout the rule to "patient financial responsibility."

Penalty calculation for underpaid claims. The department also received comments on proposed §21.2815(b)(1), (d), and (e) regarding the manner in which penalties should be calculated when a carrier underpays a claim. One particular commenter requested that the department consider including a patient's financial responsibility amounts as part of the underpayment penalty calculation. The commenter indicated that a carrier's initial underpayment could frustrate or delay a provider's ability to collect the correct patient financial responsibility amount and that the penalty should take this into account by including that amount as part of the carrier's underpaid amount. The adopted amendment does not incorporate this change, as the change would be inconsistent with Insurance Code §§843.342 and 1301.137, which penalizes carriers based on amounts owed by the carriers and not amounts owed by patients. The statute penalizes a carrier for failure to timely and correctly pay only its portion of the claim by requiring the carrier to "pay a penalty on the balance of the claim" based on when the "balance of the claim" is eventually paid. If "the balance of the claim" were to include amounts the provider was delayed in collecting from the patient, the carrier's penalty payment responsibilities would be tied to the date the patient paid any applicable patient financial responsibility amounts. Such a result potentially penalizes a carrier based on lack of payment by the patient, which is outside the carrier's control. Therefore, the "balance of the claim" must be understood to be the balance of the claim owed by the carrier, and a penalty that includes any amounts that the patient must pay is not a "penalty on the balance of the claim."

Section 21.2802. Adopted §21.2802(2) sets forth a definition for "batch submission" to clarify use of the term in §21.2807 detailing a carrier's obligations with respect to multiple claims submitted together. The department has additionally changed incorrect subsection references in the proposed definition of "clean claim" in §21.2802(6)(A)(i) - (ii).

Section 21.2807. Section 21.2807 is amended to provide that a carrier may not deny or refuse to process a clean electronic claim because the claim is submitted together with, or in a batch submission with, deficient claims. This amendment is consistent with statutory and regulatory requirements that, upon receipt of an electronic clean claim at the designated address for claims receipt, a carrier must pay, deny, or audit the claim within 30 days. SB 50, enacted by the 79th Legislature, Regular Session, requires that carriers include upon request a provision in the provider's contract indicating that the carrier will not deny or refuse to process an otherwise clean claim submitted in a batch of claims that may contain deficient claims. The department has adopted amendments to rules in Chapters 3 and 11 of this title to implement SB 50; these amendments are also published in this edition of the Texas Register. While SB 50 enables providers to be better informed of their rights under their contracts with health benefit plans, adopted §21.2807 clarifies that the requirement to process an electronic claim exists independently of the existence of a provision in the contract addressing batch claim submissions. The adopted amendments also change specific references to other rules in this title to general references. These changes are necessary to reduce the need for the department to frequently update and revise this section because of amendments to the referenced rules that result in a change in the citations. These changes are also user friendly in that persons who must comply with the rules will not have to monitor frequent changes and updates.

Section 21.2815. The adopted amendments to §21.2815 clarify the methodology for calculating a penalty for failure to meet the statutory claims payment period, as specified in Insurance Code §§1301.103 and 843.338, when applicable patient financial responsibility under the terms of the patient's health benefit plan is considered. The department has received inquiries regarding the issue of coinsurance responsibilities when calculating a penalty for underpayment. The adopted rule addresses the penalty section as a whole and includes examples that make use of patient financial responsibility to provide greater clarity in instances of late payments penalties and underpayment penalties. Section 21.2815(b)(1) clarifies that patient financial responsibility is included in the contracted rate used for calculating a penalty. Amended §21.2815(d) as adopted clarifies the method for calculating a penalty on an underpaid claim. Insurance Code §§843.342(g) and 1301.137(g) requires the carrier to calculate "the ratio of the amount underpaid on the contracted rate to the contracted rate as applied to the billed charges." Thus, the carrier pays the billed charges rate for the portion of the claim the carrier fails to timely pay. Section 21.2815(d) as amended includes an example to clarify how coinsurance or other patient responsibility should be treated when calculating an underpayment penalty. The amendment also clarifies that the rate used in the calculation should be the balance the carrier owes on the claim to the total amount the provider is due under the contract with the health plan. This represents the amount left unpaid after the carrier's initial payment. This is consistent with the statutory directive in Insurance Code §§843.342(d) and 1301.137(d) that the carrier must pay "a penalty on the amount not timely paid." This percentage is then applied to the specific portion of the claim that was paid late. The adopted amendments include examples with patient financial responsibility amounts to assist providers and carriers in understanding the correct calculation methods. In response to comments, the department has modified the example in proposed §21.2815(e) which demonstrates how a secondary carrier should calculate penalties for its proportionate responsibility for a claim. The change in the proposed amendment indicates that the overall percentage of the claim owed by the secondary carrier will impact the penalty calculations such that the contracted rate and billed charges amounts are both reduced to be consistent with the secondary carrier's obligation on the claim. The adoption also corrects the format for monetary amounts to include cents for consistency with subsection (d) as amended.

Amended §21.2821 as adopted changes the deadline for the annual verification reporting requirement from on or before July 31 to on or before to August 15 of each year for consistency with the date for quarterly reporting of claims data as required in §21.2821. The adopted amendments also specify that the 12-month period for reporting the number of declinations of requests for verification is July 1 of the prior year through June 30 of the current year. This amendment is necessary to clarify the time period for which reporting is required.

3. HOW THE SECTIONS WILL FUNCTION. Section 21.2802 as adopted is amended to add a definition of "patient financial responsibility" to clarify that the amount reflected by this term derives from the patient's health benefit plan and includes any portion of the contracted rate for which the patient is responsible under the patient's health benefit plan. Amended §21.2802 also defines "batch submission" to be consistent with the usage of that term in federal standardized electronic health care transactions.

The adopted amendments to §21.2807 provide that a carrier may not deny or refuse to process a clean electronic claim because the claim is submitted together with, or in a batch submission with, claims that are deficient and clarify that the requirement to process an electronic clean claim exists when the carrier receives the claim despite the claim being included among other claims that may or may not be clean. In addition, the adopted amendments substitute general references for the more specific references to other rules in this title which will reduce the need for frequent updating and revisions.

Section 21.2815 as adopted includes amendments to the examples of penalty calculations for failure to meet the statutory claims payment period as specified in Insurance Code §§1301.105 and 843.338. These amendments clarify the methodology for calculating a penalty when applicable patient financial responsibility under the terms of the health care plan is taken into consideration. The amendments clarify that the contracted rate is the total amount the provider is due under the terms of the provider contract and includes patient financial responsibility for any portion of that amount.

The adopted amendments also include an additional example in §21.2815(e) for calculating a penalty for claims that are subject to coordination of benefits for multiple carriers. The amendment indicates that the overall percentage of the claim owed by the secondary carrier will impact the penalty calculations such that the contracted rate and billed charges amounts are both reduced to be consistent with the secondary carrier's obligation on the claim.

The adopted amendments to §21.2821 change the deadline for the annual reporting requirement for the number of declinations of requests for verification and clarify the time period for which reporting is required.

4. SUMMARY OF COMMENTS AND AGENCY'S RESPONSE TO COMMENTS.

§21.2802. Definitions:

"Batch submission."

Comment: Commenters support the department's proposed definition, with one commenter noting that it is consistent with the term as applied to federal standardized health care transactions.

Agency Response: The department appreciates the supportive comments.

"Patient responsibility."

Comment: A commenter asks that the term "patient responsibility" as defined in proposed §21.2802(18) be changed to "patient financial responsibility" to be consistent with how the term is utilized in the rules.

Agency Response: The department agrees and has made the requested change.

Comment: Commenters ask that the definition take into account the various types of out-of-pocket expenses for which the patient may be responsible under the terms of the insurance contract or evidence of coverage. Another commenter opined that the definition appears to allow physicians and providers to balance bill patients.

Agency Response: At this time, the department declines to identify by rule particular types of cost-sharing mechanisms, such as copayments, deductibles, etc., to avoid any confusion due to the various methods in which health plans may treat these charges in relation to the provider's contracted rate. Some carriers include all of a patient's out-of-pocket expenses in the contracted rate. Others do not. For example, some plans treat the copayment requirements as an amount in addition to the contracted rate. Therefore, if a carrier and provider have agreed to a $100 contracted rate for a particular service, the patient's $20 copayment will result in the provider receiving $120 for a service that is contracted for $100. The distinction the definition seeks to make is that only those patient financial responsibility amounts that are included as a portion of the amount agreed to between the provider and the carrier (the contracted rate) should be included in the penalty calculation. To include a list of particular types of cost-sharing mechanisms that may be treated differently by carriers is not helpful in making the distinction necessary for appropriate application of the definition of patient financial responsibility. The language in the definition does not affect a provider's responsibilities or rights regarding whether patients may be billed for any balance after receipt of the carrier's payment.

Comment: One commenter states the opinion that the proposed definition may lead to confusion that a provider's agreed or contracted rate imposes financial responsibility on a patient. Another commenter notes that the patient financial responsibility amount is the amount the patient is required to pay for covered services pursuant to the policy or evidence of coverage, but it is not an amount that is part of the contracted rate.

Agency Response: The department agrees with the commenters that the patient's coverage document establishes a patient's financial responsibility through the use of particular cost-sharing mechanisms such as deductibles, copayments or coinsurance percentages. The contracted rate, however, does play a part in the calculation of the amount due from the patient when coinsurance percentages are involved. Nonetheless, the department has revised the definition to clarify that patient financial responsibility is a function of the coverage agreement rather than the provider contract.

§21.2807(d). Responsibility for batch submissions. Comment: A commenter opines that the reference to clearinghouses in SB 50 permits the department to directly regulate clearinghouses and other agents of carriers. The commenter suggests that subsection (d) be revised to include a reference to a carrier's "agent" and that the department include an express statement on this issue in its response to comments.

Agency Response: The department does not believe that SB 50 provides broad and comprehensive regulatory authority over clearinghouses or other agents of carriers not specifically subject to a statutory licensure or certification requirement. Nonetheless, the department's direct regulation of carriers and applicable prompt pay requirements operates to affect entities performing on behalf of carriers. For this reason, the department continues to look to carriers as the parties ultimately responsible for compliance with the requirements of the statute and this subchapter. The department thus declines to make the requested change.

§21.2815(b)(1), (d), and (e). Penalty calculations.

Comment: Commenters state that some contracts between carriers and providers prohibit the collection of patient deductibles or co-insurance until after the carrier adjudicates the claim and issues an explanation of benefits. The commenters assert that in such a situation, a carrier's initial payment miscalculation prevents the provider from collecting the correct payment from the patient until the carrier corrects the error and issues a corrected explanation of benefits. Because the carrier's initial miscalculation caused the delay of correct payment by the patient, the commenters ask that the penalty calculation account for those amounts the provider is delayed in collecting. Another commenter argues that patient responsibility amounts should be included in the penalty calculation against the carrier because providers have difficulty in confirming patient responsibility amounts due to the fact that deductibles may be met at any time after the initial provision of the services for which the carrier makes an initial underpayment, thus changing the calculation without notice to the provider.

Agency Response: It is the department's position that the statute does not support the requested revision. While the department recognizes providers do not always have the most current information regarding patient financial responsibility amounts, the statutory framework in Insurance Code §§843.342 and 1301.137 penalizes a carrier for failure to timely and correctly pay only its portion of the claim by requiring the carrier to "pay a penalty on the balance of the claim." The department interprets "the balance of the claim," as used in the statute, to include only those amounts due from but not initially paid by the carrier. This is reinforced by the fact that the date "the balance of the claim is paid" determines whether the carrier will pay 50% or 100% of the underpaid amount as a penalty. If "the balance of the claim" were to include amounts the provider was delayed in collecting from the patient, the carrier's penalty payment responsibilities would be tied to the date the patient paid any applicable patient financial responsibility amounts. Such a result would potentially penalize a carrier based on lack of payment by the patient, which is outside the carrier's control. Therefore, the "balance of the claim" must be understood to be the balance of the claim owed by the carrier and a penalty that includes any amounts that the patient must pay is not a "penalty on the balance of the claim."

Comment: A commenter expresses appreciation for the department's desire to clarify the appropriate method of calculating both late payment and underpayment penalties and could support the proposed language provided that the department changes the definition for patient financial responsibility. The commenter suggests that the definition reflect that it is the amount that the patient is required to pay for certain covered health services and may be either a set dollar amount in the form of a deductible or copayment or a percentage of eligible expenses in the form of a coinsurance as set forth in a patient's certificate of coverage or insurance policy.

Agency Response: The department appreciates the commenter's support and believes that the adopted definition of "patient financial responsibility" is broad enough to address the commenter's concern.

§21.2815(e). Penalty calculations and coordination of benefits.

Comment: A commenter notes that secondary carriers often base their responsibility for a claim on their contracted rate rather than on the primary carrier's contracted rate. Thus, when the primary carrier's allowable amount is more than the secondary carrier's allowable amount, the secondary carrier makes no additional payment. The commenter asks that the rule include additional examples demonstrating how to calculate a penalty in situations in which the secondary payer's contracted rate is more than the primary payer's rate and the secondary payer's contracted rate is less than the primary payer's rate.

Agency Response: The department has added language to the example in §21.2815(e) to adequately demonstrate how the secondary carrier should calculate penalties for its proportionate responsibility for a claim. The rule establishes the primary carrier's contracted rate as the entire claim amount. Any amount owed by the secondary carrier is a percentage of that amount and this percentage is used to calculate the secondary carrier's penalty.

The department declines to include additional examples based upon the contracted rate of the secondary carrier. Such examples, which would demonstrate a secondary carrier's responsibility for the unpaid portion of the claim, are not appropriate for this rule. A secondary carrier's payment responsibilities are dictated by the coordination of benefits language in the coverage document between the secondary carrier and the patient.

§21.2821(e). Verification reporting requirement.

Comments: A commenter agrees with the proposed language that makes the reporting date consistent with the existing dates for quarterly reporting of claims data.

Agency Response: The department appreciates the supportive comment.

5. NAMES OF THOSE COMMENTING FOR AND AGAINST THE SECTIONS.

For: None.

For with changes: America's Health Insurance Plans, Texas Association of Health Plans, Texas Hospital Association.

Against: Seton Healthcare Network, Texas Medical Association.

6. STATUTORY AUTHORITY. The amendments are adopted under Insurance Code §§1301.007, 1301.103, 1301.137, 1212.001 - 1212.003, 843.151, 843.338, 843.342, and 36.001. Section 1301.007 authorizes the Commissioner to adopt rules necessary to implement Insurance Code Title 8 Chapter 1301, which regulates preferred provider benefit plans, and to ensure reasonable accessibility and availability of preferred provider benefits and basic level benefits to residents of this state. Section 843.151 authorizes the Commissioner to adopt reasonable rules as necessary and proper to implement Insurance Code Title 6 Chapter 843 and Chapter 20A, which regulate health maintenance organizations. Sections 1301.103 and 843.338 require carriers to pay clean claims upon receipt and within the statutory claims payment period. Sections 1301.137 and 843.342 provide for the calculation of penalties for violations of prompt pay requirements. Sections 1212.001 and 1212.002 create the Technical Advisory Committee on Claims Processing (TACCP) to advise the commissioner on claims processing, payment and adjudication. Section 1212.003 requires the TACCP to submit a biennial report to the legislature concerning the activities of the committee. The reporting requirements in this subchapter are necessary to provide information to the TACCP in fulfilling its statutory role. Section 36.001 provides that the Commissioner of Insurance may 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.

7. TEXT.

§21.2802 Definitions. The following words and terms when used in this subchapter shall have the following meanings:

(1) Audit--A procedure authorized and described in §21.2809 of this title (relating to Audit Procedures) under which an HMO or preferred provider carrier may investigate a claim beyond the statutory claims payment period without incurring penalties under §21.2815 of this title (relating to Failure to Meet the Statutory Claims Payment Period).

(2) Batch submission--A group of electronic claims submitted for processing at the same time within a HIPAA standard ASC X12N 837 Transaction Set and identified by a batch control number.

(3) Billed charges--The charges for medical care or health care services included on a claim submitted by a physician or provider. For purposes of this subchapter, billed charges must comply with all other applicable requirements of law, including Texas Health and Safety Code §311.0025, Texas Occupations Code §105.002, and Texas Insurance Code Art. 21.79F.

(4) CMS--The Centers for Medicare and Medicaid Services of the U.S. Department of Health and Human Services.

(5) Catastrophic event--An event, including acts of God, civil or military authority, acts of public enemy, war, accidents, fires, explosions, earthquake, windstorm, flood or organized labor stoppages, that cannot reasonably be controlled or avoided and that causes an interruption in the claims submission or processing activities of an entity for more than two consecutive business days.

(6) Clean claim--

(A) For non-electronic claims, a claim submitted by a physician or provider for medical care or health care services rendered to an enrollee under a health care plan or to an insured under a health insurance policy that includes:

(i) the required data elements set forth in §21.2803(b) or (c) of this title (relating to Elements of a Clean Claim); and

(ii) if applicable, the amount paid by the primary plan or other valid coverage pursuant to §21.2803(d) of this title (relating to Elements of a Clean Claim);

(B) For electronic claims, a claim submitted by a physician or provider for medical care or health care services rendered to an enrollee under a health care plan or to an insured under a health insurance policy using the ASC X12N 837 format and in compliance with all applicable federal laws related to electronic health care claims, including applicable implementation guides, companion guides and trading partner agreements.

(7) Condition code--The code utilized by CMS to identify conditions that may affect processing of the claim.

(8) Contracted rate--Fee or reimbursement amount for a preferred provider's services, treatments, or supplies as established by agreement between the preferred provider and the HMO or preferred provider carrier.

(9) Corrected claim--A claim containing clarifying or additional information necessary to correct a previously submitted claim.

(10) Deficient claim--A submitted claim that does not comply with the requirements of §21.2803(b),(c) or (e) of this title.

(11) Diagnosis code--Numeric or alphanumeric codes from the International Classification of Diseases (ICD-9-CM), Diagnostic and Statistical Manual (DSM-IV), or their successors, valid at the time of service.

(12) Duplicate claim--Any claim submitted by a physician or provider for the same health care service provided to a particular individual on a particular date of service that was included in a previously submitted claim. The term does not include corrected claims, or claims submitted by a physician or provider at the request of the HMO or preferred provider carrier.

(13) HMO--A health maintenance organization as defined by Insurance Code §843.002(14).

(14) HMO delivery network--As defined by Insurance Code §843.002(15).

(15) Institutional provider--An institution providing health care services, including but not limited to hospitals, other licensed inpatient centers, ambulatory surgical centers, skilled nursing centers and residential treatment centers.

(16) Occurrence span code--The code utilized by CMS to define a specific event relating to the billing period.

(17) Patient control number--A unique alphanumeric identifier assigned by the institutional provider to facilitate retrieval of individual financial records and posting of payment.

(18) Patient financial responsibility--Any portion of the contracted rate for which the patient is responsible pursuant to the terms of the patient's health benefit plan.

(19) Patient-status-at-discharge code--The code utilized by CMS to indicate the patient's status at time of discharge or billing.

(20) Physician--Anyone licensed to practice medicine in this state.

(21) Place of service code--The codes utilized by CMS that identify the place at which the service was rendered.

(22) Preferred provider--

(A) with regard to a preferred provider carrier, a preferred provider as defined by Insurance Code Article 3.70-3C, §1(10) (Preferred Provider Benefit Plans) or Article 3.70-3C, §1(1) (Use of Advanced Practice Nurses and Physician Assistants by Preferred Provider Plans).

(B) with regard to an HMO,

(i) a physician, as defined by Insurance Code §843.002(22), who is a member of that HMO's delivery network; or

(ii) a provider, as defined by Insurance Code §843.002(24), who is a member of that HMO's delivery network.

(23) Preferred provider carrier--An insurer that issues a preferred provider benefit plan as provided by Insurance Code Article 3.70-3C, Section 2 (Preferred Provider Benefit Plans).

(24) Primary plan--As defined in §3.3506 of this title (relating to Use of the Terms "Plan," "Primary Plan," "Secondary Plan," and "This Plan" in Policies, Certificates and Contracts).

(25) Procedure code--Any alphanumeric code representing a service or treatment that is part of a medical code set that is adopted by CMS as required by federal statute and valid at the time of service. In the absence of an existing federal code, and for non-electronic claims only, this definition may also include local codes developed specifically by Medicaid, Medicare, an HMO, or a preferred provider carrier to describe a specific service or procedure.

(26) Provider--Any practitioner, institutional provider, or other person or organization that furnishes health care services and that is licensed or otherwise authorized to practice in this state, other than a physician.

(27) Revenue code--The code assigned by CMS to each cost center for which a separate charge is billed.

(28) Secondary plan--As defined in §3.3506 of this title.

(29) Source of admission code--The code utilized by CMS to indicate the source of an inpatient admission.

(30) Statutory claims payment period--

(A) the 45-calendar-day period in which an HMO or preferred provider carrier shall make claim payment or denial, in whole or in part, after receipt of a non-electronic clean claim pursuant to Insurance Code Article 3.70-3C, §3A (Preferred Provider Benefit Plans) and Chapter 843;

(B) the 30-calendar-day period in which an HMO or preferred provider carrier shall make claim payment or denial, in whole or in part, after receipt of an electronically submitted clean claim pursuant to Insurance Code Article 3.70-3C, §3A (Preferred Provider Benefit Plans) and Chapter 843; or

(C) the 21-calendar-day period in which an HMO or preferred provider carrier shall make claim payment after affirmative adjudication of an electronically submitted clean claim for a prescription benefit pursuant to Insurance Code Article 3.70-3C, §3A(f) (Preferred Provider Benefit Plans) and §843.339, and §21.2814 of this title (relating to Electronic Adjudication of Prescription Benefits).

(31) Subscriber--If individual coverage, the individual who is the contract holder and is responsible for payment of premiums to the HMO or preferred provider carrier; or if group coverage, the individual who is the certificate holder and whose employment or other membership status, except for family dependency, is the basis for eligibility for enrollment in a group health benefit plan issued by the HMO or the preferred provider carrier.

(32) Type of bill code--The three-digit alphanumeric code utilized by CMS to identify the type of facility, the type of care, and the sequence of the bill in a particular episode of care.

§21.2807 Effect of Filing a Clean Claim.

(a) The statutory claims payment period begins to run upon receipt of a clean claim, including a corrected claim that is a clean claim, from a preferred provider, pursuant to §21.2816 of this title (relating to Date of Receipt), at the address designated by the HMO or preferred provider carrier, in accordance with §21.2811 of this title (relating to Disclosure of Processing Procedures), whether it be the address of the HMO, preferred provider carrier, or any other entity, including a clearinghouse or a repricing company, designated by the HMO or preferred provider carrier to receive claims. The date of claim payment is as determined in §21.2810 of this title (relating to Date of Claim Payment).

(b) After receipt of a clean claim, prior to the expiration of the applicable statutory claims payment period specified in §21.2802 of this title (relating to Definitions), an HMO or preferred provider carrier shall:

(1) pay the total amount of the clean claim in accordance with the contract between the preferred provider and the HMO or preferred provider carrier;

(2) deny the clean claim in its entirety after a determination that the HMO or preferred provider carrier is not liable for the clean claim and notify the preferred provider in writing why the clean claim will not be paid;

(3) notify the preferred provider in writing that the entire clean claim will be audited and pay 100% of the contracted rate on the claim to the preferred provider; or

(4) pay the portion of the clean claim for which the HMO or preferred provider carrier acknowledges liability in accordance with the contract between the preferred provider and the HMO or preferred provider carrier, and:

(A) deny the remainder of the clean claim after a determination that the HMO or preferred provider carrier is not liable for the remainder of the clean claim and notify the preferred provider in writing why the remainder of the clean claim will not be paid; or

(B) notify the preferred provider in writing that the remainder of the clean claim will be audited and pay 100% of the contracted rate on the unpaid portion of the clean claim to the preferred provider.

(c) With regard to a clean claim for a prescription benefit subject to the statutory claims payment period specified in §21.2802 of this title, an HMO or preferred provider carrier shall, after receipt of an electronically submitted clean claim for a prescription benefit that is affirmatively adjudicated pursuant to Insurance Code Article 3.70-3C, §3A(f) (Preferred Provider Benefit Plans) and Insurance Code §843.339, pay the prescription benefit claim within 21 calendar days after the clean claim is adjudicated.

(d) An HMO or preferred provider carrier or an HMO's or preferred provider carrier's clearinghouse that receives an electronic clean claim is subject to the requirements of this subchapter regardless of whether the claim is submitted together with, or in a batch submission with, a claim that is deficient.

§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% 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% 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% 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% 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% 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% 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% 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% 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% 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 the billed charges. For example, a claim for a contracted rate of $1,000.00 and billed charges of $1,500.00 is initially underpaid at $600.00, with the insured owing $200.00 and the HMO or preferred provider carrier owing a balance of $200.00. The HMO or preferred provider carrier pays the $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, $200.00, is 20% of the contracted rate. To determine the penalty, the HMO or preferred provider carrier must calculate 20% of the billed charges, which is $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 $300.00, or $150.00.

(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% of a claim for a contracted rate of $1,000.00 and billed charges of $1,500.00, leaving $200.00 unpaid as the patient's financial responsibility. The patient has coverage through Carrier B that is secondary and Carrier B will owe the $200.00 balance pursuant to the coordination of benefits provision of Carrier B's policy. If Carrier B fails to pay the $200.00 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 $200.00 (20% of Carrier A's $1,000.00 contracted rate), and the billed charges will be $300.00 (20% of $1,500.00). 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 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 45th 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.

§21.2821. Reporting Requirements.

(a) An HMO or preferred provider carrier shall submit to the department quarterly claims payment information in accordance with the requirements of this section.

(b) The HMO or preferred provider carrier shall submit the report required by subsection (a) of this section to the department on or before:

(1) May 15th for the months of January, February and March of each year;

(2) August 15th for the months of April, May and June of each year;

(3) November 15th for the months of July, August and September of each year; and

(4) February 15th for the months of October, November and December of each preceding calendar year.

(c) The HMO or preferred provider carrier shall submit the first report required by this section to the department on or before February 15, 2004 and shall include information for the months of September, October, November and December of the prior calendar year.

(d) The report required by subsection (a) of this section shall include, at a minimum, the following information:

(1) number of claims received from non-institutional preferred providers;

(2) number of claims received from institutional preferred providers;

(3) number of clean claims received from non-institutional preferred providers;

(4) number of clean claims received from institutional preferred providers;

(5) number of clean claims from non-institutional preferred providers paid within the applicable statutory claims payment period;

(6) number of clean claims from non-institutional preferred providers paid on or before the 45th day after the end of the applicable statutory claims payment period;

(7) number of clean claims from institutional preferred providers paid on or before the 45th day after the end of the applicable statutory claims payment period;

(8) number of clean claims from non-institutional preferred providers paid on or after the 46th day and before the 91st day after the end of the applicable statutory claims payment period;

(9) number of clean claims from institutional preferred providers paid on or after the 46th day and before the 91st day after the end of the applicable statutory claims payment period;

(10) number of clean claims from non-institutional preferred providers paid on or after the 91st day after the end of the applicable statutory claims payment period;

(11) number of clean claims from institutional preferred providers paid on or after the 91st day after the end of the applicable statutory claims payment period;

(12) number of clean claims from institutional preferred providers paid within the applicable statutory claims payment period;

(13) number of claims paid pursuant to the provisions of §21.2809 of this title (relating to Audit Procedures);

(14) number of requests for verification received pursuant to §19.1724 of this title (relating to Verification);

(15) number of verifications issued pursuant to §19.1724 of this title;

(16) number of declinations, pursuant to §19.1724 of this title;

(17) number of certifications of catastrophic events sent to the department;

(18) number of calendar days business was interrupted for each corresponding catastrophic event;

(19) number of electronically submitted, affirmatively adjudicated pharmacy claims received by the HMO or preferred provider carrier;

(20) number of electronically submitted, affirmatively adjudicated pharmacy claims paid within the 21-day statutory claims payment period;

(21) number of electronically submitted, affirmatively adjudicated pharmacy claims paid on or before the 45th day after the end of the 21-day statutory claims payment period;

(22) number of electronically submitted, affirmatively adjudicated pharmacy claims paid on or after the 46th day and before the 91st day after the end of the 21-day statutory claims payment period; and

(23) number of electronically submitted, affirmatively adjudicated pharmacy claims paid on or after the 91st day after the end of the 21-day statutory claims payment period.

(e) An HMO or preferred provider carrier shall annually submit to the department, on or before August 15th, at a minimum, information related to the number of declinations of requests for verifications from July 1st of the prior year to June 30th of the current year, in the following categories:

(1) policy or contract limitations:

(A) premium payment timeframes that prevent verifying eligibility for 30-day period;

(B) policy deductible, specific benefit limitations or annual benefit maximum;

(C) benefit exclusions;

(D) no coverage or change in membership eligibility, including individuals not eligible, not yet effective or membership cancelled;

(E) pre-existing condition limitations; and

(F) other.

(2) declinations due to inability to obtain necessary information in order to verify requested services from the following persons:

(A) the requesting physician or provider;

(B) any other physician or provider; and

(C) any other person.