2003 Legislative Compendium: Managed Care/Insurance Reform

[ Prompt Payment | Physician Negotiation | Independent Review Organization | Online Physician Directory | Extension of Rate Increase Notice | Mandated Benefits | Health Care Reimbursement Accounts | Managed Care Near Misses | Standardized Contracts | Balance Billing | Health Insurance Fraud | Retrospective Reviews ]

For Texas physicians, two dates live in infamy: Dec. 7, 1941, and June 17, 2001, the day Governor Perry vetoed House Bill 1862, the hard-won prompt pay bill the legislature had just passed.

Two years later, and after a lot of fence-mending on both sides, Governor Perry and TMA put the final trim on a repaired relationship with a ceremonial bill-signing at TMA headquarters of the 2003 prompt pay bill, Senate Bill 418. Last year, TMA elevated HMO and insurance company payment reform to the top of its legislative priority list after it became clear that regulatory reform at the Texas Department of Insurance (TDI) would not accomplish the relief that physicians sought.

On the horizon…

SB 418 becomes effective Aug. 17. TDI wasted no time with the rulemaking process, publishing draft rules just a few weeks after the bill was signed. A technical advisory committee, composed of representatives from TMA, medical group office managers, hospitals, and health plans, is advising TDI on the rule drafting. Despite the promise of timely payment within SB 418, the rulemaking process has involved endless rehashing of issues TMA believes the bill specifically addresses. Issues at odds between the bill and the draft rules include verification of benefits, eligibility, and the definition of usual and customary payments, which governs the amount of penalties insurers pay when claims are not paid on time.

TMA and the Texas Medical Group Management Association are pushing aggressively for redrafting of the rules to comply with the intent of the bill authors: timely, logical claims submission and payment policies.

Impact of prompt pay legislation on physician practices : Improved cash flow and lower overhead costs for physician practices; more time for physician office staff to spend taking care of patients rather than chasing claims.

PROMPT PAYMENT

SB 418 by Sen. Jane Nelson (R-Flower Mound) and Reps. John Smithee (R-Amarillo) and Craig Eiland (D-Galveston) was this session's prompt pay bill. While other bills were filed, including HB 2405 (Rep. Sid Miller, R-Stephenville) written by the Texas Association of Business and Texas Association of Health Plans, TMA's early grassroots efforts on this issue meant little competition for a bill medicine resoundingly supported. Along the way, there were bumps in SB 418's passage. Early in the process, Representative Eiland filed HB 720, a replica of HB 1862, vetoed in 2001, minus an objectionable arbitration provision. Many physician office managers and their bosses cheered Representative Eiland's efforts. After the stinging veto of HB 1862, many physicians were reluctant to let that bill go. However, SB 418 contained TMA-backed improvements and enjoyed support from the legislative leadership. After clearing the Senate unanimously, SB 418 hit another snag in the House when it sat inexplicably in the House Calendars Committee for nearly two weeks. Without a vote from Calendars, the bill would have died before it ever reached the House floor for debate. Well-timed personal physician appeals to the Calendars Committee chair, Rep. Beverly Woolley (R-Houston), freed the bill, however. On the House floor, SB 418 passed unanimously on a voice vote.

The passage of SB 418 was a solid victory for TMA and addresses most of the provisions passed in HB 1862, in some cases improving those provisions.

Highlights of SB 418 prompt pay legislation are:

Does not alter ERISA health benefit plans. The prompt payment language does not regulate, alter, or modify ERISA plan benefits or coverage. The contractual arrangement between the physician and the health plan, regardless of the type of benefits and coverage provided by the health plan, is the foundation of the prompt payment language. The legislation regulates claims processing and payment timeframes once the health plan has made a benefit determination. State courts have determined in numerous cases that payment is not preempted by ERISA when challenged by independent third-party providers, such as physicians, hospitals, and other providers of health care services. It will likely take private litigation to establish Senate Bill 418's applicability to all health benefit plans. Until such time, TDI will enforce the law only against fully insured ERISA plans.

Prohibits retrospective denials of payment when services have been verified previously. SB 418 requires upon the request of a physician that health plans inform the physician whether the care that is being proposed will be paid by the health plan and specify any amounts for which the patient is responsible. The health plan may not deny or reduce payment once verification has been given unless the physician materially misrepresented the services that were provided or substantially failed to provide the services. The health plans may decline to verify if they cannot determine their liability at the time the physician requests verification. When the health plan declines to verify, the physician may make alternative financial arrangements with the patient before care is provided.

Requires health plans to look only to other payers in coordination of payment disputes. Payment may not be pursued from the physician unless the physician has received primary payments from both the primary payer and the secondary payer. Coordination of payment is an insurance function and disputes should not involve physicians and providers.

Requires that eligibility information be available readily 24 hours per day. Health plans must have appropriate personnel available at a toll-free telephone number to provide a verification or preauthorization between 6 a.m. and 6 p.m. central time Monday through Friday and between 9 a.m. and noon central time on Saturday, Sunday, and legal holidays. Health plan telephone systems must be capable of accepting or recording incoming phone calls for verification and preauthorization after 6 p.m. central time Monday through Friday and after noon central time on Saturday, Sunday, and legal holidays and responding to each of those calls on or before the second calendar day after the date the call is received.

Gives the commissioner of insurance authority to define a clean claim, which cannot be changed by the health plans. Under HB 610 health plans were allowed to "add" to or "change" the data elements that constitute a clean claim. The unilateral addition or change was accomplished simply when the plan notified the physician 60 days before the new elements went into effect. SB 418 requires the commissioner to adopt a standard definition of a clean claim that will be applied across health plans.

Sets standards for requesting attachments or additional documentation for claims processing. SB 418 limits the information that health plans can request to clinical documentation that already is a part of the patient's record and specific to the claim. The bill sets appropriate standards for attachments.

Prohibits plans from avoiding requirements of this statue through contract. Under current statute, health plans are able to circumvent the prompt pay statute and rules via contractual provisions, thereby eradicating the effectiveness of the laws. SB 418 prohibits health plans from contracting around statutory provisions by stating that certain sections cannot be waived, voided, or nullified by contract.

Modifies current statute to allow for graduated penalties. Changes the time frame for claim payment to 30 days for electronic claims and 45 days for paper claims. Penalties are 50 percent of the difference between billed charges and contracted rates during the first 45 days after the end of the claim payment timeframe; 100 percent of the difference between billed charges and contracted rates from the 46th through the 90th day after the payment timeframe; and after the 90th day, the penalty will accrue at 18-percent interest per annum until the claim and penalty are paid.

Allows health plans to require by contract that claims be submitted electronically. Health plans must provide for a waiver process from the requirement for circumstances where no method of transmission is available, for small physician practices, or undue hardship. The health plan must have a default method in place to submit claims if there is a system failure or catastrophic event that would interfere with electronic submission.

Limits health plans from recovering an overpayment more than 180 days after the physician received the original payment. The health plan must notify the physician in writing of the specific reason for the recovery. SB 418 ensures that the health plan will provide the physician with an opportunity to appeal if the physician disagrees with the request for recovery. The health plan may not attempt to recover until all appeal rights are exhausted.

Regulates claim submission timeframes. SB 418 prohibits physicians and providers from filing duplicate claims before day 46; requires physicians and providers to submit claims within 95 days under penalty of forfeiture of payment; and requires providers and payers to complete underpayment/overpayment investigations within 180 days.

Provides for a technical advisory committee. SB 418 requires that the commissioner of insurance appoint a committee to advise the department on issues related to technical aspects of coding health care services and claims development, submission, processing, adjudication, and payment, as well as implementation of standardized coding and bundling edits and logic.

PHYSICIAN NEGOTIATION

SB 752 by Sen. Chris Harris (R-Arlington) and Representative Smithee prevented the expiration of the physician negotiation law passed in 1999. The bill extended the sunset of this law for four more years until 2007. TMA strongly supported this bill. In 2005, TMA will consider filing technical amendments to the law to make it more usable to physician practices wanting to negotiate jointly with health plans. The current statute requires expensive paperwork for physicians to get approval for joint negotiation from the attorney general. Once the attorney general approves the plan, HMOs and other insurers are not required to negotiate.

INDEPENDENT REVIEW ORGANIZATION

HB 3109 by Rep. Bill Keffer (R-Dallas) and Sen. John Carona (R-Dallas) makes confidential as a trade secret the names and identification of health care professionals that will be performing reviews for an independent review organization (IRO) on the application to the TDI to become an IRO.

ONLINE PHYSICIAN DIRECTORY

SB 494 by Sen. Eliot Shapleigh (D-El Paso) and Rep. Carlos I. Uresti (D-San Antonio) applies to HMOs and insurers that maintain an Internet Web site. The bill requires that a listing of contracting physicians, including mental health providers and substance abuse treatment providers, must be maintained on the health plans' Internet Web sites. The listing must identify those physicians that will accept new patients and be updated at least quarterly. TMA supported this bill.

EXTENSION OF RATE INCREASE NOTICE

HB 508 by Representative Woolley and Sen. Tommy Williams (R-The Woodlands) requires insurers to give a minimum of 60 days notice (previously 30 days) before the effective date of a premium rate increase for a group policy for health, accident and health, or life, health, and accident insurance. It also would require a minimum of 60 days notice before the effective date of a rate increase on a group life insurance policy.

MANDATED BENEFITS

Several bills passed this legislative session to reduce the number of state-required health care benefits within health insurance plans. The intent of the bills is to increase affordability of health insurance, primarily for small employers. In general, proponents of the bills argued that state-mandated benefits have increased the costs of health insurance beyond the reach of many small businesses, thus contributing to the high percentage of uninsured, but employed Texans. The Texas Association of Business, the Texas Association of Health Plans, and the National Federation of Independent Business supported these bills. House of Delegates policy supports efforts to reduce the costs of health insurance and opposes adding new mandates. Yet, TMA policy also strongly favors select health care coverage requirements, including mental health parity, immunizations, newborn hearing, cancer screenings, and other preventive health services. Several specialty societies also raised objections or concerns about the bills. Therefore, TMA did not take a position on the bills, but monitored them closely.

SB 10 by Sen. Kip Averitt (R-Waco) and Representative Smithee allows small businesses to form a health group cooperative to purchase group health coverage. The cooperative may allow large employers to join as well. The health group cooperative may offer employees policies that exclude state-mandated benefits. Additionally, the state's 1.75-percent premium tax would be waived for insurers who cover people who previously had been uninsured.

In a similar vein, HB 897 by Representative Woolley, Rep. Helen Giddings (D-Dallas), and Senator Nelson prohibits cooperatives the purchase from limiting or restricting employer or employee choice among plans based on health conditions or duration of coverage. It also would consider a small employer health coalition the same as a single small employer for the purposes of regulation.

SB 541 by Senator Williams and Rep. Larry Taylor (R-Friendswood) allows HMOs and small business carriers to offer one or more "standard" accident or sickness insurance policies that do not include some or all state-mandated health benefits. The bill defines state-mandated benefits to include required coverage for specific health services, limitations on cost sharing, or inclusion of a specific category of licensed health care practitioner. An insurer could not exclude from the standard health-benefit plan benefits mandated by federal law or certain required provisions such as continuity of coverage, coverage of beneficiaries with preexisting conditions, coverage of certain dependents, and diabetic treatment supplies and services. Treatment for serious mental illness could not be excluded from a standard plan issued to a large employer. Physician advocacy also resulted in cancer screenings remaining a mandated benefit.

An application for or document of a standard health-benefit plan would have to include a standard disclosure to consumers. The disclosure would inform consumers that the plan "does not provide state-mandated health benefits normally required in accident and sickness insurance policies in Texas" and would provide other information about the plan, including a list of the state-mandated benefits the plan did not include. An employer applying for initial coverage or renewing coverage would have to sign and return the disclosure statement. Additionally, an insurer that offered a standard health-benefit plan also would have to offer at least one plan with the state-mandated benefits.

HEALTH CARE REIMBURSEMENT ACCOUNTS

In 2001, the 77th legislature enacted HB 3343 by then Rep. Paul Sadler (D-Henderson), creating a state-administered health insurance program for teachers and other public school employees in districts with 500 or fewer employees. This bill provided that in the 2002-03 school year, all school employees, regardless of whether they participated in a group health plan, would receive "pass-through" money from the Teacher Retirement System (TRS). School employees could choose to apply their pass-through to any one or combination of the following options:

A health care reimbursement (medical savings) account;

A cafeteria plan under Section 125, Internal Revenue Service (IRS) Code of 1986 (which allows for the spending of pretax dollars on premiums, medical reimbursement, dependent child care credits, or transportation expenses); or

Supplemental compensation (salary).

Effective with the 2004-05 school year, HB 3257, authored by Rep. Dianne Delisi (R-Temple) and sponsored by Sen. Robert Duncan (R-Lubbock), requires that the full amount of the active school employee pass-through be directed toward an employer-paid Healthcare Reimbursement Account (HRA). The options to use the pass-through for salary compensation, a medical savings account, or a cafeteria plan are repealed.

An HRA is defined as a health benefit plan that:

Is paid for solely by the employer,

Is not provided under a salary reduction election,

Reimburses a participant for a qualified health care expense incurred by the participant or his or her dependent,

Provides reimbursements up to a maximum dollar amount at the end of a coverage period; and

Provides that any unused portion at the end of a coverage period would be carried forward for use in a subsequent coverage period.

The bill directs the state, through TRS, to contribute to an employee's HRA account in an amount determined by appropriation. The contribution would be made in equal monthly installments and only could be used for qualified health care expenses.

Additionally, House Concurrent Resolution 90 by Rep. Rob Eissler (R-The Woodlands) and sponsored by Sen. Todd Staples (R-Palestine) requests the U.S. Congress to broaden the scope and availability of the medical savings account program, remove its restrictions, and allow state governments to design such programs for their employees.

MANAGED CARE NEAR MISSES

TMA supported several managed care bills that got lost in the prompt pay fight, most notably HB 648 to implement standardized contracts. Below is a brief summary of the bills that died in the process, but TMA intends to resurrect in 2005. Also summarized are bills that TMA opposed or had concerns about and which may reappear during the next legislative session.

STANDARDIZED CONTRACTS

HB 648 by Rep. Toby Goodman (R-Arlington) was left stranded in the House Calendars Committee, along with many other bills that died as a result of the walkout by the House Democrats. This is the second legislative session in a row in which the standardized contracts bill supported by TMA was left pending in the House Calendars Committee. Similar to HB 2620 from the previous legislative session, the bill instructed TDI to convene a work group of physicians, consumers, and health plans to develop the contents and criteria for a uniform, standardized contract. The goal of HB 648 was to allow physicians to easily compare the contracts of multiple plans. Also, these contracts would reduce costs by minimizing the administrative burdens of the physician and would protect patients from provisions that place physicians in positions of conflict.

It was intended that HB 648 accomplish the following:

Establish a nine-member contract panel to advise and make recommendations regarding the adoption of standard contract forms;

Expand the statutory enforcement authority of the commissioner of insurance to include issuing a cease and desist order, referring to the attorney general for assessment of a civil penalty, and seeking injunctive relief for violations; and

Allow for limited modification of the contract and standardize any addenda.

BALANCE BILLING

TMA advocacy kept SB 1313 by Sen. Leticia Van de Putte (D-San Antonio) from escaping the Senate State Affairs Committee, where it was left pending after TMA testimony opposing the bill. The bill was intended to prohibit noncontracted physicians from balance billing HMO and PPO enrollees when noncontracted physicians provide services in a facility that is contracted. The bill also would have required that contracts between HMOs and a limited provider network or delegated entity contain a hold harmless clause if the HMO fails to pay the limited network or the delegated entity and further specified that the limited network or delegated entity would require its subcontractors to honor such hold harmless provisions. It appears that this bill was intended to eviscerate the attorney general's March 2003 opinion (Opinion No. GA-0040) that upheld a noncontracted physician's right to balance bill even for services provided to the HMO enrollee in a contracted facility. During the interim, TMA and the Bexar County Medical Society will continue to educate Senator Van de Putte on the damaging impact of this bill on physicians.

HEALTH INSURANCE FRAUD

HB 1838 by Rep. Senfronia Thompson (D-Houston) and Senator Averitt would have required that an individual convicted of health care insurance fraud be ordered to pay restitution and attorney fees to the affected insurer. However, this bill did not require that in situations where the insurer had recovered the fees paid to a physician and received restitution from the patient that the physician be repaid for the services provided in good faith.

RETROSPECTIVE IRO REVIEWS

HB 1491 by Rep. Elliot Naishtat (D-Austin) was left pending in the House Insurance Committee. This bill, supported by TMA, amended the Texas Insurance Code to allow the IRO to review retrospective denials based on medical necessity. Currently, the IRO may review only denial of medical necessity for prospective or concurrent services.

Managed care/insurance TMA staff contacts:

-Teresa Devine, director, Health Care Financing Department, (512) 370-1415
-C.J. Francisco, JD, senior counsel, Office of the General Counsel, (512) 370-1339
-Lee Spangler, JD, senior counsel, Office of the General Counsel, (512) 370-1337
-Rich Johnson, director, Division of Medical Economics, (512) 370-1315

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