Let’s say your contracted insurance carrier violates prompt pay laws and misses the deadline for paying or responding to your claim (within 45 days of receipt of a claim you submitted nonelectronically and within 30 days of receipt of a claim you submitted electronically).
The law says that, in addition to the full contracted rate for your service, the carrier has to pay you a penalty — either a percentage of the claim amount, or a specific dollar amount, whichever is less, as follows:
Penalty (in addition to full contracted rate)
- 1-45 days: Half of the difference between the billed charges and the applicable contracted rate OR $100,000, whichever is less;
- 46-90 days: All of the difference between the billed charges and the applicable contracted rate OR $200,000, whichever is less; and
- 91 or more days: All of the difference between the billed charges and the applicable contracted rate OR $200,000, whichever is less. In addition, the carrier must pay you 18 percent annual interest on the penalty amount, accruing from the date payment was originally due and through the date of actual payment.
So, by what deadline does the carrier have to pay the penalty? What happens to the carrier if it pays the claim late but does not pay the penalty?
According to the Texas Department of Insurance (TDI), language in the prompt pay statute (SB 418) and in the prompt pay rules (28 TAC Section 21.2815) implies that the carrier should pay the penalty and the late claim payment at the same time. If the carrier fails to send you the penalty payment along with the tardy claim payment, the carrier may be subject to an administrative fine — but not to any additional penalty or interest payable to you. (The state of Texas, not the providing physician, collects the administrative fine.) The Texas insurance commissioner may consider such factors as the carrier’s penalty payment policies and pattern of behavior when deciding whether to levy the fine.
If a carrier sends you a late payment but fails to include the penalty, first contact the company to arrange for the penalty payment. If the carrier does not respond satisfactorily, you should file a complaint with TDI. (Note that a carrier is not liable for a penalty if it paid the claim late as a result of a catastrophic event.)
And if the insurance company pays on time but underpays you — if it doesn’t pay in full by the statutory deadline, it still must pay you a penalty based on the number of days the payment is late and the underpaid amount of the claim. Read How to Calculate Underpaid Amount in Prompt Pay Rules.
Content reviewed: 11/06/2007
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