Law - December 2008
Tex Med . 2008;104(12):31-35.
By Crystal Conde
After reading yet another news story about yet another health care payment plan fined for failing to reimburse physicians promptly, Lewis Foxhall, MD, a Houston family physician and chair of Texas Medical Association's Ad Hoc Committee on Managed Care, asked TMA to look into what he describes as a pattern of offenses.
"One might think this is a way of doing business, that it's perhaps more effective for them to violate the various rules and just pay the fine," he said. "I'm not suggesting that's happening, but it's worrisome when we see repeat occurrences of very similar violations. There seems to be no learning from one plan to another and no improvement in the process."
Dr. Foxhall, former chair of TMA's Council on Socioeconomics, contacted TMA about putting together a snapshot of violations by insurance companies in the past year. The printout of Texas Department of Insurance (TDI) sanctions and fines shows that health care payment plans continue to struggle with abiding by the prompt pay law passed in 2003. Texas' prompt pay statutes give the department authority over fully insured commercial health insurance plans, which make up about one-third of all public and private insurance coverage.
The document also demonstrates that TDI has stepped in and acted against silent PPO activity where it can. (See " TDI Takes Action Against Silent PPOs .")
For a full list of TDI disciplinary actions against insurance companies for prompt pay, silent PPO, and other violations, visit the TDI Web site. Select TDI Disciplinary Actions to view actions going back to 1996.
Within the past year, the most high-profile prompt pay violation went to UnitedHealthcare. TDI fined United $4.4 million last November for not achieving 98-percent prompt pay compliance during the third quarter of 2006 and for neglecting to submit complete and accurate quarterly complaint logs for all of 2006 and the first quarter of 2007.
In addition to the fine, TDI ordered United to:
- Continue to file complaint logs with TDI an additional two years;
- Appoint an employee responsible for legal and regulatory matters relative to United's compliance with Texas insurance laws; and
- Resubmit corrected complaint logs for 2006 and the first quarter of 2007.
Should United violate the terms of the order, it could face an additional penalty of $3 million. Since 2001, TDI has fined United four times for the way it pays claims.
However, United isn't the only company having difficulty.
In January, TDI fined Mercy Health Plans of Missouri, Inc. $100,000 and Community First Health Plans, Inc. and MedImpact Healthcare Systems, Inc. $200,000 for failing to pay clean claims in a timely manner. In February, the department fined MEGA Life and Health Insurance $225,000.
In 2007, the department levied the following fines for prompt pay violations:
- Combined Insurance Company of America, $30,000;
- Employers Direct Health, Inc. and North Carolina Mutual Life Insurance Company, $150,000; and
- Aetna Health, Inc., $45,000.
According to Katrina Daniel, TDI associate commissioner for life, health and licensing, the most common complaints from physicians pertain to prompt pay. When receiving justified complaints, the department has investigated and imposed administrative penalties and fines when necessary.
Keith Bourgeois, MD, chair of TMA's Council on Socioeconomics and a Houston ophthalmologist, recognizes that insurance companies have improved compliance in the prompt pay arena overall.
"I applaud TDI for recent rulings and fines," he said. "It definitely sends the right message."
In 2003, Gov. Rick Perry signed Senate Bill 418, better known as the prompt payment law. Six years and four legislative sessions in the making, the law established prompt payment requirements for transactions between physicians and insurers.
The law entitles physicians to penalties and interest for late payments. Under the statute, insurers have 30 days to pay clean electronic claims and 45 days to pay clean paper claims. Failure to do so results in penalties calculated on the difference between a physician's billed charges and the contracted rate.
Penalties are 50 percent of the difference during the first 45 days after the payment deadline and 100 percent of the difference for late payment 46 to 90 days after the deadline. Beyond 90 days of the deadline, insurers are liable for 18-percent annual interest on the unpaid claim. TDI can also levy fines against insurance companies that violate the prompt pay law.
The commercial plans under TDI's jurisdiction agreed to the graduated late penalty payment formula and caps on penalty payments under the law. However, the Texas Association of Health Plans (TAHP) recently suggested to the Sunset Advisory Commission that the state reduce the severity of the penalties. (See " TAHP Suggests Limiting Prompt Pay Penalties .")
From July 2007 to June 2008, insurers paid nearly 46.9 million clean claims from physicians on time; they paid 37,931 late. TDI bases these figures on claims payment data submitted by health care payment plans.
Overall, Ms. Daniel says the number of complaints for prompt pay violations has decreased since 2003.
In 2001, before passage of SB 418, TDI fined 17 health care payment plans and ordered each company to pay $1.25 million for neglecting to pay 85 percent of a claim when an audit was necessary.
The fines insurance companies pay end up in the State General Revenue Fund.
According to TDI's Accident and Health Complaint Index, the department received 5,425 justified complaints in calendar year 2002. As of September 2008, 4,619 complaints had been filed, with 1,020 justified.
According to TDI, justified complaints involve "an apparent violation of a policy provision, contract provision, rule or statute, or there is a valid concern that a prudent layperson would regard as a practice or service that is below customary business or medical practice."
Yet regardless of the decline in the number of complaints, physicians continue to face challenges in receiving timely reimbursements.
TMA's 2008 Physician Survey investigates the economic and business issues physician practices face. Sixty-one percent of physicians report their income from medical practice had decreased in the two years before the survey.
More than 70 percent of physicians indicate cash flow problems when dealing with slow payment, nonpayment, or underpayment of claims by insurance companies or government payers. Overall, 29 percent identify payment as the biggest challenge facing the practice of medicine.
The Harris County Medical Society conducted a similar survey last year. Sixty-nine percent of the 487 physicians who responded indicated that insurance companies often or always fail to reimburse them in a timely manner.
The medical society sent the survey to 5,708 of its member physicians and asked them to rate Aetna, Blue Cross and Blue Shield of Texas, CIGNA, Humana, Unicare, and UnitedHealthcare of Texas on patient care, payment, and customer service. The full survey report is available on the medical society's Web site . (See the February 2008 issue of Texas Medicine , page 21.)
Dr. Bourgeois has an idea why health care payment plans continuously miss the prompt pay mark.
"These companies struggle to meet regulations because they're not incentivized to meet them. If they delay payment, it's more interest to them. Holding onto that volume of money for an extra month adds up," he said.
A proposed solution to these problems, he says, would require the health care industry to use a common platform that would allow physicians and office staff members to access payment information at the time of service.
"Real-time claims adjudication would benefit both the medical practices and patients because the contracted rate would be clear to both at the time of service," he said.
Working Toward Improvement
TMA staff and members of the Council on Socioeconomics meet regularly with representatives of health plans to discuss prompt pay and other matters affecting physicians statewide. TMA's Payment Advocacy Department can assist physicians who are having trouble being paid by insurance companies in filing a complaint with TDI.
Physicians and health care professionals can submit compliance complaints on TDI's Web site, www.tdi.state.tx.us. Select Health Providers from the menu on the left and click on Complaint Forms.
In addition, TDI has a prompt pay e-mail address, email@example.com , physicians can use to submit questions. The department suggests physicians first consult the Frequently Asked Questions page on TDI's Web site .
Valerie Brown, manager of complaints resolution in TDI's Consumer Protection Division, encourages physicians to submit complaints when they have problems with insurance carriers.
TMA can help physicians and office staff members deal with claims-payment problems. The Hassle Factor Log is free to TMA members. Physicians can get answers to questions about correct coding, claims appeals, prompt pay, and other insurance matters.
TMA also can intervene with an insurer or health care payment plan to help resolve a problem. Call (800) 880-1300, ext. 1414, or (512) 370-1414, or visit the TMA website for additional information about the Hassle Factor Log.
TDI's Technical Advisory Committee on Claims Processing (TACCP) advises the commissioner of insurance on technical aspects of health care services coding and claims development. TMA is a TACCP member and will refer complaints to TDI's Provider Ombudsman Program if the association receives a large volume of complaints about a specific problem.
Dr. Foxhall says TDI remains vigilant in its oversight of prompt pay violations. And, he urges physicians to submit complaints to TDI and to TMA's Hassle Factor Log to help ensure resolutions to payment problems and other insurance carrier concerns.
With TDI and TMA monitoring health care payment plans, Dr. Foxhall says, the system has the greatest chance of reform, bringing an end to repeat violations.
"I'd like it if none of the insurance plans ever got fined again," he said.
Crystal Conde can be reached by telephone at (800) 880-1300, ext. 1385, or (512) 370-1385; by fax at (512) 370-1629; or by email at Crystal Conde .
TDI Takes Action Against Silent PPOs
A sample of Texas Department of Insurance (TDI) sanctions and fines levied within the past year, prepared by TMA, shows some insurers have been penalized for improperly applying network discounts to physicians. They are:
- Great-West Life & Annuity Insurance Company, $8,000;
- Metropolitan Life, $5,000;
- Unicare Life & Health Insurance Company, $15,000; and
- Humana Insurance Company, $15,000.
Silent PPO activity can occur when PPOs contract with one another and grant access to physician discounts not contemplated in the original network contract with the physician. The situation can lead to providers being under-reimbursed for the provision of services.
TDI's complaint database shows 89 complaints related to silent PPO discounts since Jan.1, 2007. This total includes justified and unjustified complaints; the department is unable to separate the two. So far in 2008, TDI has received 49 complaints for silent PPO activity.
Doug Danzeiser, deputy commissioner for regulatory matters at TDI, says the department has limited authority regarding silent PPOs, making it difficult to bring cases against them. TDI doesn't regulate PPOs as entities but has some authority over preferred provider benefit plans, which are the insurance benefit plans through which consumers receive their health care. Through its financial regulation, TDI has authority over third-party administrators, as well.
According to a draft of the 2008 Technical Advisory Committee on Claims Processing (TACCP) Report on Activities, Texas law prohibits an insurer or third-party administrator from reimbursing a physician or provider on a discounted fee basis unless:
- The insurer or third-party administrator has a contract with the physician or provider or a PPO that has a contract with the physician or provider;
- The physician or provider agreed to the contract terms; or
- The insurer or third-party administrator agreed to provide coverage for health care services under the insurance policy.
The Sunset Advisory Commission addresses the department's limitations in its hearing material and recommends all PPOs be required to obtain a certificate of authority from TDI to operate in Texas.
The hearing material states, "By certifying PPOs operating within Texas, this recommendation would allow TDI to have some regulatory authority over PPOs, and take enforcement action against them if they violate current state law or TDI rules. For example, if a PPO were to engage in the unauthorized practice of insurance, … TDI would be able to administratively enforce against the PPO."
"A lot of that discounting we think happens in that PPO layer, that business-of-health-care layer. That's something that we don't regulate. As the Sunset report points out, we don't even know how many [PPOs] operate in Texas," said Katrina Daniel, associate commissioner for life, health and licensing at TDI.
Mr. Danzeiser gives an example of a physician who agrees to certain discounts through a PPO in exchange for more patients, known as steerage. The PPO has agreed to that contract but then enters into a contract with an insurance company and doesn't require that insurance company to give steerage to the doctor.
"It's hard to hold the carrier liable when it may never have been told it was supposed to be giving steerage," Mr. Danzeiser said. "Maybe if we had some authority over that middle entity we could look at whether it's fulfilling its contractual obligations to the providers."
During the 2007 legislative session, TMA supported House Bill 839 by Rep. Craig Eiland (D-Galveston), but the bill never made it to the House floor for debate. Had it passed, TDI would have the authority to pursue not only the insurer, but also the secondary networks that are inappropriately leasing, selling, or brokering the discount the physician negotiated only with the insurer.
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TAHP Suggests Limiting Prompt Pay Penalties
The September 2008 Sunset Advisory Commission's decision material report focuses on evaluating Texas Department of Insurance (TDI) programs and recommending changes to improve their transparency and accountability. Insurance industry stakeholders had an opportunity to comment on the state's approach to insurance regulation.
In the report, the Texas Association of Health Plans (TAHP) suggests the legislature limit prompt pay violation payments to physicians, hospitals, and other facilities.
TAHP proposes penalties be limited to the usury ceiling for commercial transactions of 28-percent interest per year. Furthermore, it advocates a requirement that any penalty in excess of the state commercial usury cap be deposited in a fund to assist low-income Texans in obtaining coverage through the Texas Health Insurance Risk Pool.
Jared Wolfe, TAHP's executive director, says the thinking behind the proposal is to keep the money paid through penalties for prompt payment in the health care system. He says the fines for health care payment plans in violation of the law would remain the same, but any penalty amount in excess of the state commercial usury cap would be applied to funding health care.
"Our proposal keeps the deterrent in place," he said. "The idea is to fund health care rather than [pay] penalties that vastly outweigh any transgression a plan may have committed."
He says Texas has one of the most stringent prompt payment laws in the nation, and adds that two TAHP-member health plans that operate nationally report that two-thirds of all the prompt payment penalties they've paid are in Texas.
TMA lobbyist Patricia Kolodzey, RN, BSN, says the current prompt payment penalty structure actually protects insurance companies by ensuring the penalty is in proportion to the violation.
"TDI is still actively administering fines and penalties, and the volume of complaints has decreased," she said. "The penalty provisions are working."
In addition, she adds that prompt pay penalties paid to physicians, hospitals, and other health care entities are currently reinvested into the health care system for the insured and uninsured.
"These penalties allow the medical and hospital community to continue to want to be part of the insured's provider network and at the same time allow them to continue to provide access to services to the uninsured when necessary," she said.
The Sunset Advisory Commission will consider suggestions submitted by TAHP and all stakeholders who commented on the commission's report. The final Sunset Bill may or may not contain TAHP's suggestion, but Ms. Kolodzey says it could be filed as a separate piece of legislation.
To view the commission's report and all stakeholder comments, visit www.sunset.state.tx.us.
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