Cover Story -- October 2003
UPDATE: TDI issues strong final prompt pay rules
By Walt Borges
After months of haggling and negotiation, the Texas Department of Insurance (TDI) in August issued emergency prompt pay rules that Texas Medical Association physician leaders say give doctors a major weapon in the fight against health insurers' slow-pay/no-pay practices.
The rules implement Senate Bill 418, TMA's prompt pay bill passed by the legislature last spring. TDI rejected insurers' pleas to use the rules to give them up to 15 days to verify payment obligations, to require unnecessary elements to certify claims as complete, and to use "usual and customary charges" established by insurers as the basis for late reimbursement penalties.
After physicians mobilized by TMA and county medical societies testified to the effect of the proposed rules at a public hearing earlier in the month, TDI issued emergency rules that:
- Reduced the number of required elements of a "clean" claim from 18 to nine, with four others required only in certain conditions;
- Made a physician's billed charges the basis for penalties for late payment; and
- Reduced a health plan's leeway for providing payment verification to five days or less.
"This was a 100-percent win for Texas physicians on prompt pay in the emergency rules," said C. Bruce Malone III, MD, a member of the TMA Board of Trustees. "When the department of insurance issues the final rules later this year, we expect nothing less than what we won under Senate Bill 418 as incorporated in the emergency rules."
Lewis Foxhall, MD, chair of TMA's Council on Socioeconomics, said the important part of the emergency rules "is that billed charges will be the basis for penalties for late payment. Without this provision, the law would have no teeth. The middle ground reached on time for verification and the nature of information required should avoid an excessive number of declinations from the plans."
But Dr. Foxhall says TMA will keep a watchful eye on how the emergency rules work.
"We will need to monitor this closely to see if it works as expected," he said. "Otherwise, we will need to change these provisions for the final rule."
The emergency rules took effect Aug. 16 and are in effect for up to 180 days. TDI must set permanent rules by Dec. 4, or the rulemaking process must begin from scratch.
Making Prompt Pay Work
TDI's adoption of the emergency rules came less than a month after Gov. Rick Perry delivered a powerful endorsement of a strong prompt pay law to physicians, who had assembled in TMA's Austin headquarters on July 18 for a ceremonial bill signing.
Governor Perry said passage of the prompt pay bill "will truly make a difference," and it sends a message to insurers that they "will pay an extraordinary price" for not paying claims on time. He said lawmakers had told insurers to "pay your bills on time or face the consequences."
However, TDI's initial proposed rules raised fears among medical professionals that insurance regulators would undermine a hard-fought legislative victory won over six years and four sessions. The proposals strayed from the definitions of key terms contained in SB 418 and substituted new terms that many physicians believed directly contradicted the bill's intent.
Houston internist Carlos R. Hamilton Jr., MD, spoke for many physicians at an Aug. 7 TDI public hearing when he told Insurance Commissioner José Montemayor that he was concerned that the proposed rules "will make the legislation meaningless."
The legislative authors of SB 418 also were concerned. The three House coauthors -- Reps. John Smithee (R-Amarillo), Craig Eiland (D-Galveston), and Vicki Truitt (R-Keller) -- took the unusual step of warning colleagues that TDI appeared to be proposing rules that would "essentially gut the legislation."
Sen. Jane Nelson (R-Lewisville), the bill's chief author, also weighed in.
"The legislature spoke loudly and clearly on this issue," she said. "Not only did we approve a strong piece of legislation, both chambers voted down amendment after amendment designed to weaken this bill by overwhelming margins. The legislature's role is to set policy. The agency's job is to implement those policies. We need strong rules to match the strong bill we approved."
Commissioner Montemayor responded to the House members' memo in a letter to Representative Eiland on July 22.
"Let me assure you that I have no intention of gutting any legislation, and let me further assure you that my ultimate goal is that intended by the law: get physicians paid promptly and correctly," he wrote. He added he was "committed to delivering a rule that balances the interests of all parties."
Dr. Malone said TMA's objective was to secure enforcement of the law as written, adding that TDI rulemaking authority "wasn't designed to later moderate the law to the benefit of insurance companies."
Senator Nelson made a similar point. "Every household and every other business have to pay their bills on time, and after four years of investigating this issue, I have yet to hear a convincing argument as to why we should give insurance companies special treatment."
A Public Hearing at TDI
At the Aug. 7 hearing, Commissioner Montemayor expressed concern over the statute's requirement that insurers verify or decline verification of payment "without delay." TDI proposed that insurers have up to 15 days to verify or decline payment.
Before the bill's passage, a health insurer could deny or reduce payment to a doctor who had verified coverage or received preauthorization for services if the insurer later determined a reason that payment should not be made. Payments to physicians could be denied even if the insurer made a mistake.
Under SB 418, verification locks an insurer into paying for a medical service as long as it is performed within a set time period. Once verification is obtained, a health plan may not deny or reduce payment.
For patients with an immediate need for care of a life-threatening condition, concurrent hospitalization, or post-stabilization care, insurers must verify coverage within 72 hours.
"The department expects that a carrier will use only the amount of time necessary to process the request 'without delay' rather than the maximum 72 hours or 15 days allowed by the rule," TDI officials said in the initial rules.
They said verification delays were justified because insurers in effect were required to "adjudicate" claims -- that is, make a final determination on the validity of paying the claim -- before providing a promise of payment.
But that upset some of the bill sponsors, who said regulators were ignoring their intent. Representative Eiland was particularly blunt. "The name of the bill is prompt pay," he noted. "That sort of gives you the intent."
At the hearing, Commissioner Montemayor asked Leah Rummel, executive director of the Texas Association of Health Plans, how many verification requests would be approved if verification was required when a physician asked for it over the telephone.
She said less than 1 percent of the requests would be verified, compared with 90 percent if "without delay" was stretched to allow verification within 15 days of receiving a request.
Eliese Wolff, compliance manager for Aetna Inc., said verification "equates to a guarantee of benefits," and insurers need additional time to decide whether to decline or verify complex treatments.
But physicians at the hearing were adamant that health insurers should not be able to undermine what they believe is a clear mandate to verify payment as soon as possible.
Several witnesses suggested that physicians could live with a delay of up to three days for verification, but only when the complexity of the treatment warranted it. Payment for routine treatments or visits should be verified immediately, the witnesses said.
"Almost everything I do is on the same day as the visit," said Houston family practitioner Robert C. Vanzant, MD. "Can I really ask my patients to wait 15 days?"
Houston neurosurgeon Alfonso Aldana-Luebbert, MD, noted that he often is called upon to treat patients with injured discs in their spine.
"How do you ask a patient to wait 15 days for pain relief? We choose to follow the Hippocratic Oath instead of following the contract with the insurance company. . . . We don't get paid because we have violated the [health plan's] administrative process."
Commissioner Montemayor's emergency rules ultimately gave health insurers up to five days to provide verifications instead of the three days TMA said was acceptable.
Another key controversy concerned how to define the penalty for late payment.
Instead of accepting legislative language basing penalties on billed charges (the nondiscounted amount of charges billed by the doctor for services), TDI proposed adopting the amorphous standard of "usual and customary" charges, allowing health insurers to determine the appropriate penalty.
The TDI proposals represented a weakening of previous rules, which specified the penalties were based on the "billed charges."
TDI's initial rules allowed an insurer to base its penalty on the usual and customary charge, which is allegedly an average fee for a service charged by physicians in a particular market. However, TMA officials note that health insurers set usual and customary charges without disclosing to TDI or doctors how such charges are calculated.
At the hearing, TMA President-Elect Bohn Allen, MD, led the physicians who urged the insurance regulators to stick with SB 418's provisions that based penalties for late payment on the billed charges of the treating physician. "The legislature debated this issue at length," Dr. Allen said, "and it meant what it said."
Another physician told the insurance commissioner, "You may be called on to be Solomon. Give us the baby -- with billed charges on it."
"Usual and customary charges are determined by the plans themselves, and there is no standard method of determining what is usual and customary," Dr. Foxhall explained in an interview. Antitrust laws prevent physicians from gathering and comparing fees for specific services and determining the usual and customary charges for themselves.
Because penalties in the initial prompt pay rules were based on the difference between the discounted fee of the health plan and the usual and customary fees billed by physicians for similar services, insurers could have reduced their late payment penalties to zero simply by finding that the contract rate it pays for a service is the usual and customary rate for physicians.
"We believe that the legislature and the bill authors and cosponsors intended to prevent such a manipulation," Dr. Foxhall said. "This would be the only instance we know of in state law in which an entity violating regulations would be able to set its own fine and would leave us with a toothless bill."
The insurance commissioner apparently agreed. When the emergency rules were issued, billed charges were the basis for the penalties.
How Much Information Is Enough?
Another issue addressed by physicians was the TDI's initial proposal to require doctors to give insurers 18 pieces of information with every request for verification.
TMA leaders regarded the extensive list as excessive. For example, the initial rules proposed that physicians provide the name of the health plan member in addition to the name of a covered spouse or child. But many health plans issue insurance cards to spouses and children of enrolled health plan members that only include the name of the spouse or child and the plan number, and leave off the name of the subscribed relative.
Doctors point out that the health plans have the member's name in front of them as soon as they enter the plan number and spouse's or child's name, while doctors would have to make substantial, time-consuming inquiries to determine the actual plan member.
"Most of these data elements may not be in the possession of the physician or provider, but they are readily available to health plans in their databases of enrollees and providers," Dr. Foxhall explained. "We want to speed up the process, not encumber practices with additional requirements and delays."
At the hearing, other physicians objected to requirements that instructed doctors to inform health insurers of what would be done to treat the patient, even before the patient was examined.
"How can we tell what the patient needs before we examine him?" asked Dr. Hamilton, a faculty member of The University of Texas Health Science Center at Houston. "This kind of foreknowledge cannot be expected -- even from University of Texas faculty."
When the emergency rules were issued Aug. 15, only nine elements were required, and four others were conditional, depending on whether the information was available to the physician submitting the claim. TDI also agreed that a presumptive diagnosis or presenting symptoms would be sufficient for a valid verification request. (See "Verify This.")
Prompt Pay 101
In pushing for prompt pay legislation in 2003, TMA physician leaders had two simple objectives. They sought to reform the laws and regulations governing the Byzantine claim-submission processes that allowed health insurers to deny or delay payments to doctors without consequence. And they would create an effective system of penalties that would remove health insurers' incentive to avoid prompt payment.
TMA anticipated that an effective prompt pay bill would improve practice cash flow, lower practice overhead, and free up physicians and office staff to spend their time taking care of patients instead of pursuing claims payment.
The nuts and bolts of Senate Bill 418 were crafted to meet those objectives by addressing known practices of insurers that delayed payment. Among the major achievements of the bill are:
- Ending retrospective denials of payment for claims previously verified. SB 418 commits insurers to pay for services once they say they will. Exceptions are limited to situations in which the services were not provided or when a doctor misrepresented the nature of the requested services. If an insurer cannot determine whether it is liable for payment, then the physician can tell the patient to be prepared to pay for his or her treatment if the insurer ultimately denies payment.
- Enhancing the availability of eligibility information. The new law expands the hours that claims personnel must be available by phone for making verification and preauthorization determinations. It requires health insurers to record after-hours calls and respond within 48 hours.
- Limiting insurers' requests for additional information. Insurers have incurred the wrath of doctors and billing staff with frequent and sometimes repetitive requests for additional patient or treatment information. SB 418 limits the information that can be requested to clinical and other information that is already part of the patient's record and that is specific to the claim being processed.
- Ending confusion over claims and overpayment recovery deadlines. The new law gives physicians 95 days to file claims, and prohibits them from filing duplicate claims until 45 days after the first claim is submitted. If the physician does not file a claim within the 95-day limit, the doctor forfeits the payment due. The law also sets a 180-day limit on health insurers to complete investigations of overpayments. The health plans have only 180 days to recover the overpayment, and the physician is guaranteed an appeal of the recovery. No recovery can be made until the appeal is exhausted.
- Strengthening insurance regulators' authority to define clean claims and set other key elements of prompt pay. Under previous law, health plans could change the elements of a "clean" claim simply by notifying doctors of the changes 60 days before they took effect. Under SB 418, the Texas insurance commissioner will adopt a definition of a clean claim that will apply to all health plans. The new law also prevents health insurers from using their contracts with physicians to nullify or waive key sections of the prompt pay law.
- Establishing graduated penalties for late payments. Electronic claims now must be paid within 30 days and paper claims within 45 days. Failure to do so results in penalties calculated on the difference between a physician's billed charges and the contracted rate. The 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. Once a payment is delayed more than 90 days beyond the deadline, an insurer also is liable for 18-percent annual interest on the unpaid claim.
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The new emergency prompt pay rules require requests for verification to contain the following:
- Patient's name, ID number, if included on an identification card issued by the insurer, and birth date;
- Name of enrollee or subscriber, if included on an identification card issued by the insurer;
- Patient's relationship to enrollee or subscriber;
- Presumptive diagnosis, if known; otherwise, presenting symptoms;
- Description of proposed procedure(s) or procedure code(s);
- Place-of-service code indicating where the services will be provided; if other than the physician's office, the name of hospital or facility where services will be provided;
- Proposed date of service;
- Group number, if included on an identification card issued by the insurer;
- If known, the name and contact information of any other carrier, including the name, address, and telephone number, name of enrollee, plan or ID number, group number (if applicable), and group name (if applicable);
- Name of provider providing the proposed services; and
- Provider's federal tax ID number.
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