Update: After meeting with the Texas Medical Association in December, the state comptroller’s office said it will postpone the date that medical practices will be required to pay taxes on medical billing services by an outside company.
The comptroller’s office in November announced that medical billing services would be subject to sales and use taxes beginning Jan. 1. That date has been pushed back to April 1.
TMA continues to have concerns with the attorney general’s opinion that preparing an insurance claim is an “inherent part of the insurance claim process,” which was the basis for the comptroller’s decision to tax medical billing services.
TMA is continuing to speak with the comptroller’s office. Check back for more details.
You’ve heard the old saying that only death and taxes are certain.
As a physician, you do everything you can to prevent death. Unfortunately, there’s not a lot you can do (legally) to prevent taxes.
Therefore, if your practice uses an outside company for medical billing services, expect to start paying sales tax on those services beginning next year.
“Beginning January 1, 2020, it is agency policy that medical billing services, including those performed prior to submitting a claim to an insurance company, to provide additional information, or to adjust a submitted billing, are taxable insurance services,” the Texas Comptroller’s office announced recently. “The services may include assigning codes for the preparation of claims, verifying insurance eligibility, preparing claim forms for filing, filing the claim, resubmitting and adjusting claims, reviewing and appealing denied claims, settling claims, and posting payment for a claim.”
Physicians likely will be unable to pass along any of this tax to patients because payment rates are already established in most cases and set by insurance companies or the federal government.
Texas imposes a 6.25% tax on all sales, leases, and rentals of most goods, as well as taxable services. Local taxing entities, such as cities or transportation authorities, can impose an additional tax of up to 2%.
Medical billing services had been considered taxable insurance claims adjustment or claims processing until 2002.
“In 2002, the agency determined that merely completing a form for the insured did not rise to the level of claim processing,” the office said. “The agency also determined that claim processing does not begin until receipt of a claim by an insurance company. Thus, medical billing services which happened before the claim was submitted were not taxable.”
However, the state attorney general later determined that the timing of the start of an insurance service does not matter as long as the services pertain to an insurance policy.
Because preparing a claim is “an inherent part of the insurance claim process … medical billing services are insurance services,” the state comptroller wrote. “This change in policy will be prospective as of Jan. 1, 2020.”
The Texas Medical Association has reached out to the Comptroller’s Office to discuss the change. Check back for more details.