Comptroller Postpones Taxing Medical Billing Services Until 2021
By David Doolittle



State Comptroller Glenn Hegar will postpone until late 2021 the date that medical practices will be required to pay taxes on medical billing services provided 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. Thanks to Texas Medical Association advocacy, that date had been pushed back to April 1

Comptroller Hegar announced late last week that the date will be further postponed until Oct. 1, 2021 – after the Texas Legislature meets next. 

The delay will allow “industry time to seek a legislative change,” Comptroller Hegar said in a statement. “The policy remains that medical billing services that occurred before a claim was submitted are not taxable insurance services.” 

“In this time of immense stress on physician practices in Texas, the Texas Medical Association sends a huge ‘thank you’ to Comptroller Hegar,” TMA President David C. Fleeger, MD, said. “He and his staff had an open door and listened to our concerns over this new tax and lifted this new burden.”

Original story:

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.

Last Updated On

April 01, 2020

Originally Published On

December 05, 2019