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Source: TDI HB 610 Provider Claims Data Calls - September 2003 through June 2004 TABLE 2: SB 418 Timeliness of Provider Claims Payments
KEY: Inst. = Institutional claims (facilities); Non-Inst. = Non-institutional claims (physicians) Source: TDI SB 418 Provider Claims Data Calls - September 2003 through June 2004 TABLE 3: Electronic vs. Non-Electronic Claims - SB 418 Claims Data
Source: TDI SB 418 Provider Claims Data Calls - September 2003 through June 2004
TABLE 4: Requests for Verification
Source: TDI SB 418 Provider Claims Data Calls - September 2003 through June 2004 as of 8/19/2004 TABLE 5: SB 418 Annual Reasons for Declination Report - Summary
NOTE: Includes declinations issued from September 2003 through June 2004 as of 8/25/2004;carriers may have reported more than one reason for a declination. Source: SB 418 Annual Reasons for Declination Report Complaints The table below reports the complaints from physicians and providers received by TDI from fiscal 2000 through August 10, 2004. In fiscal 2004, the number of complaints has dropped to about half of the number received in fiscal 2003. The number of justified complaints has decreased as well. A complaint is justified if there is 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. TABLE 6: Complaints Received From Physicians and Providers (Fiscal 2000 through August 10, 2004 )
Source: TDI Complaints Inquiry System (CIS) database SUMMARY TDI continues to collect and review claims, verifications, and complaints data, and use the data to drive education and enforcement efforts. CHAPTER 2: EDUCATION AND OUTREACH
SB 418 and its associated rules require significant change on the part of providers and carriers. New federal requirements for electronic claims transactions also present significant challenges to providers and carriers. Given the magnitude of the changes, a concentrated effort was initiated, and continues, for sharing information with physicians, providers, and carriers about how to comply with prompt pay statutes and rules. Since the adoption of SB 418 during the 78th Legislative Session, the agency's Provider Ombudsman and other TDI staff completed 39 educational presentations on the new prompt pay statutes and rules. TDI has partnered with the Texas Hospital Association, Texas Medical Association (TMA), the Texas Association of Health Plans, and other organizations and groups to educate physicians, providers, and insurance industry representatives throughout Texas in the following cities:
One additional, but significant, way in which providers gained education was through the eight presentations provided by TMA staff. Two of the presentations were offered in Austin while one each was offered in Bedford, Dallas, Galveston,San Antonio, Victoria and Waco. TDI also established a provider resource page with educational materials that is accessible through TDI's home page at www.tdi.state.tx.us/consumer/ppresource.html. This site, which has had more than 31,000 hits since September 2003, includes:
TDI's website also includes a managed care payor resource page (www.tdi.state.tx.us/consumer/payors.html) with links to the statutes, rules, educational materials, and other information for carriers. In addition, TDI issued three Commissioners' Bulletins about SB 418 and new rules, two in October 2003 and one in January 2004. These bulletins can be accessed at www.tdi.state.tx.us/commish/bulletins.html. The bulletins include:
Three other bulletins (B-0004-04, B-0018-04, B-0029-04) were issued regarding claims processing reporting requirements for payors subject to SB 418. TACCP payor members reported that they extended a wide variety of education and outreach efforts to physicians, physician office staff, hospital and ancillary providers, agents and other affected stakeholders about new SB 418 prompt pay requirements. The topics discussed with stakeholders included information such as filing deadlines for electronic and paper claims, eligibility/verification information, expanded hours of member services availability, and prompt pay requirements and penalties. Examples of such outreach and education are presented below:
Payor members also reported the distribution of a variety of educational materials associated with SB 418. For example, payors:
SUMMARY Significant education and outreach has occurred on SB 418 matters with many materials readily accessible through TDI, association and payor websites. The process of educating stakeholders about SB 418 is ongoing, however, and will likely evolve as new issues or educational needs are identified. CHAPTER 3: PREAUTHORIZATION AND VERIFICATION
Over time, health maintenance organizations and issuers of preferred provider benefit plans (payors) have developed systems to control costs and to ensure that proposed care is medically necessary. Physicians and providers have used other systems to determine, prior to treatment, whether payors will provide reimbursement for the services they furnish. Prior to passage of SB 418, payors often required that proposed services be submitted for utilization review which was commonly referred to as preauthorization. Utilization review is described in Insurance Code Article 21.58A, and is a determination of whether proposed services are medically necessary. Providers expressed concern that even after services were determined to be medically necessary, payors sometimes subsequently reversed their initial medical necessity determination, in whole or in part, upon review of medical records for the treatment provided. Also, prior to SB 418, providers routinely telephoned payors as part of an eligibility check before treatment to ask whether a patient´s coverage was in force and to determine the scope of benefits provided. Providers expressed concern that the information received was unreliable and, because the payor´s response was not binding on the payor, it did not guarantee payment would be made. Payors countered that they lacked reliable information from employers as to a patient´s current employment status as well as the employer´s premium payment status. Payors also contended that they cannot guarantee payment of most claims in advance because they have no opportunity to investigate claims to determine if the payor owes the claim. To help remedy these concerns, SB 418 established preauthorization and verification processes that apply to provider contracts that are entered into or renewed on or after August 16, 2003 . SB 418 requires that a payor that uses preauthorization must provide to each contracted provider, not later than the 10 th business day after a request is made, a list of services that require preauthorization. The statute also sets forth preauthorization requirements in addition to the existing utilization review processes, and provides that payors may not deny or reduce payment for a service based on medical necessity unless the provider has materially misrepresented or substantially failed to perform the service. The statute also requires that the payor or its designee provide toll free telephone access during stipulated hours during the week, on weekends and on holidays, to receive and respond to requests for preauthorization. Because of the nature of these requests, qualified clinical staff is also required to be available during these time frames. SB 418 also provided for a verification process by which a provider may receive a guarantee of payment. If verification is issued by the payor, a claim for services rendered within 30 days of the verification may not be reduced or denied for any reason unless the provider materially misrepresented or substantially failed to perform the service. Payors may decline to issue the verification but, under applicable TDI regulations, must give a reason for denial that is specific to the proposed service. Payors are also required to provide toll free telephone access during stipulated hours during the week, on weekends, and holidays, in order to receive and respond to requests for verification. Final rules to implement the verification and preauthorization sections of SB 418, which were developed following extensive discussions with the CCWG and subsequent consultation with the TACCP, became effective October 5, 2003, and may be found at 28 TAC §§19.1703, 19.1723 and 19.1724. Since adoption of these rules, payors have established new units to receive, respond to, and track verifications and preauthorizations. Payors have also developed special materials for training staff in the new processes and have enhanced their computer systems and developed Web-based systems to implement the statute and rules. Commissioner´s Bulletin # B-0017-04, was issued on March 30, 2004 to provide direction and clarification on issues relating to preauthorization and verification. Many payors have created user-friendly websites that provide clear instructions, but providers indicate that not all payor sites disclose clear and specific payor procedures, nor is it always clear how to find the information. DATA REQUIREMENTS FOR VERIFICATION The TACCP discussed the extent of information that the proposed rule required providers to submit in order to request a verification. Payors supported the proposed rule´s verification data requirements and the requirement that the payor confirm the verification in writing. Although the original list contained many more requirements, ultimately, the adopted rule included the 13 listed below:
The adopted rule allows a payor to give a telephonic verification response which must be followed by the written decision within three days. RESPONSE TIMES FOR VERIFICATION The TACCP also explored the issue of response times allowed for a payor to respond to a provider´s verification request. The time frames in the proposed rule were patterned after the time frames set forth in Insurance Code Article 21.58A for utilization review determinations. Providers contended that the process be instantaneous and handled over the telephone. Providers also expressed concern that a delay in receiving a verification or guarantee of payment could delay elective, non-emergency patient care. Some providers indicated that services would be provided without verification. Payors countered that, since verification is a guarantee that the insurer or HMO will pay the claim, they cannot issue a verification without sufficient time to conduct a basic investigation of the facts. The rules, as adopted, shortened the initially proposed 15-day review period to "without delay, but not later than 5 days, with 24 hours for concurrent hospitalization and 1 hour for post stabilization of emergency care." WEEKEND AND HOLIDAY TELEPHONE COVERAGE Payors commented during TACCP meetings that the required weekend and holiday hours for the preauthorization and verification toll-free telephone lines were onerous. Payors indicated that staffing the telephone lines with appropriate personnel for these types of determinations was unnecessarily burdensome when compared to the infrequency of calls for preauthorization and verification during the weekend and on holidays. As part of the TACCP discussions, payor members of TACCP were invited to report on the volume of after-hour, weekend, and holiday calls they have received since implementing the requirements. Of the 11 payors who provided information on after-hour, weekend, and holiday calls, 5 indicated they had received no such calls since implementing SB 418. The remaining responses are as follow:
Providers indicated that the weekend and holiday hours were necessary and that the frequency of such calls would increase as providers become more informed and experienced with the opportunity and procedures for preauthorization and verification. DENTAL AND VISION PLANS The TACCP heard comments related to preauthorization and verification from carriers that provide dental or vision benefits exclusively to their members. Commenters indicated that because dental and vision benefits are not typically delivered by providers outside of regular business hours, it would not be necessary or practical to impose verification and preauthorization processes on such carriers. Commenters indicated the requirement for the non-business and weekend hours availability of staff via a toll-free telephone line would result in an unnecessary expense and that the department´s rules should therefore provide for an exception for these benefits. The department rules, however, may not exempt these carriers from the preauthorization and verification procedures because current state law does not exempt them. A change to the statute is the best route to establish such an exemption. SUMMARY Payors have established new units to receive, respond to, and track verifications and preauthorizations in compliance with SB 418. They have also developed special materials for training staff in the new processes and have enhanced their computer systems and developed web-based systems to implement the statute. Data received at TDI indicates that from the period September 2003 through June 2004, 28,269 verification requests were received and 16,297 verifications were issued. The most common reasons for declining verification were due to premium payment cycles that prevented verifying eligibility for a 30 day period; policy deductibles, specific benefit limitations or annual benefit maximums; and benefit exclusions. Utilization data received at TDI indicates low usage of the after-hours and weekend telephone coverage to date. Dental and vision plans have expressed concern that the preauthorization and verification requirements are not necessary for their pattern of delivering services; however, a statutory change would be necessary to exempt them from the requirement. CHAPTER 4: CODING AND BUNDLING
The TACCP is charged with advising the Commissioner " on technical aspects of coding of health care services and claims development, submission, processing, adjudication, and payment." In addition, the TACCP is to " advise the commissioner with respect to the implementation of the standardized coding and bundling edits and logic." To better understand coding and bundling, TDI invited a panel including representatives from the major coding software vendors, a coding manager from a physicians´ billing service, and an expert on the Health Insurance Portability and Accountability Act (HIPAA) and the electronic submission of claims, to give presentations and participate in a panel discussion at the November 12, 2003, TACCP meeting. In addition, the Texas Medical Association (TMA) representative on the TACCP distributed copies of the American Medical Association´s (AMA) informational packet about coding. The panelists included:
OVERVIEW Coding, or the use of standard alphanumeric and numeric codes on an insurance claim, serves several purposes:
Reimbursement for physician services is a function of three interrelated factors:
While coding is used to describe the service or procedure performed by the physician or provider on a claim form, two other activities affect reimbursement. Billing is the submission of claims from physicians and providers to payors for payment of services rendered. Pricing is the fee a physician or provider sets for a particular service. If a physician or provider participates in a third party payor´s network, then pricing is pre-established through a contract. If a physician or provider participates in Medicare, then reimbursement is determined by rates established by Medicare. Payors use electronic adjudication systems to process and pay claims. These systems are proprietary and have been developed over time to reflect the payor´s adjudication criteria. They are based on complex computer programs that may include the use of audit checks, recognition/non-recognition of modifiers, and policies for bundling, unbundling, downcoding, and upcoding. CODING STANDARDS The HIPAA Administrative Simplification Act provisions set out standards for certain electronic transactions. HIPAA has designated a standard format for exchanging data among physicians, providers, clearinghouses, and payors. HIPAA also adopted certain code sets as standards. Although payors are required to use the national standard code sets, payors are also allowed to continue their current adjudication processes; that is, they can continue to process claims using their proprietary software including the use of audit checks, code editing, bundling, and other tools. The most common and universally accepted codes used to document services provided by physicians and providers are contained in the Current Procedural Terminology (CPT) developed and maintained by the AMA and Healthcare Common Procedure Coding System (HCPCS) developed and maintained by the Center for Medicare and Medicaid Services. CPT and HCPCS codes were selected as a HIPAA standard code set for procedures and services. CPT and HCPCS manuals contain guidelines for correct coding including methods for assigning the appropriate level or intensity of a service (for example, the difference between "Level III" Office Visit Code 99213 and a "Level IV" Office Visit Code 99214). CPT and HCPCS coding and coding policies are so technical that an industry has arisen to assist providers in the technical aspects of coding. Accurate coding is essential to assure accurate billing for services rendered. CPT and HCPCS provide a method of communicating variable situations encountered in the diagnosis and treatment of patients. CPT and HCPCS also provide for a series of modifier codes to be used in addition to the primary codes. CPT and HCPCS modifiers are used when a physician or provider needs to communicate that the listed service has been altered by some specific circumstance but has not changed in its definition. For example, a physician may need to indicate that a service has been increased or decreased, performed bilaterally, performed more than once, or performed by more than one physician. Modifiers are two-digit alphanumerics appended to five-digit CPT or HCPCS codes to indicate an unusual circumstance that will affect reimbursement for the service or procedure. The service or procedure remains the same, but the circumstances of its delivery were altered. HIPAA designated another standard coding system for use in addition to CPT, the International Classification of Diseases, Ninth Revision, Clinical Modification or ICD-9CM. ICD-9CM is used to record diagnoses, signs and symptoms, and complaints. ICD-9CM also indicates the medical necessity of an encounter or procedure. BUNDLING AND OTHER PRACTICES Vendors including Ingenix, IntelliClaim, and McKesson sell software used by payors in conjunction with a payor´s processing system to process and pay healthcare claims. The software products themselves use the standard code sets CPT and ICD-9CM as well as other standard code sets. However, the software is highly sophisticated so that it can be customized by the payor to suit their particular adjudication criteria. Bundling occurs when the payor pays two or more procedure codes reported by the physician or provider under only one procedure code. While the physician or provider has indicated that several separate services have been performed, the payor may reimburse only a single service on the basis that the other billed services are included in payment for the single service. Payment policies like this vary considerably among health plans. For this reason, the AMA believes that bundling is inconsistent with its standardized CPT guidelines. Bundling of services has an enormous impact on physician reimbursement and is the basis of many disputes between physicians and health plans. Unbundling is defined in the National Correct Coding Policy Manual (an initiative by the federal Center for Medicare and Medicaid Services (CMS)), to promote national correct coding methodologies and to eliminate improper coding. For Medicare, unbundling is defined within the manual as "the billing of multiple procedure codes for a group of procedures that are covered by a single comprehensive code." Two types of unbundling are most prevalent:
For example, when multiple patient services are reported by the same physician on the same date of service, there may be a perception of unbundling when, in fact, the services were performed under separate and distinct circumstances. Modifier -59 is used to identify procedures and services that are not normally reported together, but are appropriate under the circumstances. This may represent a different session or patient encounter, or a different procedure not ordinarily encountered or performed on the same day by the same physician. Because insurance payors, including Medicare carriers, cannot identify these situations based solely on CPT code assignment, the -59 modifier was established to permit unrelated services to bypass correct coding edits. Upcoding occurs when a provider wishes to communicate a more intense level of service and to support other codes on the claim. Another type of upcoding occurs when a provider lists multiple CPT codes on a medical claim in an effort to describe each service component rendered to an insured, when the provider could have used more all-inclusive or "global" codes to describe the services.
Downcoding occurs when a payor denies or changes certain codes submitted on a medical claim. This reduces costs to the carrier, but may result in a dispute between the provider and the carrier as to whether the changes accurately reflect the services rendered to an insured.
All parties agree that coding errors resulting in either upcoding or downcoding are inevitable because of the complexity of the CPT coding system. However, if upcoding is done intentionally by a physician or provider to generate higher reimbursement, then it could be viewed as unethical and as an indicator of potential fraud. If downcoding is done intentionally by a payor, it may result in a payment to the provider that is less than the rate stipulated in the contract, which may be a deceptive trade practice. Furthermore, intentional unsupported downcoding by a payor may constitute a violation of the contract between the physician or provider and the payor. The AMA recently decided to study the feasibility of developing a national standard for using codes, code combinations, modifiers and bundling. The study, ordered by the AMA in June 2004, would examine a national standard that is consistent with CPT guidelines and could be used by all commercial and government payors. Providers feel that such a standard could help address the controversy over bundling and downcoding. SUMMARY Physicians and providers wish to be paid correctly and timely for their services. Payors wish to pay claims correctly and timely. All parties agree that correct coding is essential to assure correct reimbursement. The controversy seems to arise from the fact that while coding standards in the health care industry exist in the sense that there is agreement as to what specific CPT or ICD-9CM codes mean and how they should be used to describe services on a claim, there is no national standard as to how payors process and pay claims based on the standard codes. Although the contracts between providers and payors establish parameters for payment, disagreement may still occur between the parties over whether coding and bundling are clinically justifiable and whether the adjudication criteria used by payors are appropriate and fair. Physicians and providers have indicated their reimbursements are controlled by "black box" technology about which they have no information. Given this situation, physicians and providers say they do not know what they will be paid. As a result, their income streams can be unpredictable. Payors say they have a responsibility to pay all clean claims efficiently and correctly. In order to do this, they must rely on the coding presented on the claim form and use audit checks and system edits to review the coding. In Texas, physicians and providers who contract with HMOs and insurers offering preferred provider health benefit plans have the right, under SB 418 and 28 TAC §3.3703 and 11.901 to request from payors certain claims payment information including fee schedules, payment methodologies, and coding and bundling rules or processes. The payors must include information such that a person with sufficient training could determine what the physician´s or provider´s rate of reimbursement for services would be. Disclosure of claims payment information is one tool Texas physicians and providers can use to determine if they are being paid according to the contract they signed with a given payor. Further details about this requirement and its impact are included in the Chapter 5 entitled Disclosure of Claims Payment Information. CHAPTER 5: DISCLOSURE OF CLAIMS PAYMENT INFORMATION
DISCLOSURE RULES On September 18, 2002, the department adopted rules that require health maintenance organizations (HMOs) and insurers that issue preferred provider plans (collectively "carriers") to disclose " all information necessary to determine that the provider is being compensated in accordance with the contract," including fee schedules, coding methodologies and bundling processes, within 30 days from receipt of a request. (See 28 TAC §§3.3703 and 11.901.) The rules also required carriers to provide 60 days notice of any changes to the information. Consistent with SB 418 and after TACCP input, the disclosure rules were amended to require that the carrier give 90, rather than 60, days written notice prior to instituting any changes to the claims processing information. In addition, the rules required that the carrier not make retroactive changes to any of the information provided; and, if software is used, the carrier must identify the publisher, product name and version of such product. The rule revisions also added "other business operations" and "communications with a governmental agency involved in the regulation of health care or insurance" to the list of acceptable uses of disclosed information. Further, the rules allow a provider that receives information under the disclosure requirements to terminate its contract with a carrier on or before the 30 th day after the date the provider receives the information. Pursuant to SB 418, the amended rules also require that disclosed rules and processes relating to coding and bundling be consistent with nationally recognized and generally accepted bundling edits and logic and clarify that the disclosure requirements may not be waived, voided, or nullified by contract. Finally, the amended rules allow a carrier to require a provider to retain in its records updated information concerning a patient´s other health benefit plan coverage. CONTINUING ISSUES RELATED TO FEE SCHEDULE DISCLOSURE Since the amended rules were adopted in September 2003, carriers have informed TDI that they have not received many requests for disclosure from providers. However, carriers indicated that, upon receipt of requests, they provide the information timely to requesting providers using various methods, including regular mail, e-mail, and by referring the requestor to information on web pages. One entity that provides claims payment information for some payors reported that approximately every 30 seconds someone uses a tool on its web page to look up sources for edits. A large carrier advised the department that it has implemented a reimbursement information site on its provider page, which provides a tool for providers to request specific contracted fee and coding and bundling information and which also provides information regarding the carrier´s general claims processing policies. The carrier included instructions on how to access the site in its first quarter 2003 provider newsletter. For those providers that do not have access to the Internet, the carrier has a local contact to assist providers in obtaining copies of this information. (Edits, bundling and downcoding are discussed in Chapter 4.) Some providers indicated that when they do request the information, it is not provided timely or at all. Providers also reported that some of the notices of changes to claims payment information they received were incomplete or "sample" notices that direct the provider to request information specific to the provider´s practice. In addition, at least one provider indicated a preference to receive the information required by the statute and rule prior to contracting rather than afterwards. TDI has requested information from carriers concerning the number of requests for information they have received. Since 2002, one large carrier reports that it has received only 33 requests for fee schedules (22 in 2002, 11 in 2003 and none through March 2004) and 790 requests for bundling information (25 in 2002, 590 in 2003, and 175 through March 2004). The same carrier received 327 requests for related medical policies (18 in 2002, 236 in 2003 and 73 through March 2004.) TDI also requested that providers who do not receive information in accordance with the requirements of the rule file complaints with TDI. Since December 2003, TDI has received three complaints from providers on this issue. Because of complaints concerning some carriers´ change of information notices, on March 30, 2004 , TDI issued Commissioner´s Bulletin number B-0017-04. This bulletin reminds carriers that the rules require them to send to the provider the specific changes to the claims payment policies, procedures and information that will affect the payment to be made under the contract. The bulletin states that while a carrier may meet its obligation under the rules by giving notice and providing a source, such as a link to a Web page, where the provider can obtain information concerning the applicable change(s), the provider must be able to access the information without any additional request to the payor. SUMMARY TDI and the TACCP have worked together to implement the provisions of SB 418 to continue to ensure that providers have all the information necessary to enable them to determine the payment to be made under the contract. By providers making use of the rules´ provisions and requesting all necessary information from carriers, and by carriers providing this information to providers timely, providers are better able to confirm that their payments are consistent with the terms of their contracts. TDI will continue to foster these necessary practices by informing all parties of the provisions in the rules and addressing any complaints as they arise. CHAPTER 6: IDENTIFICATION CARDS
SB 418 includes a provision that requires HMOs and insurers offering preferred provider benefit plans to include on any identification card issued to enrollees or insureds a designation that will allow physicians and providers to determine whether such health benefit plan is regulated by the TDI. Carriers are not required to issue identification cards to enrollees or insureds, except that identification cards are required for health plans that include a pharmacy benefit. The language in SB 418 does not require that carriers issue identification cards. Instead, SB 418 details certain requirements for identification cards that carriers choose to issue. The CCWG discussed the idea of a symbol on identification cards that would allow physicians and providers to determine which patients were covered by a health benefit plan regulated by TDI. The designation would give important information to physicians and providers concerning to whom complaints should be directed and whether prompt pay requirements apply. SB 418 subsequently required the inclusion of such a designation on any identification cards that are issued by a managed care plan that is regulated by TDI. Pursuant to the department´s rules, identification cards issued after January 1, 2004 , must include a designation that the plan is regulated by the department and the first date that coverage became effective under the health plan, or a toll-free telephone number that will allow physicians and providers to obtain that information. RULE REQUIREMENTS TACCP discussions on implementation of the SB 418 identification card requirements were focused primarily on the type of symbol to be used in order to identify a TDI-regulated health benefit plan. Providers emphasized the need for something simple and easily recognizable. Carriers commented on the costs of changing identification cards and the need for a delayed implementation date. The department first implemented the identification card requirements of SB 418 through the adoption of emergency rules on August 16, 2003 . The rules required a symbol to be included on the front of the identification card. The symbol was a star with the letters "TDI" in the middle of the star. The emergency rules required compliance for health plans issued or renewed on or after January 1, 2004 . The department heard numerous comments from carriers during the subsequent TACCP meetings concerning the cost and difficulty in implementing the requirements for a symbol on identification cards. Carriers also requested that a non-Texas specific symbol be allowed so that a carrier that used a national vendor for printing cards could include a symbol that would serve a similar purpose in other states. Physicians and providers continued to stress that the symbol needed to be simple and recognizable. The department consulted with the TACCP prior to the proposal and adoption of the letters "TDI" or "DOI" being included on the front of the identification card. The various members of the TACCP agreed that the choice in letters served the needs of physicians and providers as well as carriers. The Department adopted the final rules relating to identification cards on January 12, 2004 . The rules require compliance for health plans issued or renewed on or after February 1, 2004 . The emergency rules were withdrawn effective February 1, 2004 , so that there was no gap in time during which identification card requirements were not in place. Although the effective date for the final rules references health plans issued or renewed on or after February 1, 2004 , the emergency rule provisions relating to identification cards applied to health plans issued or renewed on or after January 1, 2004 . This results in identification card requirements beginning in January 2004 and a transition to the final rules on February 1, 2004 . Any cards properly issued with the star symbol during or before January are deemed to be compliant with the final rules. A small number of carriers that have voluntarily reported regarding implementation of the identification card rule requirements indicate that members covered under new or renewed plans are receiving compliant identification cards. Those carriers reporting indicate that compliant identification cards are being issued only upon plan issuance or renewal instead of issuing new identification cards to all existing members. SUMMARY The CCWG began discussing the idea of using identification cards as a method for distinguishing between plans that were or were not required to comply with Texas´ prompt pay requirements. SB 418 required identification cards to include information relating to the first date of coverage under the plan and indicating that the plan is regulated by the Department. The Department consulted extensively with the TACCP to successfully implement these requirements in a manner that was simple and recognizable for physicians and providers and as efficient as possible for carriers. Carriers issuing identification cards for health plans issued or renewed on or after January 1, 2004 , must include the information required by the Department´s rules.
While SB 418 applies to all insurers offering preferred provider benefit plans and HMOs, Texas law prevents insurers from offering preferred provider benefit plans with dental benefits. As a result, SB 418 applies to dental coverage only when offered through an HMO, including single-service HMOs offering only dental benefits. However, the SB 418 requirements relating to specific claims forms, both electronic and non-electronic claims, do not appear to allow specifically for claims for dental care services. Therefore, dentists that contract with HMOs offering dental benefits did not have a method for submitting a clean claim and availing themselves of the benefits of prompt pay. Payors brought this issue to the TACCP in order to properly address the manner in which dental claims should be handled under SB 418. DENTAL CLAIMS STANDARD Following the initial TACCP discussions related to the department´s implementation of SB 418, the TACCP heard comments from HMOs concerning the applicability of SB 418 to dental claims. Members generally agreed that SB 418 applied to HMOs offering dental care services, and that dentists needed a method for submitting a clean claim. The specific claim forms referenced in SB 418 and the department´s rules containing clean claim elements were inconsistent with dental care services and would not allow for submission of clean dental claims. After discussions among members, the department proposed that amendments to the prompt pay regulations could provide for a new set of clean claim elements specifically for dental claims. In these discussions, the TACCP heard from representatives of the National Association of Dental Plans (NADP) and the Texas Dental Association (TDA). The Department worked closely with the NADP and TDA and consulted with the TACCP in adopting amendments to the prompt pay regulations. The amendments, adopted on January 12, 2004 , added a new section to the elements of a clean claim that specifically addressed dental claims. The amendments also addressed internal references within the regulations to clarify that the regulations apply to dental claims. SUMMARY Dentists providing dental care services to patients covered by an HMO did not have a method to submit a clean claim and take advantage of SB 418. The issue was brought to the attention of the TACCP, who heard from the NADP and TDA. As a result of the TACCP discussions, the Department adopted amendments to the prompt pay regulations that established clean claim elements for dental claims. CHAPTER 8: ERISA AND PROMPT PAY
The Employee Retirement Income Security Act (ERISA) is a federal statute that, among other things, details the responsibilities of employers that provide employee welfare benefit plans ("ERISA plans") that may include a health benefit plan to employees. ERISA generally preempts state laws that relate to these plans. However, state laws that regulate insurance are saved from preemption so long as they do not deem an ERISA plan to be an insurer. Therefore, states may regulate an insurer from whom the plan purchases coverage (known as fully-insured plans), thus indirectly impacting such plans. If an ERISA plan does not purchase coverage from an insurer, but instead takes on the risk of paying employees´ claims for health benefits, such plans are referred to as self-funded ERISA plans. Self-funded ERISA plans often contract with a third party administrator (TPA) to oversee the administration of the plan. TPAs are often licensed insurers or HMOs that either offer coverage or administer services to an employer. Under self-funded ERISA plans´ setup, the employer acts as a funding mechanism for the benefits, while a TPA may take on the responsibility for plan design, establishing provider networks, and/or claims adjudication. Although the result is a plan that may appear to insureds and providers like an insurance arrangement, the state may not regulate a self-funded ERISA plan, even if administered by a licensed insurer or HMO. Self-funded ERISA plans make up an estimated 60-70 percent of the health plan market. The state´s efforts at resolving physician and provider payment issues through prompt pay legislation have not reached the self-funded plans. The TACCP´s discussions relating to ERISA have focused on how physicians and providers can better identify ERISA plans (see Chapter 6 of this report entitled Identification Cards) and whether state prompt pay statutes and regulations should be extended to better regulate this large segment of the market. EXTENDING PROMPT PAY TO ALL EMPLOYER PLANS The TACCP discussions relating to ERISA focused on ERISA´s preemption of state laws affecting self-funded employer-sponsored health plans. Physician and provider members of the TACCP suggested that TDI extend the prompt pay provisions of SB 418 to licensed carriers acting as TPAs to self-funded ERISA plans. The department´s long-standing interpretation of the issue, based upon consultation with the Office of the Attorney General, is that TDI may not regulate self-funded ERISA plans and instead may only regulate the carriers from whom a fully-insured ERISA plan purchases coverage. Inclusion of a TPA that is also a licensed carrier does not change this interpretation. The TACCP discussed two recent court cases related to ERISA preemption: Kentucky Association of Health Plans v. Miller and Baylor v. Arkansas Blue Cross Blue Shield . While neither case appears to immediately affect Texas ´ prompt pay laws, some members of the TACCP view the cases as providing potential for increased state authority in regulating self-funded plans. In KAHP v. Miller , the United States Supreme Court changed the test for application of the ERISA preemption savings clause and therefore changed the scope of state laws that may be saved from preemption under ERISA. After the decision in KAHP v. Miller , in order for a state law to be saved from preemption by the savings clause, the statute must be "specifically directed toward entities engaged in insurance" and must "substantially affect the risk pooling arrangement between the insurer and the insured." Language in a footnote to the Court´s opinion has raised questions regarding whether state laws that regulate insurers engaged in purely administrative functions (as opposed to risk-bearing) for self-funded ERISA health plans may also escape preemption under the new savings clause test. If so, a state could arguably extend the requirements of prompt pay to self-funded plans that use TPAs that are also insurers. However, this theory, derived from only the footnote, would represent a major shift in the interpretation of ERISA preemption law. Another method that physicians and providers, as private litigants, have recently used in attempting to extend prompt pay to ERISA plans is to argue that the state´s prompt pay laws do not relate to the ERISA plan because the laws affect only the relationship between the carrier and the physician or provider. Because the plan sponsor and plan participant relationship remains unaffected, ERISA should not preempt the state law. In Baylor v. Arkansas Blue Cross Blue Shield , Baylor University Medical Center (Baylor) filed suit against Arkansas Blue Cross Blue Shield (ABCBS) for breach of contract and late claims payment under the Texas Insurance Code. ABCBS sought to remove the case to federal court, asserting that the claims were preempted by ERISA. The federal district court analyzed the prompt pay claim in relation to ERISA´s civil enforcement provision and concluded that the enforcement provision does not preempt Baylor´s prompt pay claims because the health plan is only peripheral to the obligations to the providers under the prompt pay statutes. The case was not removed to federal court and is still being litigated in a Dallas County court. The case does not involve a self-funded plan and the issue of ERISA´s conflict preemption provisions remains undecided. Only the question of removal to federal court under the civil enforcement provisions of ERISA has been decided. Some of the physician and provider members commenting on this case during a TACCP meeting concluded that the case should provide adequate support for the Department to move forward in enforcement of Texas ´ prompt pay statutes against self-funded ERISA plans. The department´s response during the meeting included the department´s acknowledgement of the potential import of the case. The TACCP was informed that the department consulted the Office of the Attorney General regarding the case and concluded that the case had no effect on the current interpretation of Texas ´ prompt pay statutes. The specific references to insurers and HMOs limits the applicability of the prompt pay statutes to licensed insurers and HMOs that are operating pursuant to their authority to offer preferred provider benefit plans and HMO evidences of coverage and not to a self-funded plan´s third party administrator operating pursuant to Chapter 21 of the Insurance Code. While the case is a signal that there may be an avenue for extending the requirements of prompt pay, the case has not at this time decided all matters related to this issue. SUMMARY TDI has historically regulated employer plans only indirectly through the plans´ purchase of health benefits from a licensed insurer or HMO. This practice is consistent with the preemption provisions of ERISA, which preempts state laws that relate to an ERISA plan, but saves from preemption state laws regulating insurance so long as the state law does not deem the ERISA plan to be an insurer. Self-funded ERISA plans comprise a large portion of the health benefit plan market and are not required to comply with Texas ´ prompt pay laws. Possible changes include requiring licensed carriers acting as third party administrators for self-funded ERISA plans to comply with prompt pay requirements. Although recent cases suggest a possibility for expansion of prompt pay requirements to self-funded ERISA plans, Texas ´ current prompt pay statutes do not apply to such plans. CHAPTER 9: HEALTH CARE CLAIMS FRAUD As part of its discussions, the TACCP held a meeting on May 26, 2004 , to consider health care fraud-related issues in the context of SB 418 requirements. The session included presentations by a panel comprised of representatives of the Texas Hospital Association (THA), Texas Medical Association (TMA), Texas State Board of Medical Examiners (TSBME), National Health Care Anti-fraud Association (NHCAA), and the Texas Department of Insurance´s (TDI) Associate Commissioner for Insurance Fraud. The full committee participated in discussions following the presentations. The issues discussed follow. MAGNITUDE AND TYPES OF HEALTH CARE FRAUD There are no state-specific estimates of the costs associated with health care fraud in Texas , and carriers are not required to report such data to TDI. National health care fraud estimates vary; a panelist in the session mentioned above, representing the NHCAA, indicated that his organization estimates fraud at $54 billion, or 3 percent, of all health care expenditures. The panelist further indicated that the U.S. Government Accounting Office suggests that health care fraud could reach 10 percent of expenditures, or about $180 billion nationally in 2004. The type of health care fraud primarily discussed in the TACCP session involved actions associated with billing including billing for services not rendered, upcoding, and fee splitting among providers (e.g., for unnecessary referrals). FRAUD PREVENTION AND INVESTIGATION Fraud prevention and investigation activities are conducted by a variety of public and private organizations. Several public entities play a role. TDI´s Fraud Unit, for example, is a law enforcement entity that receives referrals and conducts investigations about a wide variety of insurance fraud. If appropriate, the Fraud Unit refers cases to District and U.S. Attorneys for criminal prosecution or to regulatory agencies such as TSBME, the Board of Nurse Examiners, the Texas State Board of Pharmacy or the Board of Chiropractic Examiners. The Fraud Unit received 89 reports involving health care providers in fiscal 2002 and 71 such reports in fiscal 2003. In this two-year period, 10 cases were referred to regulatory agencies. To date, none of the cases involved criminal actions and there have been no indictments. Most reports were determined to involve disputed coding. The Department issued a Commissioner´s Bulletin (B-0057-04) in July 2004 that addresses requirements in the Insurance Code for reporting suspected insurance fraud and the governmental and non-governmental agencies to which fraud may be reported. The Insurance Code, Article 1.10D Sec.4 (2) directs each person, including insurers, to report suspected fraud that has been or is about to be committed to a local, state, or federal law enforcement authority. Fraud may be reported to TDI via the Internet at www.tdi.state.tx.us/fraud/ or toll free at 1-888-327-8818. The TSBME uses a complaint-driven process for investigating persons licensed by that agency. Anyone may file a complaint and, if TSBME opens an investigation, most are completed within 180 days. The Texas Committee on Insurance Fraud, a cooperative association of insurers, law enforcement agencies, consumer members, TDI´s Fraud Unit and national anti-fraud organizations meet voluntarily to communicate and coordinate their anti-fraud efforts. The goal of the Committee is to reduce insurance fraud, encourage effective prosecution of those who commit fraud, and provide education to the public about the impact of insurance fraud. This Committee is also working to develop legislation to fight fraud. The TACCP also discussed the Health Facilities and Licensure Division of the Texas Department of Health and whether certain suspected fraud cases may fall within that entity´s purview. At the time of this writing, Committee members are gathering additional information regarding the existing and possible roles of this entity. TMA and THA also conduct programs that help providers comply with regulatory requirements. Both TMA and THA make referrals to the TSBME when an issue is identified that requires regulatory review. Finally, the insurance industry invests significant resources in identifying and investigating fraud. By state law, insurance carriers must develop an anti-fraud plan, but are not required to submit them to a regulatory agency. One payor indicated that the cost to investigate a potentially fraudulent claim averages $5,000 and that it typically takes 18 months to resolve the case. HEALTH CARE FRAUD ISSUES The TACCP discussed a number of issues and concerns associated with fraud. In general, providers expressed concerns about the possible interpretation of unintentional errors as fraud. Providers are concerned that the complexity of coding and the varying provisions in contracts create differences in billing that might be seen as upcoding or overbilling, when they may actually reflect a coding error or a billing variance related to contract provisions. Payors, on the other hand, are concerned that a reduction in payment from the amount billed due to reasons such as inaccurate coding may be viewed as downcoding or inappropriate underpayment. Carriers expressed concerns that SB 418 requires them to authorize payments in certain cases where fraud is suspected when the payment should actually be at least temporarily withheld until an investigation is completed. The process of documenting an intent to defraud often requires the confirmation of a pattern of fraudulent activity. Carriers indicate that they should not be subject to prompt pay penalties for delaying payments on cases where fraud is being investigated. Some affected parties believe that claims involving suspected fraud were never intended to fall under the requirements of SB 418, while others indicate that the lack of a clear exception for such claims leaves the issue open to question. Specific issues regarding payments when fraud is suspected are discussed below. Time Lines for Claims Payment Payors suggested that SB 418´s 180-day time period to audit a claim, even if combined with possible additional days allowed for carriers to make one information request of providers, does not give adequate time to process a fraud investigation to completion before they become obligated to make payment. One payor indicated that claims may meet the criteria for a clean claim set out in law and rule, thereby requiring payment of the claim within SB 418 time frames. One member expressed concern that paying a claim under such a circumstance could create a conflict with a carrier´s fiduciary responsibility. Providers indicated that payors should not be subject to SB 418 time lines unless the claim meets all criteria for a clean claim, including accuracy . A fraudulent claim would not be accurate. Providers indicated that SB 418 was aimed at payment of legitimate claims and not intended to inhibit valid anti-fraud activities. Payment of Claims Where Verification Has Been Granted Payors expressed concern that the verification process created by SB 418 requires carriers to pay a claim for which they have issued a verification, even if they suspect the claim is fraudulent. Providers suggest, however, that a verification is granted under a presumption that nothing about the associated claim will be fraudulent. If the claim is fraudulent, carriers should be able to use remedies currently available to them. If the provider misrepresented or failed to perform the proposed services, no payment is due. Tools and Remedies for Addressing Health Care Fraud The TACCP heard a variety of opinions on possible remedies for addressing fraud. At the Committee´s request, TDI prepared and distributed to the TACCP a list of available tools and remedies for members´ review. Providers generally indicated that the industry should rely on existing legal and regulatory remedies along with creative industry solutions to deal with any issues of fraud. Providers indicated the intent of SB 418 was to address claims payment issues, not fraud. Providers suggest that under certain circumstances, for example, carriers may terminate a contract or recover claims paid if the claim involved material misrepresentation. Payors, however, indicated that they experience considerable difficulty in retroactively recovering inappropriately paid claims, and that SB 418 does not include penalties for providers who file fraudulent claims, whereas it does require penalties for carriers when claims are not paid timely. One TACCP member representing a carrier suggested that TDI could adopt a rule change whereby a payor could suspend payment for fraud investigation given that a time limitation would be established by which the payor would be required to refer the case to an appropriate criminal or regulatory agency. In circumstances where fraud could not be substantiated by the allowed time frame, a payor would be required to pay the claim and applicable penalties to the provider. Payors expressed concerns about the need, at times, to keep an investigation confidential until adequate information is available to confirm suspected fraud. SUMMARY Parties affected by SB 418 differ on whether the legislation impedes a carrier´s ability to deal with suspected fraudulent claims and whether any action is needed to clarify conditions as to when payment may be delayed or withheld during a fraud investigation. APPENDIX A: PROVIDER CLAIMS DATA COLLECTION JANUARY 2001 THROUGH AUGUST 2003
The TDI Provider Ombudsman Team initially identified 23 insurers and HMOs with the highest number of provider complaints. In May 2001, TDI requested data about claims payments to physicians and providers for the first quarter of calendar year 2001. The Provider Ombudsman and top TDI executives met with representatives from these carriers to reiterate TDI´s expectations regarding prompt payment and put the carriers on notice regarding possible regulatory actions.
In August 2001, TDI requested second quarter data from the first group of 23 carriers. In addition, TDI identified a second group of 17 carriers for review and included them in the second quarter data call. Then TDI identified a third group of 12 carriers and included them in the third quarter data call in November 2001 . Fourth quarter 2001 data was requested from the 52 carriers in January 2002. These companies continued to report data each calendar year quarter through August 2003. As companies merged or left the market, the number of reporting companies dropped to 47. A table summarizing the data is included at the end of this section. Reporting Companies First Group
Second Group
Third Group
TABLE 7: HB 610 Data Summary January 2001 through August 2003 Note: Some carriers reported data that includes all claims, while others reported only clean claims.
Source: TDI HB 610 Provider Claims Data Quarterly Reports January 2001 though August 2003 For more information contact: Last updated: 05/21/2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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