|
|
|
|
|
HMO Prompt Payment Defineable or an Oxymoron?
An overview of what family physicians need to know to combat late HMO payments.HMO “prompt payment” – can we define it? Yes, but the reality shifts depending upon the type of coverage that your patient carries. Most states have legislation and/or regulations that define HMO prompt payment.
Typically, HMOs are required by state law to pay a “clean claim” within 15 to 45 days, depending upon the state. Pennsylvania, for example, requires payment within 45 days, while Georgia allows health plans 15 days to pay clean claims.
Federal payors, such as the Medicare and Medicaid programs, have their own prompt payment rules, and federal law relating to ERISA may protect HMOs acting in certain capacities as agents of employer health benefit plans from having to meet prompt payment requirements established by state insurance law.
As often happens in our fragmented healthcare system, a provider cannot know whether specific prompt payment requirements will apply to a particular patient’s bill without understanding the type of coverage carried by the patient.
State prompt payment laws typically require that a set amount of interest be paid on clean claims that are paid beyond the established timeframe. The failure of an HMO to pay on time, and to include required interest when paying late, constitutes a violation of state law.
Nevertheless,
experience around the country has indicated that such occurrences
are not unusual. Two avenues have become recently popular
for reigning in this behavior.
State
Action
First, states have begun to be more aggressive in dealing with non-compliant
HMOs. State insurance regulators have issued fines to wayward HMOs in states
such as Georgia, New York, New Jersey, Maryland, Texas, and Florida. In some
cases, the fines have run into the hundreds of thousands of dollars.
In particular, one large fine issued by Maryland was based upon the failure of an HMO’s payment system to routinely include interest payment on late claims. Other states, such as Connecticut and New Mexico, have warned HMOs of intended aggressive enforcement of prompt payment laws, and some have required HMOs to self-report their success, or lack thereof, in meeting legal requirements.
It is worth noting that prompt payment laws are generally applicable not only to HMOs, but also to their delegated subcontractors. Enforcement action in Maryland specifically referenced the HMOs’ responsibility to ensure that their subcontractors pay claims within the requirements of the law.
One issue that complicates state enforcement is determining whether claims are “clean.” On the theory that payors may “create” issues with claims in order to delay payment, 12 states, including Pennsylvania, have attempted to clarify their prompt payment laws in order to eliminate undue delay.
Provider
Action
A second avenue of redress on the increase is private action. For example,
the American Medical Association and medical associations in Georgia and California
have sued HMOs that were not complying with prompt payment requirements. To
date, medical associations from Florida and Texas have joined the suit.
Additionally, local associations, such as the Texas Medical Association, have passed resolutions authorizing the participation in such suits, when warranted. Provider cash flow problems have increased frustration, and many providers do not want to rely on state action, alone, to resolve the issue.
Federal
Programs
Section 1876g(6)(A) of the Social Security Act requires prompt payment under
Medicare risk-sharing contracts. The Secretary of DHHS is authorized to enforce
this requirement, and is empowered to fine HMOs that are non-compliant. Federal
law requires that 90 percent of clean claims be paid within 30 days, and provides
for interest payments on late payments.
Section 1932(f) of the Social Security Act addresses prompt payment under Medicaid managed care arrangements. The Medicaid rule mirrors the Medicare rule, but does not apply if the provider and the managed care organization “agree” to an alternate payment schedule. This raises a troubling issue, due to the likely disparity in bargaining power between an HMO and most healthcare providers.
ERISA
Exemption
One major problem that healthcare providers have with protections enacted in
state insurance laws is that such laws typically do not apply to employer health
plans that are self-funded, and therefore, ERISA-exempt.
An HMO that is managing such a plan (as opposed to directly providing “insurance” benefits to employees) is not going to fall under state prompt payment requirements. This “loophole” has been under discussion at the congressional level for several years, and only a change in federal law can remedy the situation.
As a general proposition, increased regulatory enforcement and provider-brought civil actions appear to be having an impact on HMO practices in the “prompt payment” area. It is likely that only continued pressure will result in a long-haul fix, and, unless federal law is changed in the ERISA area, there will continue to be many healthcare “payors” that do not need to comply with well-meant state insurance laws.
Henry E. Schwartz is a partner with Blank Rome Comisky & McCauley LLP in Baltimore, Maryland. He can be reached at 410-659-3962 or schwartz@blankrome.com.
