Part 1. TEXAS DEPARTMENT OF INSURANCE

Chapter 21. TRADE PRACTICES

Subchapter T. SUBMISSION OF CLEAN CLAIMS

28 TAC §§21.2801 - 21.2816

The Commissioner of Insurance adopts new §§21.2801 - 21.2816 concerning submission of clean claims to health maintenance organizations (HMOs) and insurers who issue preferred provider benefit plans. Sections 21.2802-21.2809, §21.2811, and §21.2815 are adopted with changes to the proposal as published in the December 17, 1999, issue of the Texas Register (24 TexReg 11219). Section 21.2801, §21.2810, §§21.2812 - 21.2814, and §21.2816 are adopted without changes and will not be republished in the Texas Register .

These sections provide definitions and procedures necessary to implement House Bill 610 (Acts 1999, 76th Leg., ch. 1343, p. 4556, eff. Sept. 1, 1999) enacted by the 76th Legislature and existing Articles 3.70-3C, §3(m) and 20A.09(j) of the Insurance Code. During the 1997 legislative session, the legislature enacted Articles 3.70-3C, §3(m) and 20A.09(j) of the Insurance Code (Senate Bill 383 (Acts 1997, 75th Leg., ch. 1024, §1, eff. June 19, 1997) and Senate Bill 385 (Acts 1997, 75th Leg., ch. 1026, §7, eff. Sept. 1, 1997)) to require preferred provider carriers and HMOs to pay claims submitted by contracting physicians or providers within 45 days. The "trigger" for calculating the prompt payment period was the receipt of a claim for payment "with the documentation reasonably necessary to process the claim." In practice, the issue of what documentation was reasonably necessary to process a claim resulted in numerous disputes between HMOs or preferred provider carriers and their contracted physicians or providers submitting claims. House Bill 610, passed during the 1999 legislative session, requires claim payment or denial, in whole or in part, on "clean claims" submitted by contracted physicians and providers to HMOs and preferred provider carriers within the statutory claims payment period of 45 days after the date that the clean claim is received. Under the new law, if an HMO or preferred provider carrier acknowledges coverage of an enrollee or insured but intends to audit the clean claim, the HMO or preferred provider carrier shall pay 85% of the contracted rate on the claim within the statutory claims payment period. House Bill 610 also requires an electronically adjudicated and electronically paid prescription benefit claim for authorized treatment to be paid within the statutory claims payment period (i.e., 21 days after the treatment is authorized). The new law also provides that department rules shall determine when a claim is complete, thus constituting a "clean claim."

These sections are necessary to implement House Bill 610 and are intended to diminish the frequency of disputes arising between HMOs or preferred provider carriers and their contracted physicians or providers submitting claims by requiring prior notification to the physicians and providers of documentation considered reasonably necessary to process a claim (i.e., what constitutes a "clean claim"). These sections are not intended to address the validity or the viability of a submitted claim; instead, these sections specify the required data elements and attachments for a clean claim, which also constitute the documentation considered reasonably necessary to process a claim pursuant to Articles 3.70-3C, §3(m) and 20A.09(j) of the Insurance Code. These sections also specify procedures necessary for the processing of a clean claim, including procedures for requiring necessary attachments, additional clean claim elements, and revision of data elements; auditing; and determination of compliance with the statutory claims payment period. These sections are intended to provide uniformity and consistency in the documentation of and procedures for processing claims, thereby promoting efficiency of claims processing and ensuring prompt claims payment to contracted physicians and providers. Any question as to the completeness of a claim should readily be answered by reference to the physician or provider contract, manual and/or other document that sets forth the procedures for filing claims, and pertinent notifications.

The department recognizes the need for preliminary actions to be undertaken by the HMOs and preferred provider carriers to implement the notification and processing requirements of these sections. Therefore, while all of the adopted sections (§§21.2801-21.2816) become effective 20 days after the date the sections are filed with the office of the Secretary of State, all of the sections (§§21.2801-21.2816) apply to claims filed for non-confinement services, treatments, or supplies rendered on or after August 1, 2000, and to claims filed for services, treatments, or supplies for in-patient confinements in a hospital or other institution that begin on or after August 1, 2000.

The Commissioner held a public hearing on the proposed sections on January 25, 2000, under Docket No. 2429, at the William P. Hobby Jr. State Office Building, 333 Guadalupe Street in Austin, Texas.

Changes have been made to the proposed sections as published; however, none of the changes introduce new subject matter or affect additional persons than those subject to the proposal as originally published. In response to comments, the following changes have been made to the proposed sections: (i) The wording in the definition of "audit" in §21.2802(1) is changed to clarify that "audit" is an instance in which an HMO acknowledges coverage of an enrollee under the health care plan, or a preferred provider carrier acknowledges coverage of an insured under the health insurance policy, but exceeds the statutory claims payment period while processing a clean claim or a portion of a clean claim. This change is made for consistency with Articles 20A.18B(e) and 3.70-3C, §3A(e) as enacted by House Bill 610. The revised wording, however, does not change the meaning or application of the definition as proposed. The revised definition does not refer to acknowledgment of coverage of the service, treatment, or supplies provided to the insured/enrollee, but instead, consistent with the statute, refers to acknowledgment of coverage of an enrollee or insured. (ii) The definition of "billed charges" in §21.2802(2) is revised to amplify on what constitutes "usual" charges as provided in the proposed definition; this is necessary for clarification only and is consistent with the intent of the definition as proposed. The definition is also revised to add a sentence that provides that in the event of a case rate agreed to between the physician or provider and the HMO or preferred provider carrier, the billed charges shall be considered the higher of the case rate or billed charges. This change is necessary to prevent HMOs and preferred provider carriers from unduly benefiting rather than paying a penalty for failure to comply with the requirements of §21.2807(b) and §21.2809(a) and (c) in those situations in which there is a "case rate" payment that is a higher dollar amount than the full billed charges. As a result of this revision to the definition of "billed charges", the definition of "case rate" is added as paragraph (3) of §21.2802, and subsequent definitions in §21.2802 are re-designated accordingly. All references in all the sections to these subsequent definitions are also changed accordingly. (iii) The definition of "clean claim" in proposed §21.2802(3) is re-designated as §21.2802(4), and the wording of the definition is changed to include reference to an enrollee under a health care plan and to an insured under a health insurance policy. This change is made for consistency with the wording of Articles 3.70-3C, §3A(a) and 20A.18B(a) as enacted by House Bill 610. The revised wording, however, does not change the meaning or application of the definition as proposed. (iv) The definition of "procedure code" in proposed §21.2802(20) is re-designated as §21.2802(21) and is changed to expand the definition to include local codes developed by Medicaid and Medicare. This change is necessary because there are codes in both of these programs that address services not described by a CPT or HCPC code. (v) Section 21.2802(24)(C) is re-designated as §21.2802(25)(C) (definition of "statutory claims payment period" for prescription benefit claims that are electronically adjudicated and electronically paid) and is changed to clarify that the clean claims for prescription benefits that are electronically adjudicated and electronically paid must also be "electronically submitted" clean claims. This same clarification change is made to §21.2807(c)(1) and (2) (relating to effect of filing a clean claim for a prescription benefit that is electronically adjudicated and electronically paid). These changes are needed to clarify that the new sections only apply to completely paperless claims in which payment is made by electronic funds transfer. (vi) Section 21.2803(b)(1) is revised to add another data element (designated as (P)) for the first date of previous same or similar illness (HCFA 1500, field 15). The information provided in this data element will assist preferred provider carriers in more promptly determining whether there are pre-existing conditions for which there may not be coverage under the health insurance policy for the service, treatment, or supplies submitted as a clean claim and thereby, in some instances, reducing the amount of time required for processing the clean claim or a portion of the clean claim pursuant to Article 3.70-3C, §3A(c) and (e) of the Insurance Code as enacted by House Bill 610 and §§21.2807 and 21.2809. The information provided in this data element will assist HMOs and preferred provider carriers in detecting possible fraud or material misrepresentations on the application for coverage. (vii) Four changes are made to §21.2803 for purposes of addressing coordination of benefit or non-duplication of benefit situations. Section 21.2803(b)(1)(L) relating to disclosure of any other health benefit plans (HCFA 1500, field 11d) is revised to add clauses (i)(I) and (ii) to specify what actions a physician or provider must take if the response is "yes" to the disclosure of other health benefit plans or if the response is "no." These revisions to §21.2803(b)(1)(L) necessitate that paragraphs (3)(A)-(E) of §21.2803(b) be revised in accordance with the revisions to §21.2803(b)(1)(L)(i)(I). Clause (i)(II) is also added to paragraph (L) and the change to §21.2803(e) specifies what information is necessary when physicians or providers are submitting claims to secondary payor HMOs and preferred provider carriers in coordination of benefit or non-duplication or benefit situations. As a result of the revisions to §21.2803(b)(1)(L) and §21.2803(e), §21.2803(b)(3)(I) and (b)(3)(T) are changed to require that these two data elements must be completed in accordance with §21.2803(b)(1)(L) or as required by §21.2803(e). These revisions are necessary to assist HMOs and preferred provider carriers in determining more promptly the proper action on a clean claim in coordination of benefit or non-duplication of benefit situations and to ensure that physicians and providers submit claims in such situations in an expeditious manner. (viii) Sections 21.2804, 21.2805, and 21.2806 are revised to clarify that if the contract between the physician or provider and the HMO or preferred provider carrier provides for mutual agreement of the parties as the sole mechanism for requiring attachments; additional clean claim elements; or revised data elements, attachments or additional clean claim elements that have previously been properly included as clean claim elements, the optional provisions for notice specified in those sections do not supersede the requirement for mutual agreement. This change is consistent with the intent of §§21.2804, 21.2805, and 21.2806 as proposed. (ix) A reference to §21.2811 (Disclosure of Processing Procedures) is added to §21.2807(a) to clarify that the address of the HMO, preferred provider carrier, or a delegated claims processor designated by the HMO or preferred provider carrier as the place for submission of claims must be provided to the physician or provider in accordance with the procedures specified in §21.2811. (x) Sections 21.2807(b) and §21.2809(a) are revised to delete the reference to §21.2802(24)(A), i.e., the 45-calendar day, or other time period not to exceed 45 calendar days set forth by written agreement between the physician or provider and the HMO or preferred provider carrier, in which claim payment or denial, in whole or in part, shall be made by an HMO or preferred provider carrier after receipt of a clean claim pursuant to the Insurance Code Article 3.70-3C, §3(m) (Preferred Provider Benefit Plans) and Article 20A.09(j) (HMOs). This deletion is necessary because the statutory penalties provided in Article 3.70-3C, §3A and Article 20A.18B as enacted by House Bill 610 do not apply if clean claims are not processed within a contracted period of less than 45 days. This also necessitated an addition to §21.2815, which addresses the statutory penalties for failure to meet the statutory claims payment period, to provide that the statutory penalties do not apply if clean claims are processed within a contracted period of less than 45 days. (xi) Section 21.2808 is changed to provide for a 45-calendar-day period for notice of deficient claim, other than prescription benefit claims. This change is made in response to commenters who objected to the proposed 15-business days for notification of a deficient claim because the 15-business-day requirement conflicts with the statutory provision that an HMO or preferred provider carrier has 45 days to process a claim, and the 15-day requirement would essentially require the HMO or preferred provider carrier to process the claim twice. The provision in proposed §21.2808 that the HMO or preferred provider carrier and the physician or provider may agree to a different time period for notification that a claim is deficient is changed to specify that the agreed time period may not exceed 45 calendar days. This change is necessary for consistency with the provisions and intent of House Bill 610. A provision has also been added to §21.2808 for notification of providers who file electronically submitted prescription benefit claims that are determined to be deficient. The notice must be provided within 21 calendar days. This addition is necessary because House Bill 610 specifies different time periods for processing clean claims for prescription benefits and clean claims for medical care or health care services under a health insurance policy or health care plan, and the section as proposed did not address notification of providers who file electronically submitted prescription benefit claims that are determined to be deficient. (xii) Section 21.2809(b) is changed to clarify that refunds due to HMOs or preferred provider carriers upon completion of an audit may be made by any method, including chargebacks against the physician or provider, or agreements by contract. This change is necessary to recognize the various payment systems of the different types of physicians and providers and to allow flexibility to both the physicians and providers and HMOs or preferred provider carriers to develop the most effective and efficient method of handling refunds due to the preferred provider carrier or HMO. (xiii) Section 21.2811(a) is changed to require that the physical address of the claims processing entity be provided to the physician or provider. This change is necessary for delivery of certified mail or courier-delivered mail. (xiv) All references in all the adopted to specific number of days are changed to clarify that the references are to "calendar" days. This change does not change the actual number of days of any of the time periods specified in the sections. (xv) The proposed compliance date of June 1, 2000, is changed to provide HMOs and preferred provider carriers sufficient time to implement the notification and processing requirements of the new sections. While all of the adopted sections (§§21.2801-21.2816) become effective 20 days after the date the sections are filed with the office of the Secretary of State, all of the sections (§§21.2801-21.2816) apply to claims filed for non-confinement services, treatments, or supplies rendered on or after August 1, 2000, and to claims filed for services, treatments, or supplies for in-patient confinements in a hospital or other institution that begin on or after August 1, 2000.

In addition to the changes resulting from comments on the proposed sections, the following clarifying and editorial changes have also been made to the sections as adopted: (i) Subsections (b) and (c) of §21.2809 (relating to Audit Procedures) are revised to clarify that upon completion of the audit, any refund due to the HMO or preferred provider carrier or additional payment due to the physician or provider is only due if the HMO or preferred provider carrier determines that such refund or additional payment is due. (ii) Section 21.2815 (Failure to Meet the Statutory Claims Payment Period) is revised to clarify that the statutory penalties apply only for failure to comply with the requirements of §21.2807(b) relating to the statutory claims payment period and the actions to be taken upon receipt of a clean claim other than a clean claim for a prescription benefit. This change is necessary because Article 3.70-3C, §3A(f) and Article 20A.18B(f) as enacted by House Bill 610 do not apply the statutory penalties to preferred provider carriers or HMOs that violate Article 3.70-3C, §3A(d) and Article 20A.18B(d) relating to prescription benefit claims. (iii) Non-substantive, editorial changes include the change in spelling from "payer" to "payor" in §21.2803(b)(3) to conform the spelling with the more common spelling used in insurance terminology and the addition of the word "or" in §21.2807(c)(1) to clarify that either paragraph (1) or (2) applies depending on whether the clean claim is an electronically submitted clean claim for a prescription benefit that is electronically adjudicated and electronically paid pursuant to Insurance Code Article 3.70-3C, §3A(d) (Preferred Provider Benefit Plans) and Article 20A.18B(d) (HMOs) or an electronically submitted clean claim for a prescription benefit that is electronically adjudicated and electronically paid pursuant to §21.2814.

Section 21.2801 sets forth the scope and purpose of the new sections, including the applicability of the new sections to all paper and electronic claims submitted by contracted physicians or providers of HMOs and preferred provider carriers. Nothing in the new sections is to be construed as obviating the duty of HMOs or preferred provider carriers to promptly and efficiently process claims submitted by covered individuals and non-contracted physicians or providers. Section 21.2802 defines terms used in the rules, including the term "clean claim" which has not previously been defined. Where possible, existing definitions of terms were incorporated by reference to their statutory or regulatory origin. The term "audit" is defined for purposes of implementing the newly enacted requirements in House Bill 610 (Articles 20A.18B(e) and 3.70-3C, §3A(e)) that when the HMO or insurer intends to audit the clean claim, 85% of the contracted rate on the claim be paid within 45 days after the date the clean claim is received from the physician or provider.

Section 21.2803 specifies the elements of a clean claim. A clean claim consists of specified data elements utilized on Health Care Financing Administration (HCFA) claim forms; attachments specified by contract, manual, other document, or proper notice; additional elements that are identified by contract, manual, other document, or proper notice; and in coordination of benefit or non-duplication of benefit situations, the amount paid as a covered claim by the primary plan or other coverage. Section 21.2803 also addresses formatting requirements for the required elements and the effect of the submission of additional data elements, attachments, or information in a clean claim. Section 21.2804 provides procedures for disclosure of necessary attachments and allows HMOs and preferred provider carriers to give such disclosure by written notice, by updated revisions to the physician or provider manual or other document that sets forth the claims filing procedures, or by contract. Section 21.2805 provides procedures for disclosure of clean claims elements and attachments that are required by the HMO and preferred provider carrier in addition to those elements and attachments required pursuant to department rules and allows HMOs and preferred provider carriers to give such disclosure by written notice, by updated revisions to the physician or provider manual or other document that sets forth the claims filing procedures, or by contract. Section 21.2806 provides that, if an HMO or preferred provider carrier changes its requirements for data elements, attachments, or additional clean claim elements that have previously been included as elements of a clean claim pursuant to department rules, the HMO or preferred provider carrier must give to the affected physicians and providers at least 60 calendar days prior written notice of the revisions. Under paragraph (3) of §§21.2804 and 21.2805, and under §21.2806, if the contract provides for mutual agreement of the parties as the sole mechanism for requiring attachments; additional clean claim elements; or revised data elements, attachments or additional clean claim elements that have previously been properly included as elements of a clean claim, then the other specified methods of notice (i.e., written notice or updated revisions to the physician or provider manual or other document that sets forth the claims filing procedures) do not supersede the requirement for mutual agreement.

Section 21.2807 addresses in subsections (a) and (b) the effect of filing a clean claim for medical care or health care services under a health care plan or health insurance policy, including when the statutory claims payment period starts to run and the actions required, pursuant to House Bill 610, of the HMO or preferred provider carrier upon receipt of a clean claim and prior to the expiration of the statutory claims payment period. These actions include (i) payment of the total amount of the clean claim in accordance with the contract between the physician or provider and the HMO or preferred provider carrier (i.e., a covered claim); (ii) denial of the entire clean claim and written notification to the physician or provider of why the claim is denied (i.e., not a covered claim); (iii) written notification to the physician or provider that the entire clean claim will be audited and payment of 85% of the contracted rate (i.e., determination of coverage of claim not yet determined); or (iv) payment of a portion of the clean claim for which the HMO or preferred provider carrier has determined is a covered claim in accordance with the contract between the physician or provider and the HMO or preferred provider carrier and either denial of the remainder of the claim (i.e., not a covered claim) and written notification to the physician or provider of why the remainder of the claim is denied or written notification to the physician or provider that the remainder of the claim will be audited and payment of 85% of the contracted rate on the unpaid portion (i.e., coverage of remainder of claim not yet determined). Section 21.2807(c) specifies the actions to be taken by the HMO or preferred provider carrier after receipt of an electronically submitted clean claim for a prescription benefit that is electronically adjudicated and electronically paid pursuant to Article 3.70-3C, §3A(d) and Article 20A.18B(d) of the Insurance Code and §21.2814. Section 21.2808 requires an HMO or preferred provider carrier, upon determination that a claim is deficient (i.e., the claim does not contain the required clean claim elements pursuant to department rules), to notify the physician or provider of the deficient claim within 45 calendar days of the HMO's or preferred provider carrier's receipt of the claim, unless a different period of time, not to exceed 45 calendar days, is agreed to by contract. Under §21.2808, if an electronically submitted claim for a prescription benefit is determined by an HMO or preferred provider carrier to be deficient, the HMO or preferred provider carrier shall notify the provider within 21 calendar days of the HMO's or preferred provider carrier's receipt of the claim. Section 21.2809 specifies audit procedures if an HMO or preferred provider carrier is unable to pay or deny a clean claim in whole or in part within the statutory claims payment period, including procedures for refunds due to the HMO or preferred provider carrier or additional payment to the physician or provider upon completion of the audit. Section 21.2810 outlines the method for determining compliance with the statutory claims payment period.

Section 21.2811 specifies the administrative claim filing information that must be disclosed by HMOs and preferred provider carriers in their physician or provider contracts or in the physician or provider manual or other document that sets forth the procedure for filing claims with the HMO or preferred provider carrier, or by any other method mutually agreed upon by the contracting parties. If the administrative claims filing information is revised, the HMO or preferred provider carrier must give its contracted physicians or providers at least 60 calendar days written notice prior to the change. Section 21.2812 prohibits the denial of a clean claim because of a change of claims payment address or a change in the delegated claims processor unless the 60 calendar day prior written notice has been provided. Section 21.2813 requires that an HMO or preferred provider carrier that delegates its claims processing functions include in its delegation agreement a provision requiring the delegated claims processor to comply with the clean claims requirements and procedures specified in department rules and applicable law. Claims that are delegated for processing are subject to the statutory claims payment period. Section 21.2814 specifies when the statutory claims payment period begins to run for electronically adjudicated and electronically paid prescription benefits that do not require authorization by an HMO or preferred provider carrier. Section 21.2815 addresses the actions required of an HMO or preferred provider carrier that fails to comply with the statutory claims payment provisions in §21.2807(b) and the audit procedures in §21.2809(a) and (c). Section 21.2816 contains a severability provision.

For: Office of Public Insurance Counsel, North American Medical Management, and National Association of Social Workers\Texas Chapter. For, with changes: Texas Podiatry Association, Texas Medical Group Management Association, Capital Anesthesiology Association, United Regional Health Care System, Tenet HealthSystems, Harris County Medical Society, Texas Medical Association, Texas Hospital Association, Universal Health Services, Core Specialty Associates of North Texas, Texas Association of Health Plans, Good Shepherd Managed Care, United Health Care, Texas Association of Preferred Provider Organizations, Baylor Health Care System, and Humana on behalf of Humana Health Plan of Texas, Inc.; Humana HMO Texas, Inc.; PCA Health Plans of Texas, Inc.; PCA Provider Organization, Inc.; Humana Insurance Company; and Employers Health Insurance Company.

Against: Texas Association of Insurance Officials, Texas Association of Life & Health Insurers, Unicare, American National Insurance Company, Texas Professional Benefit Administrators Association, Brazos Valley Physicians Association, Methodist Hospitals of Dallas, Golden Rule Insurance Company, BlueCross BlueShield of Texas, AMERICAID Texas, Inc., and UT Southwestern Health Systems.

General

Comment: One commenter recommended that all references to specific numbers of days in which affected entities must perform certain functions be defined as either "calendar" days or "business" days.

Response: The department agrees, and the rules are revised to clarify that the references in the rules to specific number of days are "calendar" days.

Comment: Two commenters recommended that the proposed effective date of June 1, 2000 be changed to September 1, 2000. It is believed this is necessary because of the need for drafting revisions to provider manuals, circulating the revisions for comment internally to ensure accuracy, producing copies, and preparing for mailing by certified mail. The commenters stated that many preferred provider carriers have large provider networks and the mailing is an immense undertaking; e.g., one preferred provider carrier has 18,000 physicians and over 200 hospitals in its Texas network. Other problems relate to Y2K. Several health plans are under a systems development freeze until March 15, and they wish to ensure that Feb. 29 (leap day) does not result in problems before lifting the Y2K freeze. Also, health plans maintain several distinct claims systems and each of them will require modification to comply with the rules.

Response: The department disagrees with the recommended effective date, but recognizes the need for preliminary actions to be undertaken by the HMOs and preferred provider carriers to implement the notification and processing requirements of these sections. Therefore, while all of the adopted sections (§§21.2801-21.2816) become effective 20 days after the date the sections are filed with the office of the Secretary of State, all of the sections (§§21.2801-21.2816) apply to claims filed for non-confinement services, treatments, or supplies rendered on or after August 1, 2000, and to claims filed for services, treatments, or supplies for in-patient confinements in a hospital or other institution that begin on or after August 1, 2000.

§21.2801. Scope and Applicability

Comment: A commenter stated that the proposed rules do not address electronic filing of nonprescription claims, and rules are needed for such claims as a large number of claims are filed electronically.

Response: The rule addresses electronic filing of all claims in §21.2801. That section provides that the rules in the subchapter (28 TAC §§21.2801-21.2816) apply to all paper and electronic claims submitted by contracted physicians or providers.

§21.2802. Definitions

§21.2802(1) Audit

Comment: Five commenters disagreed with the definition of "audit." One commenter stated that the statute does not authorize the definition of "audit" that is included in the proposed rules. However, if a definition is utilized, the commenter suggested: "An instance in which an HMO or preferred provider carrier acknowledges coverage on an enrollee under the health plan but requires longer than the statutory claims payment period to process a clean claim or a portion of a clean claim." Two commenters stated that "audit" is not defined to include where the insurer acknowledges coverage under the health insurance policy.

Response: It is the department's position that a definition of "audit" is needed to implement the statute and that the definition as adopted is the proper definition to implement the statute. Articles 20A.18B(o) and 3.70-3C, §3A(n) of the Insurance Code authorize the Commissioner to adopt rules necessary to implement the articles. It is the department's interpretation that Articles 20A.18B(c) and (e) and 3.70-3C, §3A(c) and (e), when read in the context of the overall statute, provide five possible actions that may be taken by an HMO or preferred provider carrier when a clean claim is submitted for services, treatment, or supplies provided to an insured/enrollee of the HMO or preferred provider carrier. The five possible actions are: Within 45 days of the date the clean claim is received, (i) pay the total amount of the claim in accordance with the contract between the physician or provider and the HMO or preferred provider carrier (i.e., a covered claim); (ii) deny the claim in its entirety (i.e., not a covered claim); (iii) pay the portion of the claim that is not in dispute (i.e., a covered claim) and deny the remainder of the claim (i.e., not a covered claim); (iv) pay the portion of the claim that is not in dispute (i.e., a covered claim) and audit the remainder of the claim and, if the audit cannot be completed within the 45 days, pay the physician or provider 85% of the contracted rate on the portion of the claim that is being audited (i.e., coverage of the claim not yet determined); or (v) audit the entire claim and, if the audit cannot be completed within the 45 days, pay the physician or provider 85% of the contracted rate (i.e., coverage of the claim not yet determined). Therefore, whenever the HMO or preferred provider carrier requires more than the 45 days to process a clean claim or a portion of the clean claim for whatever reason, the statute requires the HMO or preferred provider carrier to pay 85% of the contracted rate on the claim. Without a definition for "audit" in the rules, HMOs, preferred provider carriers, physicians and providers could apply varying definitions which would result in inconsistent and ineffective implementation of the statute. The department, however, agrees with the commenter's requested revision, except that in lieu of "on an enrollee," the revised wording should be "of an enrollee" for consistency with the statute. Also, for consistency with the statute, the definition should include a reference to acknowledgment "of coverage of an insured under the health insurance policy." Therefore, the definition of "audit" is revised to read: "An instance in which an HMO acknowledges coverage of an enrollee under the health care plan or a preferred provider carrier acknowledges coverage of an insured under the health insurance policy but exceeds (takes longer than) the statutory claims payment period while processing (to process) a clean claim or a portion of a clean claim." The revision does not change the meaning or application of the definition. The revision does not mean acknowledgment of coverage of the claim for the service, treatment, or supplies provided to the insured/enrollee, but instead, like the statute, refers to acknowledgment of coverage of an individual enrollee or insured. The department's interpretation of "audit" is also supported by the fact that as a practical matter, most physicians and providers obtain a copy of the health care plan card or health insurance card, which provides information on the coverage of the enrollee by the HMO or of the insured by the preferred provider carrier; or contact the HMO or preferred provider carrier via phone, fax, e-mail or other contact to determine if the individual is covered before providing the service, treatment, or supplies.

Comment: One commenter suggested using a more commonly accepted definition of "audit" which contrasts it to the ordinary claims processing procedure. One commenter stated that "audit" means "auditing the elements described on the clean claim"; it does not mean disputing whether or not it's a covered benefit. Another commenter stated that to an insurer, an audit is not a process to determine claims liability but rather a process to ensure accurate billing by the provider once claims liability has been established. One commenter stated that the audit provision in House Bill 610 seems to mean "in office" types of reviews, not requests for medical records.

Response: The department disagrees. Based on a reasonable reading of House Bill 610 in its entirety and a review of the legislative history, the definition of "audit" cannot be defined as suggested by the commenters; otherwise those clean claims that require additional information or investigation by the HMO or preferred provider carrier beyond a checking of the elements described on the claim or attachments to the claim or a checking for "accurate billing" once claims liability has been established are either not included under the statute, or alternatively, the determination of claim liability would have to be one of the elements of a "clean claim." There is no other way to account for such claims under the statute. Neither one of these other possible interpretations is supported by the plain language of the statute or the legislative history. Both the language and the legislative history of House Bill 610 indicate the intent to change the law with regard to the current method of processing claims. There is nothing in House Bill 610 or the legislative history to indicate the omission from the new prompt payment laws of those clean claims for which there is a dispute about whether or not there is coverage for the service, treatment, or supplies submitted as a clean claim. To make the determination of liability for the claim an element of the "clean claim" would simply be a continuation of the status quo and not consistent with the intent of the legislature to change the law with regard to the current method of processing physician or provider claims.

§21.2802(2) Billed charges

Comment: Seven commenters recommended changes to the definition of "billed charges." All of the commenters disagreed with the use of the word "usual" in the definition because it could be interpreted as "usual and customary." One commenter recommended changing the definition to, "The charge the physician or provider normally charges for the services, treatments or supplies submitted to the HMO or preferred provider carrier." Three commenters recommended changing the definition to, "The established charges made by a physician or provider who renders or furnishes services, treatments, or supplies." Two commenters recommended the definition be changed to, "The amount(s) submitted by a physician or provider in field 28 of the HCFA 1500 claim form and in field 47 of the UB-92 who renders or furnishes services, treatments, or supplies."

Response: The department disagrees with the suggested definitions because they either do not provide any greater clarification than the published definition or they are not the definition that is necessary for the proper implementation of House Bill 610. It is necessary that "billed charges" be defined to prevent physicians or providers from billing in excess of their usual charge in order to maximize the penalty under §21.2815 and Articles 20A.18B(f) and 3.70-3C, §3A(f) of the Insurance Code. The department intends for the definition to mean "usual and customary" charges to prevent physicians and providers from billing in excess of their usual charge and has revised the definition to read, "The (usual) charges made by a physician or provider who renders or furnishes services, treatments, or supplies provided the charge is not in excess of the general level of charges made by other physicians or providers who render or furnish the same or similar services, treatments, or supplies to persons in the same geographical area and whose illness or injury is comparable in nature or severity." Other changes are made to the definition of "billed charges" as indicated in the summary of comments and responses for §21.2815.

Comment: One commenter recommended adding the term "total billed charges" to §21.2802 and defining it as: "The amount submitted by the physician or provider to the health maintenance organization (HMO) or preferred provider carrier as indicated on the HCFA 1500, field 28 or on the UB-92, field 47 (identified with revenue code 001) as per HCFA guidelines."

Response: The department disagrees. The term "total billed charges" is not used in the rule; however, "total charge" is a required element under adopted §21.2803 (b)(1)(Z) and (2)(T).

§21.2802(4) Clean claim

Comment: Seven commenters objected to the definition of "clean claim" in proposed §21.2802(3). Two commenters pointed out that the provisions in Article 3.70-3C, §3A(a), (b), and (e) of the Insurance Code all reference "under a health insurance policy." However, throughout the rule, there is no definition of a clean claim that encompasses provisions under a health insurance policy as required by the statute. The inclusion of the term "health insurance policy" within the rule is critical since the health insurance policy is the legal contract between the carrier and the insured that specifies the conditions for a claim to be paid.

Response: Though the term "health insurance policy" is not explicitly referenced in the rule as proposed, the term is included in the rule through the language contained in §21.2801 as well as definitions contained in §21.2802 and the Insurance Code. Section 21.2801 states that the subchapter applies to claims submitted by contracted physicians or providers for services or benefits provided to insureds of preferred provider carriers; §21.2802(19) defines "preferred provider carrier" as an insurer that issues a preferred provider benefit plan as provided in the Insurance Code Article 3.70-3C, §2. That law states that the article applies to any preferred provider benefit plan in which an insurer provides, through its health insurance policy . . . ." (emphasis added). The omission of an explicit reference to "health insurance policy" does not change the fact that the health insurance policy is the legal contract between the preferred provider carrier and the insured that specifies the conditions (i.e., contract terms) for a claim to be paid nor does it have any effect on the proper implementation of House Bill 610 as enacted by the legislature. House Bill 610 does not affect the conditions under which a claim is to be paid but rather provides a means for the specification of elements and attachments which must be submitted by a physician or provider to an HMO or preferred provider carrier for a claim to be "clean" (i.e., department rules); specifies the actions that an HMO or preferred provider carrier must take after receiving a clean claim; and provides the penalties for HMOs and preferred provider carriers that violate the required statutory actions for processing "clean claims." These rules which implement House Bill 610 also do not affect the conditions (i.e., contract terms) under which a claim is to be paid. Article 3.70-3C, §3A(e) and Article 20A.18B(e) as enacted by House Bill 610 specify the interim payment of 85% of the contracted rate on a submitted claim which contains the elements of a "clean claim" under department rules but which the HMO or preferred provider carrier intends to audit. This interim payment does not affect in any way the health care plan or the health insurance policy or the provisions in the plan or policy that specify what is or is not a covered benefit or service, treatment, or supplies. Upon completion of the audit, under the statute and under the rules, the actual amount of the payment on the clean claim is determined based on the terms and conditions of the health care plan or health insurance policy, and any additional payment due a physician or provider or any refund due the HMO or preferred provider carrier is to be made not later than the 30th day after the later of the date that the physician or provider receives notice of audit results or, if an appeal was filed before expiration of the 30-calendar-day refund period, any appeal rights of the insured or enrollee are exhausted. Thus, even though the department does not believe a change is needed in the definition of "clean claim," the department has revised the definition in §21.2802(4) to include reference to a health care plan or a health insurance policy as follows: "A (physician's or provider's) claim submitted by a physician or provider for medical care or health care services rendered to an enrollee under a health care plan or to an insured under a health insurance policy (for payment) with documentation reasonably necessary for the HMO or preferred provider carrier to process the claim, which contains: . . . ." The revision, however, does not change the meaning or application of the definition as proposed.

Comment: Three commenters recommended that the period provided for in Article 3.70-3C, §3A(c) commences to run only after liability has become reasonably clear, as provided in Article 21.21-2, §2(b)(4) concerning unfair claim settlement practices. Therefore, the definition of "clean claim" should be changed to: "A physician's or provider's claim for payment with documentation reasonably necessary for the HMO or preferred provider carrier to process the claim for which coverage and liability under the health insurance policy have become reasonably clear, which contains . . . ." A commenter stated that any claim where liability is not clear should be excluded from the definition of a "clean claim." Another commenter stated that the definition of "clean claim" should be revised to allow the insurer or TPA to investigate each claim for its unique facts, if any, to determine the liability under the basic policy and should include the statutory words "acknowledge coverage of an insured under a health insurance policy." Two commenters recommended that the definition of "clean claim" be revised to include a subparagraph (F) to read: "A clean claim does not include a claim subject to medical review. Medical review is the review of medical records by clinical personnel to determine applicability of a benefit provision, exclusion, or waiver." Without this change, carriers would be forced to pay claims referred for medical review when many of these are determined to be subject to benefit exclusions and then request a refund once the medical review is completed. Chargeback or recoupment may not be an option in the case of a high dollar claim paid to an infrequently used provider. One commenter stated that the definition of "clean claim" needs to exempt claims for which the carrier needs additional information that could not be identified as needed prior to receipt of the claim in order to make a coverage determination. This change is needed because a preferred provider can submit a "clean claim" as defined that includes all of the required elements but the carrier may still need additional information that could not be identified until the claim was received.

Response: The department disagrees. While the policy or health care plan is a legal contract between a preferred provider carrier or HMO and the insured/enrollee that specifies the conditions for a claim to be paid, this fact does not require that the period provided for in Article 3.70-3C, §3A(c) or Article 20A.18B(c) of the Insurance Code commence to run only after liability has become reasonably clear as provided in Article 21.21-2, §2(b)(4). Article 21.21-2, §2(b)(4) provides that "Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims submitted in which liability has become reasonably clear" constitutes an unfair claim settlement practice that is prohibited by Article 21.21-2. Article 3.70-3C, §3A and Article 20A.18B, enacted by the 76th Legislature to be effective September 1, 1999, are the latest enactment of prompt payment laws for claims submitted by contracted physicians or providers for services or benefits provided to insureds of preferred provider carriers and enrollees of HMOs. To add the language "for which coverage and liability under the health insurance policy have become reasonably clear" to the definition of "clean claim" as suggested by three of the commenters would, in effect, superimpose the requirements of Article 21.21-2, §2(b)(4) over the requirements of Articles 3.70-3C, §3A and 20A.18B, would be inconsistent with the plain language of Articles 3.70-3C, §3A and 20A.18B, and would undermine the legislative intent of these statutes. In drafting the proposed rules, the department performed extensive statutory research. Both the language and the legislative history of House Bill 610 indicate the intent to alter the current method in which claims are processed and pended before being paid or denied. To adopt the changes suggested by the commenters would be to maintain the status quo and thus would not be consistent with the statutory intent. The contract between the preferred provider carrier or HMO and the physician or provider is also a legal document, and the 75th Legislature required in Articles 3.70-3C, §3(m) and 20A.09(j) of the Insurance Code that a preferred provider carrier or HMO pay physicians or providers not later than the 45th day after the date on which a claim for payment is received with documentation "reasonably necessary to process the claim." These rules specify and clarify content standards and notifications from the preferred provider carrier or HMO to the physician or the provider to make clear what documentation is "reasonably necessary" to process a claim. The addition of the language "acknowledge coverage of an insured under a health insurance policy" and "acknowledge coverage of an enrollee under the health care plan" does not mean that a determination of liability is required before 85% of the contracted rate is to be paid. Articles 3.70-3C, §3A(e) and 20A.18B(e) provide that if the insurer or HMO acknowledges coverage of an insured under the health insurance policy or an enrollee under a health care plan but intends to audit the clean claim, the 85% payment of the contracted rate on the claim is required. The words "insured" and "enrollee" are crucial to the proper interpretation and application of this provision. The statute does not use the words "coverage of the benefit" or "coverage of the service, treatment, or supplies" submitted as a clean claim but rather refers to the individual (i.e., insured/enrollee) who is receiving or has received the service, treatment, or supplies. If a physician or provider has reason to submit a claim to a preferred provider carrier or an HMO the submission of that claim is based on some evidence or action that has informed the physician or provider that the individual insured/enrollee is covered by that preferred provider carrier or HMO, i.e., health insurance card/health care plan card or contact with the HMO or preferred provider carrier via phone, fax, e-mail, or other contact. As for the comment that chargeback or recoupment may not be an option in the case of a high dollar claim paid to an infrequently used physician or provider, House Bill 610, in Articles 20A.18B(e) and 3.70-3C, §3A(e) of the Insurance Code, does not make any exception for the refund provision in the event that the 85% is more than is owed on the claim. Chargeback is one option allowed under the rules, but neither the statutes nor the rules specify that recoupment or chargeback is the only method to obtain a refund.

Comment: Another commenter recommended that a "clean claim" as it relates to hospital claims be defined as consisting "of specified data elements utilized on HCFA claims forms." This definition is necessary because it will be very easy for payors to use "manuals, or other documents, or proper notice" to request additional but non-essential attachments and elements from providers thus producing an even greater problem with timely claims payment and will have the opposite effect the legislation was intended to have.

Response: The department disagrees. HMOs and preferred provider carriers may need information that is not on the HCFA claim form in order to accurately process claims. The rule in §§21.2803(a), (c), and (d), 21.2804, 21.2805, and 21.2806 requires that physicians and providers receive prior notification of any required elements or attachments for a claim to be considered clean, thereby prohibiting HMOs or preferred provider carriers or their delegated claim processors from delaying payment beyond the statutory claims payment period. Requests for additional information do not extend the claims payment period.

§21.2802(6) Contracted rate

Comment: Three commenters recommended changing the definition of "contracted rate" in proposed §21.2802(5) to specifically include "physician or provider group."

Response: The department disagrees because groups of physicians or providers are included in the statutory definitions of physician or provider referenced in §21.2802(17). Because of the addition of "case rate" to §21.2802, the definition of "contracted rate" is redesignated as §21.2802(6).

§21.2802(21) Procedure code

Comment: Three commenters recommended changes to the definition of "procedure code." Two of these commenters recommended expanding the definition to include the payors Medicaid and Medicare when referencing local codes because there are codes in both of these programs that have been created to address services not described by a CPT or HCPC code.

Response: The department agrees, and §21.2802(21) contains the recommended change. Because of the addition of "case rate" to §21.2802, the definition of "procedure code" is redesignated as §21.2802(21).

Comment: Another commenter objected to the proposed definition of "procedure code" because it would allow several different payors to develop different codes for the same service or procedure which could in some instances be unworkable. The commenter requested that the definition be revised to require uniformity.

Response: The department recognizes this issue and anticipates that part of the commenter's concern will be alleviated with the addition of "Medicare" and "Medicaid" to the definition of "procedure code." While there may be some instances that could continue to cause concern, the department does not have the authority to develop standard uniform codes.

§21.2802(25) Statutory claims payment period

Comment: Three commenters recommended changes to the definition of "statutory claims payment period" in proposed §21.2802(24). One commenter stated that while it is true that there are now two claims payment provisions in both Article 3.70-3C and Chapter 20A of the Insurance Code, the statutory penalty in House Bill 610 applies only if claims are not paid within 45 days of receipt of a clean claim. Therefore, subparagraph (A) in proposed §21.2802(24) defining "statutory claims payment period" should be deleted.

Response: The department disagrees with the recommended change but agrees that penalties should not apply if clean claims are not processed within a contracted period of less than the 45 days and agrees that clarifying revisions are needed. However, the penalties do apply in the event of a contracted claims payment period of less than the 45 days and failure to pay within the 45 days. Therefore, the rule is revised to delete the reference to §21.2802(24)(A) in §21.2807(b) and in §21.2809(a) and to add a sentence to §21.2815 to provide that, "This section shall not apply when there is failure to comply with a contracted claims payment period of less than 45 calendar days as provided in §21.2802(25)(A) of this title (relating to Definitions) and Article 3.70-3C, §3(m) or Article 20A.09(j) of the Insurance Code." Because of the addition of "case rate" to §21.2802, the definition of "statutory claims payment period" is redesignated as §21.2802(25).

Comment: One commenter suggested adding for purposes of clarification "at the address designated by the HMO or preferred provider carrier" following "receipt of a clean claim" in proposed §21.2802(24)(B).

Response: The department disagrees because the commenter's concerns are addressed in §21.2807(a).

Comment: Another commenter recommended that the definition of "statutory claims payment period" include the time within which the 85% of a claim that is audited must be paid and the time when a refund or additional payment is due after the audit is completed.

Response: The department disagrees. The period of time within which the 85% of a clean claim that is audited must be paid is addressed in §21.2807(b) and §21.2809(a). Article 3.70-3C, §3A(e) and Article 20A.18B(e) of the Insurance Code provide that following completion of the audit, any additional payment due the physician or provider or any refund due the HMO or preferred provider carrier shall be made not later than the 30th day after the later of the date that the physician or provider receives notice of the audit results or, if appeal was filed before expiration of the 30-day refund period, the date any appeal rights of the insured/enrollee are exhausted.

Comment: One commenter stated that proposed §21.2802(24)(A) and (B) do not clearly define when the 45-day period starts. The commenter recommended adding the following language "if by electronic transmission, from the date of electronic claims submission acknowledgment; if by certified mail or professional delivery, from date of documented receipt; if by hand delivery, from date of hand delivery."

Response: The department disagrees because the commenter's concerns are addressed in §21.2807(a) and Articles 20A.18B(b) and 3.70-3C, §3A(b) of the Insurance Code.

§21.2803. Elements of a Clean Claim

Comment: Two commenters stated that there are many instances where the patient during the admission process will not provide information on other insurance coverage, and the omission of this information by the patient leaves the hospital vulnerable to the submission of a claim that will be placed in a "pend" status while the payor further investigates the existence of other insurance---sometimes taking up to a year for this investigatory process. Because the hospital is not reimbursed during this process and is unable to pursue payment from the member, the commenters recommended three changes in §21.2803(b) to prevent the claim from being determined "deficient." The commenters recommended revising §21.2803(b)(1)(L) to read: "(L) disclosure of any other health plans (HCFA 1500, field 11d); if respond yes, then the data elements specified in paragraph (3)(A)-(E) . . . are applicable if available; if respond "no" or left blank, the data elements are not considered essential as the information was either unavailable or not applicable and does not render the claim deficient." The commenters recommended similar changes to §21.2803(b)(3)(A) and §21.2803(b)(3)(B). The commenters also recommended revising the second and third sentences of §21.2803(e) to provide that: "If a claim is submitted for covered services or benefits. . . the amounts paid by all other valid coverage is considered to be an element of a clean claim if available to the provider at the time of claim filing. If a claim is submitted for covered services or benefits and the policy contains a variable deductible provision . . . the amount paid by all other health insurance coverages, except for amounts paid by individually underwritten and issued hospital confinement indemnity, specified disease, or limited benefit plans of coverage, is considered to be an element of a clean claim if available to the provider at the time of claim filing. The unavailability of this information does not render the claim deficient."

Response: The department agrees that changes are needed to proposed §21.2803(b)(1)(L), (b)(3)(A), (b)(3)(B) and §21.2803(e) but does not agree with the changes recommended by the commenters for several reasons. First, physicians and providers are in the best position for obtaining information from insureds and enrollees about the existence of other health care coverage. Physicians and providers and/or their staff have personal, face-to-face contact with the enrollee/insured and are able to inquire directly about other coverage at the time services are rendered. Additionally, obtaining the information at the time services are rendered should result in the most current information as to the existence and identity of other health care coverage as an individual's health care coverage may change due to several reasons, including the following: their employer may change insurance or HMO carriers or may self-insure; employees and/or their spouses may change employers or may change to another plan offered by the same employer; or enrollees/insureds may purchase or cancel individual or member association group health coverage. Insureds and enrollees purchase or enroll for coverage in addition to the HMO or preferred provider coverage to minimize their financial exposure for payment of medical bills; consequently, it is the department's belief that to avoid having to pay out-of-pocket for medical services, treatments, or supplies, and in order to utilize the coverage for which premiums have been paid, enrollees and insureds have a strong incentive to disclose to the physician or provider all information about all health benefit plans that the physician or provider can look to as a source of payment before seeking payment from the enrollee/insured. In addition, health benefit plans, whether fully insured or self-insured, require, before reimbursement is provided to an enrollee or insured, the submission of claim forms, such as the UB-92, HCFA 1500, or the plan's attending physician/provider statements, many of which are completed and filed by the physician or provider on behalf of the insured or enrollee; thus physicians and providers usually know whether a claim has been submitted to other health benefit plans and can provide information regarding the existence and identity of other coverage. While the department does not agree with the specific recommended revisions to §21.2803(b)(1)(L), (b)(3)(A), and (b)(3)(B), the department recognizes that there are factors which require clarification of and revision to §21.2803(b)(1)(L), (b)(3)(A), and (b)(3)(B) as proposed. These factors include: there may be occasions when enrollees and insureds may not timely provide the information required by §21.2803(b)(3)(A)-(E) to physicians or providers in order for the physicians and providers to meet claim filing deadlines; enrollees and insurers may not always provide accurate information; and preferred provider carriers and HMOs that have coordination of benefit provisions in their health care plans or insurance policies are also responsible for obtaining this information and are responsible for determining which coverage, when there is more than one coverage, is primary or secondary pursuant to 28 TAC, Chapter 3, Subchapter V, and 28 TAC §11.511(1). Therefore, §21.2803(b)(1)(L) is revised to include these factors.

The revision to §21.2803(b)(1)(L) requires that the following addition be made to §21.2803(b)(3)(A), (B), (C), (D) and (E): ". . . this is applicable unless the physician or provider submits with the claim documented proof to the HMO or preferred provider carrier that the physician or provider has made a good faith but unsuccessful attempt to obtain from the enrollee or insured any of the information needed to complete this data element." The department believes that the addition of clauses (i)(I) and (ii) to §21.2803(b)(1)(L) and the revisions to §21.2803(b)(3)(A), (B), (C), (D) and (E) are supported by the fact that most physicians and providers currently obtain or attempt to obtain health care coverage information from their patients (i.e., enrollees and insureds) as a standard business practice. This information is currently collected by physicians and providers at various times and through various means: in the initial or annual office visit questionnaire, in the sign-in sheets patients (i.e., enrollees or insureds) are requested to complete at each office visit, or upon obtaining any service, treatment or supplies from the physician or provider; or as part of the physician's or provider's routine record updating. Physicians and providers can satisfy the requirements of the adopted revisions by simply providing with the claim the documented proof of their attempt to obtain the data element information which could be a copy of the initial or annual office visit questionnaire, sign-in sheets, or other similar document and a signed statement from the enrollee/insured that there is no other health coverage. Under this adopted revision, if the HMO or preferred provider carrier receives with the claim a copy of a document signed by the enrollee/insured that there is no other health care coverage for the provided service, treatment or supplies, the HMO or preferred provider carrier may not consider the claim deficient. Also, if the HMO's or preferred provider carrier's records reflect that the enrollee/insured has other coverage or the HMO or preferred provider carrier subsequently learns through their own research or communication with the enrollee/insured of other coverage for the service, treatment or supplies, the claim may not be considered deficient. If the HMO or preferred provider carrier pays the covered clean claim and subsequently learns that the enrollee/insured has other coverage, the rules do not prohibit the HMO or preferred provider carrier from taking action, including seeking refunds, to obtain the amount paid in overpayment to the physician or provider.

The department also disagrees with the changes recommended to §21.2803(e); however, in considering the comment on the recommended change, the department realized that there is a need to revise §21.2803(e) and, for clarification, to add clause (i)(II) to §21.2803(b)(1)(L), based on the following reasons. A physician or provider could file claims with both the primary and secondary carriers/plans (i.e., payors) at the same time; or if claims are filed at different times, the physician or provider could mistakenly file the claim with the secondary carrier before filing with the primary carrier; or the physician or provider could file with the primary carrier and then file with the secondary carrier before the primary carrier completes its claim processing. The amount paid as a covered claim by the primary plan, either paid pursuant to §21.2807 and Article 3.70-3C, §3A(c)(1) or (2) or Article 20A.18B(c)(1) or (2) or upon completion of an audit pursuant to §21.2809 and Article 3.70-3C, §3A(e) or Article 20A.18B(e) is necessary to the processing of the claim by secondary payors and must therefore be an element of a clean claim. To provide otherwise would increase the administrative cost to HMOs or preferred provider carriers who are secondary payors as they could be required to pay as if they were the primary payor and to seek refunds after receiving information as to the true primary payor and the amount paid as a covered claim by the primary payor. It would also increase the recordkeeping by physicians and providers, and thereby increase their administrative cost, as they would be required to keep records as to which claims submitted to secondary payors reported interim payments by a primary payor, and depending on the primary payors' payments on covered claims, they would have to send corrected claims and possibly refund payments made by secondary payors. Additionally, if the amount paid as a covered claim by the primary payor is not a clean claim element, the secondary payor would not have the full 45-day statutory claims payment period to process the claim but would have only the balance of the 45-day statutory claims payment period, if any, that remained after the primary payor completed processing the claim which could unduly subject an HMO or preferred provider carrier who is the secondary payor to statutory penalties. If a preferred provider carrier or HMO who is the primary payor audits a claim, the 85% payment by the preferred provider carrier or HMO to the physician or provider made pursuant to Article 3.70-3C, §3A(e) and Article 20A.18B(e) is an interim payment and is not an amount paid as a covered claim and therefore may not be entered in field 29 of HCFA 1500 under §21.2803(b)(3)(I) or field 54 of UB-92 under §21.2803(b)(3)(T). Upon completion of the audit, the preferred provider carrier or HMO will determine the amount of payment for the covered claim and either make additional payment to the physician or provider or request a refund in the event of overpayment, and it is at this time that the physician or provider will have the necessary information to complete field 29 of HCFA 1500 under §21.2803(b)(3)(l) or field 54 of UB-92 under §21.2803(b)(3)(T). Thus, in the instance of a claim for which there is a primary payor and a secondary payor, both of which are either an HMO or preferred provider carrier subject to the prompt payment law enacted by House Bill 610 and the department rules implementing that law, and the primary payor HMO or preferred provider carrier audits the claim, a clean claim cannot be filed by the physician or provider with the secondary payor until completion of the audit by the primary HMO or preferred provider carrier and the physician or provider obtains the information necessary to complete field 29 of HCFA 1500 under §21.2803(b)(3)(l) or field 54 of UB-92 under §21.2803(b)(3)(T). The department in recognizing the secondary payors' need to know what final action has been taken on the clean claim by the primary carrier is requiring that the amount paid by the primary payor is a clean claim element for claims submitted to secondary payors. Concomitantly, the department recognizes that while physicians and providers are subject to statutory billing deadlines (Chapter 146, Civil Practice and Remedies Code) and, in some instances, contractual billing deadlines, physicians and providers may not have the information needed (e.g., amount paid on the covered clean claim by the primary carrier) to file a clean claim with secondary payors before the statutory or contractual billing deadline expires. In these situations, the department expects HMOs and preferred provider carriers to (i) consider a claim that is filed before the expiration of the statutory or contractual deadlines and that contains all other required clean claim elements except for the amount paid by the primary payor to be in compliance with the statutory or contractual billing deadlines; for such claims the statutory claims payment period would not begin until the HMO or preferred provider carrier received from the physician or provider the amount paid by the primary payor (i.e., the element needed to make the claim a clean claim); (ii) administratively waive the contractual billing deadlines when they themselves are the secondary payor; or (iii) revise their contracts to provide an exception to the contractual billing deadlines when they themselves are the secondary payor. HMOs and preferred provider carriers could require that when they themselves are the secondary payor, the physician or provider must comply with the contractual billing deadlines but provide that the billing period for the physician or provider to submit a clean claim would begin on the date the physician or provider receives notice of the primary payor's final action on the claim. Therefore, in lieu of the commenter's recommended change to §21.2803(e), §21.2803(b)(1)(L) is revised to include clause (i)(II) as previously specified and §21.2803(e) is revised.

Also, as a result of the revisions to §21.2803(b)(1)(L) and §21.2803(e), appropriate changes to §21.2803(b)(3)(I) and (b)(3)(T) have been made.

Comment: Seven commenters stated that claims involving coordination of benefits should be considered clean rather than returned as deficient if the physician or provider has provided the best information available at the time the claim is submitted. Additionally the claims should be placed in an "audit" mode rather than denied. Similarly, when a physician or provider submits a claim that may involve pre-existing conditions or eligibility questions, these too should be considered clean if at the time of the claim submission the physician or provider submitted all available information. This will allow physicians and providers to be paid for services rendered in good faith while the plan conducts further research. Pending further investigation, if the plan discovers that it has paid in error for either of these types of claims, then the plan has the right to recover incorrectly paid claims through the process provided in §21.2809.

Response: The department disagrees that claims involving coordination of benefits (COB) should be placed in an audit mode rather than denied if a physician or provider indicates that another HMO or preferred provider carrier is involved, but fails to provide pertinent information regarding that HMO or preferred provider carrier. To place a claim in which COB is at issue in an audit mode could result in undue enrichment to the submitting physician or provider, in that the physician or provider could receive more than 100% of the amount due, as primary and secondary payors who are HMOs or preferred provider carriers would both be required to pay 85% of the claim under the audit procedure of §21.2809. This is distinguished from the scenario in which pre-existing conditions are at issue, in that the physician or provider is receiving at most an interim payment of 85% of the contracted rate on the claim, until the audit is completed, and final determination of claim coverage is made. For those claims that are filed with secondary payors, the amount paid by the primary payor must be a clean claim element for several reasons: (i) If the amount paid as a covered claim by the primary payor is not a clean claim element, the secondary payor would not have the full 45-day statutory claims payment period to process the claim but would have only the balance of the 45-day statutory claims payment period, if any, that remained after the primary payor completed processing the claim which could unduly subject an HMO or preferred provider carrier who is the secondary payor to statutory penalties. (ii) If a preferred provider carrier or HMO who is the primary payor audits a claim, the 85% payment by the preferred provider carrier or HMO to the physician or provider made pursuant to Article 3.70-3C, §3A(e) and Article 20A.18B(e) is an interim payment and is not an amount paid as a covered claim; there is no payment of the claim until the audit is completed. Upon completion of the audit, the preferred provider carrier or HMO will determine the amount of payment for the covered claim and either make additional payment to the physician or provider or request a refund in the event of overpayment, and it is at this time that the physician or provider will have the necessary information to complete field 29 of HCFA 1500 under §21.2803(b)(3)(l) or field 54 of UB-92 under §21.2803(b)(3)(T). (iii) If the amount paid as a covered claim by the primary payor is not a clean claim element, this could result in the submission of claims to secondary payors with incorrect or incomplete information on the amount paid by the primary payor on the claim, which would increase administrative costs to both secondary payors and physicians and providers. Secondary payors could be required to pay as if they were the primary payor and to seek refunds after receiving information as to the true primary payor and the amount paid as a covered claim by the primary payor. Recordkeeping for physicians and providers would increase, as they would be required to keep records as to which claims submitted to secondary payors reported interim payments by a primary payor; and depending on the primary payors' final action, they would have to send corrected claims and possibly refund payments made by secondary payors. With regard to claims that may involve pre-existing conditions, §21.2803(b)(1) as proposed is revised to add another data element (designated as (P)) for the first date of the previous same or similar illness (HCFA 1500, field 15). The information provided in this data element will assist preferred provider carriers in more promptly determining whether there are pre-existing conditions for which there may not be coverage under the health insurance policy for the service, treatment, or supplies submitted as a clean claim and thereby, in some instances, reducing the amount of time required for processing the clean claim or a portion of the clean claim pursuant to Article 3.70-3C, §3A(c) and (e) of the Insurance Code as enacted by House Bill 610 and §§21.2807 and 21.2809. The information provided in this data element will assist HMOs and preferred provider carriers in detecting possible fraud or material misrepresentations on the application for coverage.

Comment: One commenter stated that §21.2803(b) should be clarified to specify that the amount paid by the primary plan is considered to be an element of a clean claim for those claims submitted for covered services in which coordination of benefits is necessary.

Response: Sections 21.2803(a) and 21.2803(b)(3)(I) and (T) provide that in coordination of benefit or non-duplication of benefit situations a clean claim consists of the amount paid as a covered claim by the primary plan or other coverage. However, §21.2803(b)(3)(I) and §21.2803(e) are revised to require that the amount paid as a covered claim by the primary plan or other coverage must be in accordance with §21.2803(b)(1)(L) and must be as required by §21.2803(e), and §21.2803(b)(3)(T) is revised to require that the amount paid as a covered claim by the primary plan or other coverage must be as required by §21.2803(e). Section 21.2803(b)(3)(I) and (T) are revised as described in this response.

Comment: One commenter observed that §21.2803(e) can be interpreted to require a secondary payor to have primary payor payment information (such as an EOB) before the secondary payor's responsibility can be met. The commenter requested that §21.2803(e) be revised to provide that if a payor is secondary and the required primary payment information is not provided in the claim, then the claim should be considered deficient. The commenter also requested guidance as to whether secondary payors must notify a physician or provider of their secondary status within the 15 day deadline and under what circumstances.

Response: The commenter's interpretation is correct. No revision is necessary because the rule provides that the claim is deficient if the amount paid by the primary payor is omitted. Secondary payors must notify physicians or providers that the claim is deficient as required by §21.2808. The rule makes no exception for secondary payors. As a result of comments, the 15-business-day deadline for notification by the HMO or preferred provider carrier that the claim is deficient has been changed to 45 calendar days in the adopted rule.

Comment: Two commenters requested that §21.2803(e) be revised to require that a copy of the Explanation of Benefits/Explanation of Payment from the primary carrier be attached to the claim form when it is submitted by the provider to the HMO or preferred provider carrier. This would assist with verifying the amount and service paid by the primary payor and would eliminate confusion.

Response: The department agrees in part and disagrees in part. The department recognizes that the amount paid on the covered claim by the primary payor is necessary for the submission of a clean claim to a secondary carrier; however, the department believes that a copy of the Explanation of Benefits or Explanation of Payment from the primary plan is not the only method by which such information can be verified. HMOs and preferred provider carriers may make the Explanation of Benefits or Explanation of Payment or other verification of the amount paid for the covered claim by the primary plan an attachment under the provisions of §21.2804. The department does not agree that the rules should be so restrictive as to require that a copy of the Explanation of Benefits or Explanation of Payments from the primary carrier be attached to the claim form. The department prefers to allow HMOs and preferred provider carriers to develop and implement the most expeditious means to verify amounts paid for covered claims by primary plans.

Comment: One commenter objected to the proposed "elements of a clean claim" requirements under §21.2803 because there is no mention of or allowance for "other documentation reasonably necessary to process the claim." Article 3.70-3C §3(m) specifically allows for "other documentation reasonably necessary to process the claim" and thereby recognizes that it is possible for a provider to submit a billing with all of the correct and complete data fields, but for other documentation to be "reasonably necessary" before an insurer can reach a coverage determination. Thus, it appears that the "elements of a clean claim" requirements in the proposed rule may be more restrictive than the statutes that they are written to implement, and rules may not be more restrictive than the statutes that they are written to implement.

Response: The department disagrees. Article 3.70-3C, §3(m) does not allow for "other" documentation reasonably necessary to process the claim. Instead, Article 3.70-3C, §3(m) and Article 20A.09(j) provide for "documentation reasonably necessary" to process the claim. This "documentation reasonably necessary" for the HMO or preferred provider carrier to process the claim is explicitly provided for in the definition of clean claim in adopted §21.2802(4). Thus, a claim that contains the information required in §21.2802(4) contains the documentation reasonably necessary to process the claim. Article 3.70-3C, §3A(a) provides that in this section, a clean claim means a completed claim as determined under department rules, submitted by a preferred provider for medical care or health care services under a health insurance policy, and Article 20A.18B(a) provides that in this section, a clean claim means a completed claim as determined under department rules, submitted by a physician or provider for medical care or health care services under a health care plan. In drafting the rules, the department performed extensive statutory research. It is the department's determination that both the plain language and the legislative history of House Bill 610 indicate the intent to alter the current method in which claims are processed and pended before being paid or denied. To make the revision suggested by the commenter to allow for additional information beyond that specified by an HMO or preferred provider carrier to physicians and providers before starting the clock running on the statutory claims payment period would maintain the status quo and would not be consistent with the statutory intent.

Comment: Three commenters recommended that the required clean claim elements in §21.2803(a) contain a provision relating to patient eligibility information as a clean claim element because, according to one commenter, eligibility is a key factor in determining whether or not a claim is payable. One commenter recommended that some provision regarding patient eligibility information as a clean claim element should be included in §21.2803(e). Two commenters stated that the clean claim elements in §21.2803(a) and §21.2803(b)(1), (2), and (3) should include the information necessary to establish coverage and liability under the health insurance policy.

Response: The department disagrees. It is the department's determination that both the plain language and the legislative history of House Bill 610 indicate the intent to alter the current method in which claims are processed and pended before being paid or denied. To make the revisions suggested by the commenters to require the inclusion of information necessary to establish eligibility, coverage, and liability over and above what is included in the rules would maintain the status quo and would not be consistent with the statutory intent.

Comment: A commenter stated that the subscriber's date of birth and gender as required in §21.2803(b)(1)(J) should not be required fields for a clean claim. The date of birth is utilized in assessing the "birthday rule" for coordination of benefits and the carriers request this information from the subscriber. The gender of the subscriber would not be relevant to this process.

Response: The department disagrees. The information may be needed for proper enrollee/insured identification.

Comment: A commenter stated that there is not a clear definition of what constitutes an "attachment." The commenter suggested that attachments required by Medicare may be a reasonable standard to use.

Response: While the term "attachment" is not defined, §21.2803(c) allows the use of the Medicare standard for attachments. In addition, §21.2804 requires the HMO and preferred provider carrier to identify the attachment "with specificity." This includes specificity as to content and circumstances.

Comment: One commenter stated that it is very important to reiterate the need for the clean claim data elements to be accurate and that the elements need to be in their specified fields for the claims to be considered clean.

Response: The department agrees that it is important and necessary that the claim data elements be accurate and entered into their specified fields for a claim to be considered "clean." Section 21.2803(f) requires that the elements be accurate. Entry into the incorrect field would not be accurate as required by the rule.

§21.2804. Disclosure of Necessary Attachments

§21.2805. Disclosure of Additional Clean Claim Elements

§21.2806. Disclosure of Revision of Data

Comment: Four commenters recommended that the rules be revised to require that additional or revised attachments and data elements are permitted only if there is first mutual agreement between the physician or provider and the HMO or preferred provider carrier, as reflected in the parties' contract or an amendment thereto, and then if proper notice is given to the physician or provider regarding when the new attachments and data elements are effective. Allowing an HMO or preferred provider carrier to unilaterally require extra data elements and attachments merely upon giving notice or specifying so in its manuals and documents is contrary to the express language of House Bill 610 in §18B(j) and §18B(k) of Chapter 20A and §3A(j) and §3A(k) of Article 3.70-3C, ignores the significance of the parties' contractual relationship, and gives payors rights beyond those given by the statute. According to one commenter, the parties' mutual agreement is imperative because the rules do not limit the scope or number of additional attachments or elements an HMO or preferred provider carrier can require and enable a carrier to require the submission of information that is not even relevant to the claims process.

Response: The department disagrees. It is the department's interpretation of Article 20A.18B(j) and (k) and Article 3.70-3C, §3A(j) and (k) that carriers have the option of changing or adding data elements and attachments by contract; by giving written notice 60 days before requiring the data element or attachment, or by providing updated revisions to the physician or provider manual or other document that sets forth the claims filing procedures at least 60 days before requiring the data element or attachment. It is the department's position that the plain language of the subsections support these three options and that this is the proper interpretation because of statutory construction and practical considerations. First, the contract option and the notice option are in separate subsections, i.e., (j) and (k); it is logical that if the intent of House Bill 610 is that there be a single option (i.e., change in contract with 60 days' notice of the change in contract), as urged by the commenters, the two provisions would be in one subsection to indicate this single option. Also, subsection (k) refers to "an" addition or change ("Not later than the 60th day before the date of an addition or change. . . .") rather than "the" addition or change. The use of the word "the" arguably would have referred to the change made by contract pursuant to (j), while a clear reading of the word "an" logically suggests that (j) and (k) are two separate options. Secondly, from a practical standpoint, it does not make sense that a physician or provider would need 60 days' notice of a contract amendment when the physician or provider is one of the parties to the contract. Also, changes in technology, (i.e., new testing, new treatments and procedures, etc.) may require an HMO or preferred provider carrier to frequently change the data elements and attachments needed to process a claim. Therefore, to require HMOs and preferred provider carriers and physicians and providers to constantly have to amend contracts to address new or additional data elements and attachments would be costly, time consuming, and impractical. It would be costly not only to the HMO or preferred provider carrier and the physician or provider but ultimately to the enrollee or insured. Articles 20A.18B(o) and 3.70-3C, §3A(n) authorize the adoption of rules necessary to implement the prompt payment statute; it is the department's position that for the foregoing reasons, the disclosure procedures and options outlined in §§21.2804, 21.2805, and 21.2806 are necessary to implement the statutes and are a proper and reasonable interpretation of the statutes. With regard to HMOs or preferred provider carriers' requesting information that is not relevant to the claims process, the department currently does not have any information to indicate that the potential problem will actually materialize but will monitor HMOs and preferred provider carriers through complaints and examinations to determine if this does occur and will take appropriate action if necessary.

Comment: Three commenters recommended that §21.2804 and §21.2805 be revised to provide that if the parties' contract states that the only mechanism for requiring additional attachments or elements is by the parties' mutual agreement, then the contract controls the addition of elements and attachments, and an HMO or preferred provider carrier cannot circumvent the contract by giving written notice or by providing updated revisions to provider manuals under §§21.2804(1) and (2) and 21.2805(1) and (2).

Response: The department agrees and the rules have been revised accordingly.

Comment: Four commenters stated that the lack of a mechanism for a provider to send attachments electronically will render virtually all electronic claims "not clean" by definition. The commenters recommended that §21.2804 be revised to provide that when the HMO or preferred provider carrier gives notice of the necessary attachments, or provides updated revisions identifying the attachments, or identifies the attachments in the contract, the HMO or preferred provider carrier must provide the attachment in electronic format to the provider or physician to allow the provider or physician to file the attachment electronically.

Response: The department disagrees that electronic claims will be rendered "not clean" by definition due to attachment requirements. Electronically submitted claims are the fastest and most efficient method of processing the majority of claims, and the department does not anticipate that the adoption of these sections will reduce the efficacy or desirability of electronic claims submission. The requirement for the specific identification of attachments in §21.2804 is meant to provide physicians and providers advance notice of what is required for the processing of claims. The department does not expect, and will consider unacceptable, an increase in the number and volume of attachments from that currently requested by HMOs and preferred provider carriers for all claims simply due to the adoption of these sections. To the extent that currently required attachments may be submitted electronically, that practice should continue. To the extent that it is not feasible for certain attachments to be electronically submitted, presumably such limitation already exists, and is not created by the adoption of these sections. These sections are not intended to alter the method by which claims are submitted or reviewed. They are intended to provide advance notice to all parties of when the prompt-payment-of-claims clock starts to run. If an HMO or preferred provider carrier requires by contract that claims be submitted electronically, the HMO and the preferred provider carrier should provide the physician or provider with the electronic format for filing the claims electronically.

Comment: Eight commenters raised concerns about the rules resulting in payors greatly increasing the paperwork obligation of providers in submitting claims (i.e., submission of attending physician statements, medical records, or progress notes for all likely claim scenarios) to ensure that the information is contained in a clean claim when all of the attachments may not be needed for each and every claim. One commenter stated that this result is not the intended or desired result but appears to be the only one that will allow the insurers and their third party administrators to preserve their rights and those of their insureds under the contract of insurance. Another commenter stated that if claims involving medical review are subject to clean claim payment requirements, carriers will be faced with two equally unappealing options--either risk payment based on billed charges or routinely require medical records as an additional element of a clean claim. Five commenters stated that there may be a problem with payors requiring attachments which are unnecessary, cumbersome, and which would cause undue delay in the claims processing. Another commenter stated that under the proposed §21.2804, a payor could specify the specific circumstances when an attachment is required, but that this could lead to possible fraud where physicians or providers could circumvent the specific requirement by altering their claims submissions.

Response: The intent of the rule is to require attachments to be identified with specificity with regard to the contents of the attachments and the circumstances in which the attachments are required. The department expects HMOs and preferred provider carriers (i.e., payors) to carefully determine the attachments they require and physicians and providers to properly bill and code for the services rendered. The department currently does not have any information to indicate that the potential problem will actually materialize but will monitor complaint trends and take appropriate action if necessary.

Comment: One commenter stated that the practical construct of many preferred provider organization (PPO) arrangements limits the effectiveness of several of the proposed rule provisions that are intended to provide flexibility in the data elements which constitute a clean claim. Where a carrier has contracted with a PPO rather than individual preferred providers themselves, the carrier may have great difficulty in adequately providing the written notice or manuals or other documents setting forth further additional clean claim elements as contemplated under proposed §21.2805, or the revised data elements, attachments, or additional elements under proposed §21.2806. In those situations in which a carrier contracts with a preferred provider organization which itself contracts with individual providers, the proposed rules provide an inadequate methodology by which such carriers may themselves require additional data elements or attachments, revise required data elements or attachments, or revise other procedures involving claims processing.

Response: The department disagrees that any additional rules or methodology are needed to address those situations in which a preferred provider carrier contracts with a PPO which itself contracts with individual providers. Article 3.70-3C, §3A(m) and Article 20A.18B(n) of the Insurance Code, as enacted in House Bill 610, respectively, apply the prompt payment law to a person with whom a preferred provider carrier or an HMO contracts to process claims or to obtain the services of preferred providers to provide medical care or health care to insureds under a health insurance policy and to a person with whom an HMO contracts to process claims or to obtain the services of physicians and providers to provide health care services to enrollees under a health care plan. Article 3.70-3C, §3(l), 28 TAC §3.3703(c) and Article 20A.18C(a)(5) also address the commenter's concerns. Article 3.70-3C, §3(l) provides that an insurer may enter into an agreement with a PPO for the purposes of offering a network of preferred providers in which the agreement may provide that the notice and other insurer contracting requirements may be complied with by either the insurer or the PPO on the insurer's behalf; if an insurer enters into an agreement with a PPO, it is the insurer's responsibility to meet the requirements of Article 3.70-3C or to assure that the requirements are met; and all preferred provider insurance benefit plans offered in this state shall comply with the requirements of Article 3.70-3C. Rule §3.3703(c) provides that an insurer may enter into an agreement with a PPO for the purpose of offering a network of preferred providers, provided that it remains the insurer's responsibility to meet the requirements of Article 3.70-3C and 28 TAC Chapter 3, Subchapter X (Preferred Provider Plans) or ensure that the requirements of Article 3.70-3C and 28 TAC Chapter 3, Subchapter X are met. Article 20A.18C(a)(5) requires an HMO that enters into a delegation agreement with a delegated network to execute a written agreement with the delegated network that contains a provision requiring the delegated network to comply with all statutory and regulatory requirements relating to any function, duty, responsibility, or delegation assumed by or carried out by the delegated network.

Comment: One commenter recommended that §§21.2804, 21.2805, and 21.2806 be revised to require that the 60-day notice shall be sent separately by certified mail, return receipt requested, or by courier delivery with a signed receipt. This provision is needed to resolve any disputes that arise over whether a carrier complied with the notice requirements and to prevent the required notice from being "buried" in other documents sent to the provider.

Response: The department disagrees that the method of delivery of the 60-day notice should be prescribed in the rule. The rule allows HMOs and preferred provider carriers to develop the most effective and efficient method of delivery. The department currently does not have any information to indicate that the potential problem will actually materialize but will monitor complaint trends and take appropriate action if necessary.

§21.2807. Effect of Filing a Clean Claim

§21.2809. Audit Procedures

Comment: One commenter stated that proposed §21.2807(a) leaves open the right of a payor to designate the address of the payor or delegated claims processor orally, repeatedly, frequently, and inconsistently. The commenter recommended that the rule be revised to require (i) payors to designate in writing the address to which claims should be sent; (ii) that notice of this address be given to providers and to the commissioner in writing; (iii) any claim sent to a payor's address of record with the commissioner be deemed sent to the right place; (iv) the address of record be ascertainable over the internet; and (v) a payor not be able to change its address of record except on 60 days written notice to providers. Alternatively, the commenter recommended that the proposed regulation make clear that the statutory claims payment period begins to run upon a payor's receipt of a claim at an address designated by the payor in accordance with the payor's processing procedure disclosure requirements in §21.2811.

Response: The department agrees in part and disagrees in part. The department does not believe that a change is required because the commenter's concerns in (i), (ii) and (v) are addressed in §21.2811; however, for clarification, §21.2807(a) has been changed to read: "(a) The statutory claims payment period begins to run upon receipt of a clean claim from a physician or provider at the address designated by the HMO or preferred provider carrier, in accordance with §21.2811 of this title (relating to Disclosure of Processing Procedures), whether it be the address of the HMO, preferred provider carrier, or a delegated claims processor. The date of claim payment is as determined in §21.2810 of this title (relating to Date of Claim Payment)." There is, however, with respect to recommendation (ii), no requirement that the address be provided to the commissioner, and the department does not believe that this is necessary. In response to recommendation (iii), there are no statutory or regulatory provisions designating the commissioner as the custodian. In response to recommendation (iv), HMOs and preferred provider carriers have the option of placing this address information on their website even though there is no requirement to do so. However, if HMOs and preferred provider carriers do so, they are still required to provide prior written notice to the provider as required by §21.2811.

Comment: One commenter stated that there is no clear definition of when a claim is considered "received." Without this definition, it would be possible for payors to actually receive paper claims but delay entering them into their claims payment systems as received until days or weeks later, and any reference to any period of time that uses "receipt" as the event that marks the beginning point for the calculation of a period of time is meaningless. The commenter recommended that for electronic claims the date of "receipt" should be the date the provider's claim was electronically submitted to the clearinghouse or other designee, and that the date of "receipt" for paper claims should be the date indicated on the return receipt for claims submitted via certified mail or the date indicated on tracking information available from major delivery companies like Federal Express or seven calendar days from the date the claim was mailed as indicated in field 86 on UB-92.

Response: The department disagrees. The department believes that no changes are necessary because Article 3.70-3C, §3A(b) and Article 20A.18B(b) as enacted by House Bill 610 specify the actions which a physician or provider may take to obtain acknowledgment of receipt of a paper claim and what action the HMO or preferred provider carrier or clearinghouse must take to acknowledge receipt if a claim is submitted electronically. There is nothing that prohibits an HMO or preferred provider carrier and physicians and providers from agreeing to utilize the date indicated on the tracking information available from major delivery companies like Federal Express as the date of receipt of a paper claim. HMOs and preferred provider carriers and physicians and providers could also agree that the date of receipt of a paper claim is seven calendar days from the date the claim was mailed as indicated in field 86 on UB-92. With regard to the concern that payors could actually receive paper claims but delay for days or weeks before entering them into the claims payment system as received, the department will monitor complaints for such non-compliance and take appropriate action if necessary.

Comment: Nine commenters disagreed with proposed §21.2807 and §21.2809(a) relating to the department's interpretation of Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e) of the Insurance Code. One commenter stated that the problem with House Bill 610 is that it is "essentially incomplete," and another commenter stated that the statute is "perhaps shortcoming" in addressing determination of liability. One commenter stated that the department's task is "to interpret perhaps an incomplete statute." According to one of the commenters, missing from the statute is the next logical paragraph after subsection (e) in Article 3.70-3C, §3A; that is, the consequence if the insurer is not able to "acknowledge coverage." Two commenters stated that the statute does not speak to the circumstance where the insurer in good faith receives all of the information and elements of the clean claim submitted by the provider in good faith, but there still remains a question of coverage or the insurer needs information from other providers or other sources to determine its liability or to "acknowledge coverage," and the insurer cannot determine or acknowledge coverage within the 45 days. One commenter disagreed with the department's interpretation in the proposed rule that the omission in the statute of those situations when the carrier needs additional information from some party other than the provider indicates a statutory intent to shift the economic burden to the carrier. According to one commenter, while a preferred provider can submit a clean claim that includes all of the required data elements, the carrier may still need additional information that could not be identified until the claim was received. This is frequently the case when issues arise of pre-existing conditions, coverage limitations or coverage exclusions; there may be a need for an operative report; medical records and/or a claimant's statement are needed to resolve issues regarding whether the treatment is medically necessary, whether the treatment is investigational or experimental, whether the treatment is primarily cosmetic, etc.; and police reports as well as many other types of information are needed to resolve a multitude of coverage issues.

Response: The department does not agree that House Bill 610 is incomplete, and it is the department's position that the statutes can be interpreted in a reasonable and logical manner that does not require a determination that the statutes are incomplete. The rules in §21.2807 and §21.2809(a), which are consistent with Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e) as enacted in House Bill 610, are based on the interpretation that the statutes can be implemented without the department being required to essentially create new law which the department is not authorized to do. The department is authorized in Article 3.70-3C, §3A(n) and Article 20A.18B(o) to adopt rules as necessary to implement the statute. It is the department's interpretation that Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e), when read in the context of the overall statute, provide five possible actions that may be taken by preferred provider carriers and HMOs when a clean claim is submitted for services, treatments, or supplies rendered or provided to an insured/enrollee of the preferred provider carrier or HMO. The five possible actions are: Within 45 days of the date the clean claim is received, (i) pay the total amount of the claim in accordance with the contract between the physician or provider and the HMO or preferred provider carrier (i.e., a covered claim); (ii) deny the claim in its entirety (i.e., not a covered claim); (iii) pay the portion of the claim that is not in dispute (i.e., a covered claim) and deny the remainder of the claim (i.e., not a covered claim); (iv) pay the portion of the claim that is not in dispute (i.e., a covered claim) and audit the remainder of the claim and if the audit cannot be completed within the 45 days, pay the physician or provider 85% of the contracted rate on the portion of the claim that is being audited (i.e., coverage of the claim not yet determined); or (v) audit the entire claim, and if the audit cannot be completed within the 45 days, pay the physician or provider 85% of the contracted rate (i.e., coverage of the claim not yet determined). Under the statute, these five actions are the only actions available to the HMO or preferred provider carrier upon receipt of a clean claim. The clean claim is intended to provide all of the information to the preferred provider carrier or HMO that is required, pursuant to Article 3.70-3C, §3A and Article 20A.18B of the Insurance Code and department rules, of the physician or provider submitting the clean claim for the services, treatments, or supplies rendered or provided by the physician or provider. If the preferred provider carrier or HMO must obtain information from other sources to process the clean claim in whole or in part, the statute in Article 3.70-3C, §3A(e) and Article 20A.18B(e) requires the preferred provider carrier or HMO to pay 85% of the contracted rate on the claim while collecting and reviewing this additional information if such collection and review cannot be completed within 45 days of receiving the clean claim. Therefore, all clean claims (as defined by department rules) that are submitted to preferred provider carriers or HMOs are included in the statutory scheme, including clean claims which require more than 45 days to determine liability. It is the department's interpretation, based on the plain language of the statute and legislative intent, that during the period in which the preferred provider carrier or HMO is investigating or reviewing the clean claim, collecting additional information, or taking any other action with regard to the clean claim to make a final determination of the amount owed on the claim (i.e., auditing) the intent of the statute is to partially shift the economic burden to preferred provider carriers or HMOs in lieu of the current situation in which the economic burden is borne solely by physicians or providers. This is supported by Article 3.70-3C, §3A(e) and Article 20A.18B(e) which require the physician or provider at the completion of the audit to make any refunds due to the preferred provider carrier or HMO. The statute is based on the concept that once a physician or provider has submitted a "clean claim" and thereby provided all of the information required, pursuant to Article 3.70-3C, §3A and Article 20A.18B of the Insurance Code and department rules, of that physician or provider for the services, treatments, or supplies rendered to the insured/enrollee of the preferred provider carrier or HMO, the preferred provider carrier or HMO must pay 85% of the contracted rate on the clean claim to that physician or provider if the preferred provider carrier or HMO audits the clean claim and cannot complete the audit within the 45 days; the physician or provider is no longer required to wait to receive any payment for the services, treatment, or supplies that he/she has rendered until the preferred provider carrier or HMO has collected any other necessary information from other sources and fully resolved all of the issues related to the payment of the clean claim (e.g., operative reports, medical records, a claimant's statement and authorization, police reports, etc., which may be needed to resolve issues on pre-existing conditions, coverage limitations or exclusions, medical necessity, whether treatment is investigational or experimental, or primarily cosmetic, etc.). If at the completion of the audit, the preferred provider carrier or HMO determines that a claim or a portion of a claim is not covered, Article 3.70-3C, §3A(e) and Article 20A.18B(e), as enacted in House Bill 610, clearly provide for the refund of any amounts due to the preferred provider carrier or HMO. With regard to the comments on the omission from House Bill 610 of the "next logical paragraph" after subsection (e) in Article 3.70-3C, §3A (if the insurer is not able to "acknowledge coverage") and of those circumstances where the insurer needs more than 45 days to "acknowledge coverage," the department does not agree. Article 3.70-3C, §3A(e) states, "If the insurer acknowledges coverage of an insured under the health insurance policy but intends to audit. . . ." (emphasis added), and Article 20A.18B(e) states, "If the health maintenance organization acknowledges coverage of an enrollee under the health care plan but intends to audit. . . ." (emphasis added). The use of the words "insured" and "enrollee" is crucial to the proper interpretation and application of Article 3.70-3C, §3A(e) and Article 20A.18B(e), respectively. The statutes do not use the words "coverage of the benefit" or "coverage of the service, treatment or supplies submitted as a clean claim" but rather refer to the individual insured/enrollee who is receiving or has received the service, treatment, or supplies. It is the department's position that if a physician or provider has reason to submit a claim to an HMO or preferred provider carrier, the submission of that claim is based on some evidence or action that has informed the physician or provider that the insured/enrollee is covered by that preferred provider carrier or HMO, i.e., health insurance card/health care plan card or contact with the preferred provider carrier or HMO via phone, fax, e-mail, or other contact. With regard to the comment that a physician or provider can submit a clean claim that includes all of the required data elements but the HMO or preferred provider carrier may still need additional information that cannot be identified until the claim is received, including when issues arise of pre-existing conditions, the department recognizes the need of HMOs and preferred provider carriers to obtain as much information as possible in the clean claim. Therefore, to assist preferred provider carriers in more promptly determining whether there are pre-existing conditions, §21.2803(b)(1) is revised to add another essential data element (designated as (P)) for the first date of the previous same or similar illness (HCFA 1500, field 15). Under adopted §21.2803(b)(1)(P), unless otherwise agreed to by contract, this data is necessary for claims filed by physicians or providers. The information provided in this data element will assist preferred provider carriers in more promptly determining whether there are pre-existing conditions for which there may not be coverage under the health insurance policy for the service, treatment, or supplies submitted as a clean claim, thereby, in some instances, reducing the amount of time required for processing the clean claim or a portion of the clean claim pursuant to Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e) and §§21.2807 and 21.2809. The information provided in this data element will assist HMOs and preferred provider carriers in detecting possible fraud or material misrepresentations on the application for coverage.

Comment: Several commenters objected to the department's interpretation of Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e) because the rules are beyond the clear intent and scope of House Bill 610, are inconsistent with the statute, or are more restrictive than the statute. One commenter stated that the requirement that a carrier must pay 85% of the contracted rate on the claim if the carrier is unable to secure all the information reasonably necessary to determine liability or coverage within the statutory claims payment period appears to be beyond the clear intent and scope of House Bill 610 and may be more restrictive than the underlying statutes, and rules may not be more restrictive than the statutes that they are written to implement. Another commenter stated that nowhere in Article 3.70-3C, §3A(c) or in any part of Article 3.70-3C, §3A, Article 3.70-3C(m) or Article 20A.18B is there any mention of a requirement to pay 85% of the contracted rate on a clean claim within 45 days if a final claim determination cannot be reached in that time frame. One commenter objected to the "pay first and ask questions later" approach of the rules. One commenter stated that House Bill 610 and the new §3A of Article 3.70-3C contemplate situations in which a carrier acting in good faith could dispute a claim and neither acknowledge nor deny coverage. According to the commenter, in these instances the statute imposes on the carrier only the burden to notify the provider why the claim will not be paid within the statutory payment period, and requires the carrier to pay the charges submitted at the 85% rate only in those circumstances in which the insurer acknowledges coverage. The proposed rules appear to require the carrier in these circumstances to either acknowledge or deny coverage within the statutory claims payment period, or, upon being unable to do so, to pay 85% of the contracted rate on the claim.

Response: The department disagrees. The requirement that an HMO or preferred provider carrier pay 85% of the contracted rate of the clean claim if the HMO or preferred provider carrier is unable to secure all the information reasonably necessary to determine liability or coverage within the statutory claims payment period is supported by the plain language of House Bill 610. The requirement in Article 3.70-3C, §3A(e) and Article 20A.18B(e) that the preferred provider carrier and HMO pay 85% of the contracted rate on a clean claim that the preferred provider carrier or HMO intends to audit is one of five possible actions that may be undertaken by a preferred provider carrier or HMO upon receipt of a clean claim. The five possible actions under Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e) are: Within 45 days of the date the clean claim is received, (i) pay the total amount of the claim in accordance with the contract between the physician or provider and the HMO or preferred provider carrier (i.e., a covered claim); (ii) deny the claim in its entirety (i.e., not a covered claim); (iii) pay the portion of the claim that is not in dispute (i.e., a covered claim) and deny the remainder of the claim (i.e., not a covered claim); (iv) pay the portion of the claim that is not in dispute (i.e., a covered claim) and audit the remainder of the claim and if the audit cannot be completed within the 45 days, pay the physician or provider 85% of the contracted rate on the portion of the claim that is being audited (i.e., coverage of the claim not yet determined); or (v) audit the entire claim and if the audit cannot be completed within the 45 days, pay the physician or provider 85% of the contracted rate (i.e., coverage of the claim not yet determined). Under the statute, these five actions are the only actions available to the HMO or preferred provider carrier upon receipt of a clean claim. Thus, under the statute, if an HMO or preferred provider carrier does not pay the total amount of the clean claim in accordance with the contract between the physician or provider and the preferred provider carrier or HMO, deny the clean claim in its entirety; or pay a portion of the clean claim that is not in dispute and notify the physician or provider why the remainder of the claim is denied, the only other option available to the HMO or preferred provider carrier under the statute is to "audit" the clean claim or a portion of the clean claim if the HMO or preferred provider carrier is unable to determine within 45 days of the receipt of the clean claim whether the clean claim or portion of the clean claim is covered. Therefore, the 85% requirement in §21.2807 and §21.2809(a) is supported by the language of the statute. There is no language in the statute that omits any claims from the application of the prompt payment law because the HMO or preferred provider carrier needs more than 45 days to determine coverage of the claims. The department disagrees that House Bill 610 would allow an HMO or preferred provider carrier acting in good faith to dispute a clean claim and neither acknowledge nor deny coverage of an enrollee/insured. Article 3.70-3C, §3A(e) requires the preferred provider carrier to pay 85% of the contracted rate on the claim if the preferred provider carrier intends to audit the clean claim. Article 20A.18B(e) requires the HMO to pay 85% of the contracted rate on the claim if the HMO intends to audit the clean claim. It is the department's position that if a physician or provider has reason to submit a claim to an preferred provider carrier or HMO the submission of that claim is based on some evidence or action that has informed the physician or provider that the insured/enrollee is covered by that preferred provider carrier or HMO, i.e., health insurance card/health care plan card or contact with the preferred provider carrier or HMO via phone, fax, e-mail, or other contact. Under Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e), the preferred provider carrier or the HMO, either upon receipt of a clean claim that does not require an audit or upon completion of an audit of a clean claim, may deny the claim upon determination that the claim is not covered by the preferred provider carrier or HMO.

Comment: Several commenters objected to §21.2807 and §21.2809 as being inconsistent with the statute because of the application of audit provisions to pended claims. One commenter stated that applying the audit provisions in §21.2807 and §21.2809(a) to pended claims is inconsistent with the statutory language of Article 3.70-3C, §3A(e) because under this section the audit provisions do not apply unless "the insurer acknowledges coverage of an insured under the health insurance policy but intends to audit the preferred provider claim." One commenter recommended, along with revising the rule to use a more commonly accepted definition of audit which contrasts it to the ordinary claims processing procedure, revising proposed §21.2809(a) to provide that: "If an HMO or preferred provider carrier is unable to pay or deny a clean claim, in whole or in part, because of an audit, within the statutory claims payment period specified in §21.2802(24)(A) or (24)(B) of this title (relating to Definitions), the unpaid portion of the claim shall be classified as an audit, and the HMO or preferred provider carrier shall pay 85% of the contracted rate (on the unpaid portion) of the clean claim within the statutory claims payment period." One commenter stated that carriers should not be required to meet the 45-day time frame or pay 85% of the contracted amount for a claim that may not be covered if they have made reasonable and timely efforts to obtain the information needed to reach a determination. One commenter stated that claims where liability is not clear should be pended and should be excluded from the clean claim payment requirements. A commenter stated that §3A(e) of Article 3.70-3C specifically acknowledges the determination of liability before the provisions of §3A apply. Under §3A(e), if the charges submitted are not covered by the policy, there is no liability under the policy and there is no coverage for the provider's charges. One commenter stated that the phrase "if the insurer acknowledges coverage" in combination with the phrase "under the health insurance policy" means the insurer must acknowledge that liability under the policy exists, and if the insurer does not have that liability for particular charges, then the obligation to pay and pay timely to a provider never arises. Once the liability under the insurance policy is established, then the obligation to pay the provider or deny the claim in the time periods of the rule should apply. Another commenter recommended revising §21.2807(b)(3) to add the following underlined language: "If the insurer acknowledges coverage of an insured under the health insurance policy, but intends to audit the preferred provider claim, the carrier shall notify the physician or provider in writing that the entire clean claim will be audited and pay 85% of the contracted rate on the claim to the physician or provider; or . . . ."

Response: The department disagrees. It is the department's position that the rules are consistent with the statute in applying the audit provisions to pended clean claims and the inclusion of the language in Article 3.70-3C, §3A(e) that, "If the insurer acknowledges coverage of an insured under the health insurance policy but intends to audit. . . . " (emphasis added) and in Article 20A.18B(e) that, "if the health maintenance organization acknowledges coverage of an enrollee under the health care plan but intends to audit. . . ." (emphasis added) does not change that. The use of the words "insured" and "enrollee" is crucial to the proper interpretation and application of Article 3.70-3C, §3A(e) and Article 20A.18B(e). The statutes do not use the words "coverage of the benefit" or "coverage of the service, treatment or supplies submitted as a clean claim" but rather refer to the individual insured/enrollee who is receiving or has received the service, treatment, or supplies. It is the department's position that if a physician or provider has reason to submit a claim to an HMO or preferred provider carrier the submission of that claim is based on some evidence or action that has informed the physician or provider that the insured/enrollee is covered by that preferred provider carrier or HMO, i.e., health insurance card/health care plan card or contact with the preferred provider carrier or HMO via phone, fax, e-mail, or other contact. Furthermore, if the audit provisions do not apply to pended claims then these claims are either not included under the statute and the prompt payment law does not apply to such claims or the determination of claim liability would have to be an element of a clean claim. Neither one of these other possible interpretations is supported by the plain language of the statute or the legislative history. Both the language and the legislative history of House Bill 610 indicate the intent to enact a law that changes the current method of processing claims. There is nothing in House Bill 610 or the legislative history to indicate the omission from the new prompt payment laws of those claims for which there is a dispute about whether or not there is a covered benefit, service, or treatment involved. To make the determination of liability for the claim a "clean claim" element would simply be a continuation of the status quo and would not be consistent with the intent of the legislature to change the current method of processing claims. The department does not agree with the commenter's recommended revision to proposed §21.2809(a) to add the words "because of an audit" and to delete the words "on the unpaid portion" in concert with revising the rule to use a more commonly accepted definition of audit because it is the department's position that both the language and legislative history of House Bill 610 support the department's interpretation of both the actions required of the insurer or HMO upon receipt of a clean claim in Article 3.70-3C, §3A(c) or Article 20A.18B(c) and the audit provisions in Article 3.70-3C, §3A(e) or Article 20A.18B(e).

Comment: One commenter stated that they have done legislative research and listened to all of the tapes containing legislative discussion on House Bill 610 and that they did not find a discussion that audit provisions apply to pended claims and that it is not clear that these claims are subject to the clean claims rule.

Response: The department disagrees. The department believes that the discussion on the tapes along with the lack of any no specific provision in House Bill 610 that omits pended claims from the audit provisions support the department's interpretation that all claims submitted by contracted physicians and providers to preferred provider carriers and HMOs are included within the prompt payment provisions of Article 3.70-3C, §3A and Article 20A.18B as enacted by House Bill 610 and are therefore subject to the rules adopted by the department to implement these statutes. In outlining the purpose of House Bill 610 to the House Insurance Committee at its March 30, 1999, hearing on the bill, Representative Kyle Janek of Houston, sponsor of the bill, stated ". . . we see oftentimes when insurance companies, HMOs, PPOs, will drag out the payment process. And in doing so, they are able to sit on large sums of money for a longer period of time while they earn the interest on that. . . ." Representative Janek also told the committee that many smaller hospitals in rural areas "run on a fairly short cash flow margin, and it is important for them to be able to keep the doors open. . . . I think that if the services are provided, then somebody should pay their bill. . . . the fact is that many insurance companies drag these things out for the purpose of sitting on the float. I wish . . . it did not have to be a legislative fix. . . ." but as long as insurance companies and HMOs are covering people, "I feel that they ought to pay their debt. . . ." Representative Craig Eiland of Galveston, vice chair of the House Committee on Insurance, also explained at the March 30 hearing what he perceived to be the need for the bill based on testimony presented at a House Insurance subcommittee hearing held during the interim in Fort Worth. Representative Eiland stated that the problem for providers and doctors is that when they send in a claim, they are not being paid, and that even with the "fax confirmation" of receipt of the claim, the carriers are saying, "'Well, we can't find it.' And they drag it out either for the float or for whatever purpose, and the doctor ends up waiting six months to nine months before they collect on a clean claim. . . ." (Hearing on House Bill 610 before the House Committee on Insurance, 76th Leg., R.S., Tape 1A (March 30, 1999)).

Comment: One commenter objected to the inconsistency of the rules with House Bill 610 because House Bill 610 seems to create a distinction between disputed clean claims and audited claims and only requires 85% payment if a claim will be audited and the statute does not require payment of disputed claims. The commenter stated that the rules do not consistently recognize a distinction between a disputed claim and an audit and could require a payor to pay 85% of the disputed portion of a clean claim as well as 85% of an audited claim. According to the commenter, in failing to clearly recognize the distinction between disputed claims and an audit, the rules could have an unintended adverse economic effect on payors by requiring them to pay 85% of a disputed claim. In addition, there will be an intended adverse economic impact if payors receive an administrative penalty for failure to pay 85% of a disputed claim.

Response: The department disagrees that the rules are inconsistent with the statute in addressing "disputed" clean claims and "audited" claims. The statute does not mention "disputed" claims at all. Article 3.70-3C, §3A(c)(2) and Article 20A.18B(c)(2) address claims that are "not in dispute." The statute speaks only to claims for which the total amount is paid in accordance with the physician/provider-carrier contract; claims for which the portion not in dispute is paid and the remainder is denied; claims for which the portion not in dispute is paid and the remainder is audited; claims which are denied; and claims which are audited. The rules do not distinguish between a "disputed" claim and an "audited" claim because the statute as enacted by House Bill 610 does not make such a distinction. Any "unintended adverse economic effect" on payors because of the requirement to pay 85% during the auditing of the clean claim is the result of the legislative enactment of House Bill 610. The administrative penalties for failure to pay 85% during the auditing of a clean claim are also the result of the legislative enactment of House Bill 610.

Comment: Three commenters objected to the fact that if a plan is unable to determine liability within 45 days, the only option in some instances will be to deny the claim. For example, because a plan would not be able to determine within 45 days whether or not a claimant over 19 years old (but under 25 years old) is a full-time student and therefore covered under the plan, the only option available under the rule is to deny the claim. This is because in the event that the care is provided out-of-network, recoupment is not an option (because the plan may not have another payment to that provider for many years) and the plan would be left "holding the bag" if they have to pay 85%. The commenters questioned whether carriers that are obligated to deny the claim as the only option are subject to other provisions of the Insurance Code in not dealing in good faith or denying a claim when it really should be pended, suspended, or disputed.

Response: The department disagrees that if an HMO or preferred provider carrier is unable to determine liability within 45 days, the only option in some instances will be to deny the claim. It is the department's interpretation that Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e) provide five possible actions that may be taken by HMOs and preferred provider carriers when a clean claim is submitted for treatment or services provided to an insured/enrollee of the preferred provider carrier or HMO. The five possible actions are: Within 45 days of the date the clean claim is received, (i) pay the total amount of the claim in accordance with the contract between the physician or provider and the HMO or preferred provider carrier (i.e., a covered claim); (ii) deny the claim in its entirety (i.e., not a covered claim); (iii) pay the portion of the claim that is not in dispute (i.e., a covered claim) and deny the remainder of the claim (i.e., not a covered claim); (iv) pay the portion of the claim that is not in dispute (i.e., a covered claim) and audit the remainder of the claim and if the audit cannot be completed within the 45 days, pay the physician or provider 85% of the contracted rate on the portion of the claim that is being audited (i.e., coverage of the claim not yet determined); or (v) audit the entire claim and if the audit cannot be completed within the 45 days, pay the physician or provider 85% of the contracted rate (i.e., coverage of the claim not yet determined). Therefore, whenever the preferred provider carrier or HMO requires more than 45 days to process a clean claim or a portion of the clean claim, whatever the reason, under the statute the preferred provider carrier or HMO is required to pay 85% of the contracted rate. Thus, there would never be an instance under the statute or the rules when the only option would be to deny the clean claim unless the preferred provider carrier or HMO within 45 days of receiving the clean claim determined that the clean claim was for non-covered service, treatment, or supplies or the insured/enrollee was no longer covered by the preferred provider carrier or HMO. Preferred provider carriers and HMOs who deny coverage for clean claims for which the preferred provider carrier or HMO is liable will continue to be subject to all of the provisions of the Insurance Code that address such violations. In the specific example cited by the commenter, neither the statute nor the rules would apply because in the example, the care rendered to the 19-year old claimant is by an "out-of-network" provider, and the statutes and rules apply only to contracted physicians or providers. Article 3.70-3C, §3A(m) and Article 20A.18B(n) of the Insurance Code, as enacted by House Bill 610, provide, respectively, that the prompt payment statute applies to a person with whom an insurer contracts to obtain the services of preferred providers to provide medical care or health care to insureds under a health insurance policy, and applies to a person with whom an HMO contracts to obtain the services of physicians and providers to provide health care services to health care plan enrollees. The rules in §21.2801 provide that the rules in the subchapter apply "to all paper and electronic claims submitted by contracted physicians or providers for services or benefits provided to insureds of preferred provider carriers and enrollees of health maintenance organizations. . . . " (emphasis added).

Comment: One commenter stated that it is not fair or equitable that the rules impose a penalty to pay 85% if the carrier cannot get additional information from some party other than the provider within 45 days. The commenter cited Article 21.21 which says that prompt payment must be prompt, fair, and equitable. The proposed rules clearly provide for prompt payment but what is missing is fair and equitable. Another commenter stated that requiring a carrier to make payment for something that is not owed appears to be a fundamentally flawed interpretation of the statute.

Response: It is the department's position that the rules are consistent with Article 3.70-3C, §3A and Article 20A.18B of the Insurance Code as enacted by House Bill 610. Article 21.21, which prohibits unfair methods of competition or unfair or deceptive acts or practices, has been in existence since 1951 and was last amended in 1995. Article 21.21, §4(10) defines unfair claims settlement practices as engaging in any of a statutorily specified list of acts with respect to a claim by an insured or beneficiary. One of the "unfair settlement practices" specified in §4(10) of Article 21.21 is "failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer's liability has become reasonably clear." It is the department's position that Article 21.21, §4(10) does not apply to claims by contracted physicians or providers acting on their own behalf pursuant to their contract with the HMO or preferred provider carrier. It is the department's position that the legislature determined that the situation of delays in claims payments to physicians and providers of HMOs and preferred provider carriers required a remedy and enacted House Bill 610 as the remedy. Both the language and legislative history of House Bill 610 indicate the intent to change the current method of processing claims. After a clean claim is filed with the insured's preferred provider carrier or the enrollee's HMO, the amount owed on the clean claim is arguably an amount that is in dispute; it may belong to the physician or provider for the services already rendered to the insured/enrollee or it may continue to be held by the preferred provider carrier or HMO for payment of future claims if the services, treatment, or supplies submitted as a clean claim or portion of a clean claim are not covered. It is the department's interpretation that during the period in which the preferred provider carrier or HMO is investigating or reviewing the clean claim, collecting additional information, or taking whatever other action is necessary to make a final determination of the amount owed on the clean claim (i.e., auditing) the intent of the statute is to partially shift the economic burden to preferred provider carriers and HMOs in lieu of the current situation in which the economic burden is borne solely by physicians and providers. The statute is based on the concept that once a physician or provider has submitted a "clean claim" and thereby provided all of the information required, pursuant to Article 3.70-3C, §3A and Article 20A.18B of the Insurance Code and department rules, of that physician or provider, for the services, treatment, or supplies provided to the insured/enrollee of the preferred provider carrier or HMO, the preferred provider carrier or the HMO must pay an interim payment of 85% of the contracted rate on the clean claim to that physician or provider if the preferred provider carrier or HMO intends to audit the claim and cannot complete the audit within 45 days. The physician or provider is no longer required to wait to receive any payment for the services, treatment, and/or supplies that he/she has provided until the HMO or preferred provider carrier has fully resolved all of the issues related to the payment of the clean claim (e.g., pre-existing conditions, coverage limitations or exclusions, operative reports, medical records from other providers, medical necessity, experimental or cosmetic procedures, police reports, etc.). If at the completion of the audit, the preferred provider carrier or HMO has overpaid the physician or provider, §21.2809(b) in accordance with Article 3.70-3C, §3A(e) and Article 20A.18B(e) provides for the refund of any overpayment due to the preferred provider carrier or HMO; therefore, under the plain language of the statute, the 85% payment is not a penalty. Thus, the department does not agree that the implementation of the statute by the rules is unfair, inequitable, or flawed or that the 85% payment required by Article 3.70-3C, §3A(e) and Article 20A.18B(e) is a penalty.

Comment: One commenter stated that the later refund of any overpayment does not change the fact that the rule requires 85% payment whether the insurer is liable or not.

Response: The rules are consistent with Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e) of the Insurance Code. The statute and the rules require an interim payment of 85% of the contracted rate on the clean claim or a portion of the clean claim if the preferred provider carrier or HMO intends to audit the clean claim or a portion of the clean claim and the audit cannot be completed within 45 days. After a clean claim is filed with the insured's preferred provider carrier or the enrollee's HMO, the amount owed on the clean claim is arguably an amount that is in dispute; it may belong to the physician or provider for the services already rendered or it may continue to be held by the preferred provider carrier or HMO for the payment of future claims if the services, treatment, or supplies submitted as a clean claim or portion of a clean claim are not covered. The interim payment of 85% is not the end of the clean claims process but is rather an interim shifting of the economic burden from the physician or provider to the preferred provider carrier or HMO until the final determination of the actual amount owed on the clean claim. Upon this final determination, the statute and the rules provide for the physician's or provider's refund to the preferred provider carrier or HMO of any overpayment and for the preferred provider carrier's or HMO's payment of any additional amounts owed the physician or provider. There is a difference between an 85% payment which is a final payment with no refund in the event of overpayment and an interim 85% payment with the requirement of a refund in the event of overpayment.

Comment: One commenter recommended revising the rule to allow the 45 day deadline to commence after it is determined that a clean claim requires medical review, provided the preferred provider organization makes that determination within 30 days of receipt of the claim. If the preferred provider organization determines that the claim is clean and does not require medical or eligibility review, the 45 day deadline would be in effect.

Response: The department disagrees. The recommended revision is not authorized by House Bill 610. Article 3.70-3C, §3A(e) and Article 20A.18B(e) provide that not later than the 45th day after the date that the preferred provider carrier or HMO receives the clean claim from the physician or provider, the preferred provider carrier or HMO shall pay the charges submitted at 85% of the contracted rate on the claim if the preferred provider carrier or HMO intends to audit the claim. The statute does not contain any specific omission from the 45 day deadline of clean claims requiring medical or eligibility review; to provide such an omission would result in promulgation of a rule that is not authorized by the statute.

Comment: One commenter stated that if an insurer or third party administrator unreasonably delays the determination of liability, Article 21.21, §4(10) provides the remedy for that problem.

Response: House Bill 610 as enacted by the 76th Legislature in 1999 is the most recent enactment of the legislature that addresses how physician or provider claims are to be processed. House Bill 610 does this through providing a means for the specification of elements and attachments which must be submitted by a physician or provider to a preferred provider carrier or HMO for a claim to be "clean" (i.e., department rules); specifying the actions that a preferred provider carrier or HMO must take after receiving a clean claim; and providing the penalties for preferred provider carriers or HMOs that violate the required statutory actions and deadlines for processing "clean claims." Article 21.21 which prohibits unfair methods of competition or unfair or deceptive acts or practices has been in existence since 1951 and was last amended in 1995. Article 21.21, §4(10) defines unfair claims settlement practices as engaging in any of a statutorily specified list of acts with respect to a claim by an insured or beneficiary. It is the department's position that Article 21.21, §4(10) does not apply to claims by contracted physicians or providers acting on their own behalf pursuant to their contract with the HMO or preferred provider carrier. The department does not have the authority to change or ignore the physician or provider claim requirements and penalties enacted in House Bill 610 because of the existence of Article 21.21, §4(10).

Comment: Two commenters stated that the rules ignore the contract of insurance between the carrier and the insured. One commenter stated that the contract between the insurance company and the insured, not the preferred provider organization contract, determines the liability of the insurer to its insured. The insurer, or its third party administrator (TPA) on behalf of the insurer, has the right under the insurance policy to make the determination of liability. The requirement in the rule for the TPA or insurer to determine payment without allowing for a prior determination of liability is an interference with and violation of the rights of the insurer and its TPA and the insurer's insured under the contract of insurance. In determining liability, the TPA owes a duty to the insurer to properly interpret and carry out the terms of the policy. The insurer or TPA owes a fiduciary duty to the insured to make a full investigation of relevant documents. The proposed rules require the insurer or TPA to make a determination of payment without allowing for this prior, careful determination of liability. Another commenter stated that the rule in §21.2809 which requires the insurer to pay 85% of the claim whether the insurer is liable or not under the health insurance policy ignores the fundamental health insurance policy contract and perhaps impairs that contract between the insurance company and the insured.

Response: The department disagrees. It is the department's position that the rules are consistent with Article 3.70-3C, §3A and Article 20A.18B of the Insurance Code as enacted by House Bill 610. It is the department's position that the legislature determined that the situation of long delays in health insurance or HMO payments to physicians or providers required a remedy and enacted House Bill 610 as the remedy. Both the language and legislative history of House Bill 610 indicate the intent to change the current method by which claims are processed and pended. House Bill 610 does not contain any provisions that interfere with the right of the preferred provider carrier or HMO to determine its liability to its insured/enrollee or that affect the conditions under which a physician or provider claim is to be paid but instead provides a means for the specification of elements and attachments which must be submitted by a physician or provider to a preferred provider carrier or HMO for a claim to be "clean" (i.e., department rules); specifies the actions that a preferred provider carrier or HMO must take after receiving a clean claim; and provides the penalties for preferred provider carriers or HMOs that violate the required statutory actions and claims periods for processing "clean claims." These rules which are necessary to implement House Bill 610 also do not contain any provisions that interfere with the right of the preferred provider carrier or HMO to determine its liability to its insured/enrollee or that affect the conditions under which a clean claim is to be paid. Article 3.70-3C, §3A(e) and Article 20A.18B(e) specify an interim payment to the physician or provider of 85% of the contracted rate on a claim that is submitted which contains the elements of a "clean claim" under department rules, and which the preferred provider carrier or HMO intends to audit, and provides, upon completion of the audit, for a refund in the event of overpayment and for additional payment in the event of underpayment. Based on the following analysis, the department does not agree that this interim payment interferes with the duty the TPA owes the preferred provider carrier or HMO to properly interpret and carry out the terms of the policy or health care plan or that the requirement that the interim payment be made ignores or impairs the contract between the insurance company and the insured (i.e., insurance policy) or the contract between the HMO and the enrollee (i.e., health care plan). It is the department's position that if a physician or provider has reason to submit a claim to an HMO or preferred provider carrier the submission of that claim is based on some evidence or action that has informed the physician or provider that the insured/enrollee is covered by that preferred provider carrier or HMO, (i.e., health insurance card/health care plan card or contact with the preferred provider carrier or HMO via phone, fax, e-mail, or other contact). The preferred provider carrier and the HMO have collected premiums from the insured/enrollee and have agreed to pay for all covered services, treatments, and/or supplies in accordance with the insurance contract or health care plan. The preferred provider carrier and the HMO have also contracted with the physician or provider to pay for services, treatments, and supplies that are rendered to the insured/enrollee. After a clean claim is filed with the insured's preferred provider carrier or with the enrollee's HMO, the amount owed on the clean claim is arguably an amount that is in dispute; it may belong to the physician or provider for the services already rendered to the insured/enrollee or it may continue to be held by the preferred provider carrier or HMO for the payment on future claims if the services, treatments, and/or supplies are not covered. The interim payment of 85% of the contracted rate on the clean claim while the preferred provider carrier or HMO is determining coverage of the claim is not a final payment and, by statute, is to be returned to the preferred provider carrier or HMO upon the preferred provider carrier's or HMO's determination that the claim is not covered under the health insurance policy or health care plan. The preferred provider carrier's or HMO's interim payment to physicians and providers that have rendered services, treatments, and/or supplies to the insured/enrollee, for whom the physician or provider has some evidence (i.e., health insurance card/health care plan card or contact with the preferred provider carrier or HMO via phone, fax, e-mail, or other contact) that the insured/enrollee is covered by that preferred provider carrier or HMO does not interfere with or violate the rights of the preferred provider carrier and its TPA and the insured under the insurance contract or the rights of the HMO and its TPA and the enrollee under the health care plan. The preferred provider carrier and HMO have agreed to pay these physicians and providers upon the rendering of services, treatments, and/or supplies to the insured/enrollee. The fact that the interim payment amount may be in the temporary possession of the insured's/enrollee's physician or provider while the preferred provider carrier or the HMO determines the actual amount to be paid under the policy or evidence of coverage does not interfere with or violate the rights of the preferred provider carrier and its TPA and the insured under the insurance contract or the HMO and its TPA and the enrollee under the health care plan because the amount owed on the clean claim is ultimately determined in accordance with the insurance contract or health care plan. It is important to the insured/enrollee that these physicians and providers not be required to wait for long periods of time to receive payment for the services, treatment, and/or supplies that they have rendered because the insured/enrollee needs to be able to continue to obtain medical treatment from these physicians and providers. It is the department's interpretation that during the period in which the preferred provider carrier or HMO is investigating or reviewing the clean claim, collecting additional information, or taking whatever other action is necessary to make a final determination of the amount owed on the clean claim (i.e., auditing), and such cannot be done within 45 days of receiving the clean claim, the intent of the statute is to partially shift the economic burden to preferred provider carriers and HMOs in lieu of the current situation in which the economic burden is borne solely by physicians and providers. The statute is based on the concept that once a physician or provider has submitted a "clean claim" to a preferred provider carrier or HMO and thereby provided all of the information required of that physician or provider, pursuant to Article 3.70-3C, §3A and Article 20A.18B of the Insurance Code and department rules, for the service, treatment, and/or supplies provided to the insured/enrollee, the preferred provider carrier or HMO must pay an interim payment of 85% of the contracted rate on the claim to that physician or provider if the preferred provider carrier or HMO intends to audit the clean claim and cannot complete the audit within 45 days; the physician or provider is no longer required to wait to receive any payment for the services, treatment, and/or supplies that he/she has rendered until the preferred provider carrier or HMO has fully resolved the issues related to the payment of the clean claim (e.g., pre-existing conditions, coverage limitations or exclusions, operative reports, medical records from other providers, medical necessity, experimental or cosmetic procedures, police reports, etc.). Upon completion of the audit, under Article 3.70-3C, §3A(e), Article 20A.18B(e) and §21.2809(b), the actual amount of the payment on the clean claim is determined based on the coverage provided in the health insurance policy or health care plan and any additional payment due a physician or provider or any refund due the preferred provider carrier or HMO is to be made not later than the 30th day after the later of e date that the physician or provider receives notice of audit results or, if an appeal was filed before expiration of the 30-day refund period, any appeal rights of the insured or enrollee are exhausted.

With regard to the comment that the rule in §21.2809 which requires the insurer to pay 85% of the clean claim whether the insurer is liable or not under the health insurance policy "perhaps impairs" the contract between the insurance company and the insured, the department disagrees. Article I, §10 of the U.S. Constitution provides: "No state shall pass any. . .law impairing the obligation of contracts." Article I, §16 of the Texas Constitution provides: "No . . . law impairing the obligation of contracts, shall be made." Federal and state constitutional guarantees against impairment of contractual obligations are interpreted essentially identically. Chandler v. Jorge A. Gutierrez, P.C., 906 S.W.2d 195, 203 (Tex. App.--Austin 1995, writ denied). The interpretive commentary for Article I, §16 of the Texas Constitution states in part:

The guaranty of the Constitution is directed against the impairment of the obligation of contracts rather than the contract itself. A contract is an agreement in which a party undertakes to do or not to do a particular thing. Said party is required by duty and by law to perform his undertaking and this is known as the obligation of the contract. Any law which releases a part of this obligation, any act which to any extent or degree amounts to a material change or modifies it, must impair it. . . .The obligation protected is not derived from the acts and stipulations of the parties alone, but includes also the relevant law in force at the time the contract is made. The contract clause forbids only laws which operate retroactively on contracts. (Vernon's Ann. Tex. Const., Art. I, §16)

The constitutional prohibitions against impairment of contracts "is directed against the impairment of the obligation of contracts rather than the contract itself, that is, what the party to a contract is required by duty and by law to perform. Any law which releases a part of this obligation, any act which to any extent or degree amounts to a material change or modifies it, must impair it." Cardenas v. State, 683 S.W.2d 128, 131 (Tex. App.--San Antonio 1984, no writ). For the reasons outlined in this response, it is the department's position that neither House Bill 610 nor the rules relieve a preferred provider carrier of any obligation under the insurance contract between the insurance company and the insured nor do they materially change or modify that contract nor operate retroactively on that contract; neither House Bill 610 nor the rules relieve an HMO of any obligation under the health care plan nor do they materially change or modify the plan nor do they operate retroactively on that plan. The obligation of the insurance company or HMO to pay physician/provider claims in accordance with the insurance contract or health care plan is not changed by House Bill 610 or these rules.

The department disagrees that an insurer or TPA owes a fiduciary duty to its insured. The Texas courts have held that there is no general fiduciary duty between an insurer and its insured. Garrison Contractors, Inc. v. Liberty Mutual Insurance Co., 927 S.W.2d 296, 301 (Tex. App.--El Paso 1996), aff'd 966 S.W.2d 482 (Tex. 1998) According to the courts, fiduciary relationships arise from formal, technical relationships such as attorney/client, or from informal, social, moral, or personal relationships of confidence and trust which impose greater duty as a matter of law. Garrison at 301 citing Lovell v. Western National Life Insurance Co., 754 S.W.2d 298, 303 (Tex. App.--Amarillo 1988 (writ denied)).

Comment: Two commenters stated that the rules provide incentives for both subscribers and providers to delay sending information. One commenter stated that not only do the rules seem to provide an incentive for both subscribers and providers to delay sending information, payors may never receive requested information under the proposed rules. Payors have no control over the speed with which they are provided information by others. The proposed rules seem to guarantee that providers will never send requested information as they will receive 85% payment if they "stonewall." Another commenter stated that if a provider suspects that services may not be covered, the provider is faced with the tempting position of withholding records and receiving 85% of the contracted rate or providing the records and risk having the claim denied. The commenter stated that often medical records must be requested from several providers, and providers other than the billing providers do not necessarily have an incentive to respond quickly to a request for medical records. In addition, providers may demand advance payment for medical records, and it sometimes takes longer than 45 days just to receive requested records. If the carrier never receives requested medical records, the carrier will likely pay for many claims where liability does not exist under the insurance contract. If claims expenses increase, premiums will likely increase, and this will impact the whole industry.

Response: The department disagrees that the rule provides incentives for subscribers (i.e., insureds and enrollees) and physicians or providers to delay sending information to preferred provider carriers or HMOs. The rules are consistent with the provisions of House Bill 610. As to contracted physicians or providers, the department does not anticipate that these physicians or providers will delay or fail to provide any additional information available from them as these physicians or providers want 100% of the contracted rate, and not just 85%, as the contracted rate is less than the physician's or provider's usual charge for the service rendered. In addition, in most instances, the submitted claim will contain all of the necessary information required to process the claim (i.e., the information required pursuant to Article 3.70-3C, §3A and Article 20A.18B of the Insurance Code and department rules) and thus the statutory claims payment period will commence upon receipt of the claim. The department also believes that preferred provider carriers or HMOs and physicians or providers could agree by contract to the length of time in which the physician or provider must supply any additional information/attachment within their possession that is not already defined as an element or attachment of a clean claim. The department recognizes that preferred provider carriers and HMOs may need information from non-contracted physicians or providers, the insured/enrollee, or other sources. As to non-contracted physicians or providers, there are laws that address the timeliness for physicians or providers to respond to requests for medical information necessary in the collection of fees for medical services provided by the physician or provider (including Occupations Code, Title 3, Chapter 159 (Physician-Patient Communication); Health and Safety Code, Title 4, Chapter 241 (Hospitals); and Health and Safety Code, Title 4, Chapter 311 (Powers and Duties of Hospitals). While the department is not aware of any law that requires insureds/enrollees or other sources to provide requested information within a certain time period, it is anticipated that most insureds/enrollees will provide the information as they want their physician or provider to be paid since they are still seeking care or could in the future seek care from the physician or provider. As to other sources, the department has no authority to adopt a rule requiring response within a certain time frame, but anticipates that most sources will respond as promptly as circumstances will allow and as a matter of good business practice. Neither the statute nor the rules require the payment of claims where liability does not exist under the insurance contract or the health care plan; both the statute and the rules require an interim payment of 85% of the contracted rate on a clean claim that the preferred provider carrier or HMO intends to audit and provide for a refund of any overpayment. Based upon input from the industry, the department believes that only a small percentage of clean claims will not be able to be processed within the 45-day statutory claims period and will thus be subject to the interim payment of 85% of the contracted rate on the clean claim. For example, one HMO stated at the January 25, 2000 rule hearing, that it currently has approximately 2,000, or less than 1%, of its HMO claims that require 45 days or more for processing. If, however, the implementation of House Bill 610 results in increases in claims expenses and premiums, it is within the purview of the legislature to determine if a revision is required in the prompt payment law.

Comment: A commenter stated that the requirement in the proposed rule that an insurer pay 85% of the claim whether it is liable or not in some instances is an unconstitutional "taking" that is prohibited by the U.S. Constitution and the Texas State Constitution. The commenter stated that it is a prohibited taking of one person's property and giving it to another. The commenter cited Marrs v. Railroad Commission (172 S.W.2d 491, 494 (Tex. 1944)) which cites the U.S. Supreme Court decision in Thompson v. Consolidated Gas Co. (300 U.S. 55, 80, 57 S. Ct. 364, 376, 81 L. Ed. 510, 524 (1937)). According to the commenter, the question of constitutionality can be avoided by use of the broad discretion vested in the department in Article 3.70-3C, §3A(a) to define the term "clean claim." The commenter stated that the law clearly requires that a statute be construed to be constitutional and that it is presumed that compliance with the constitution is intended and that a just and reasonable result is intended. The commenter recommended revising the definition of "clean claim" in proposed §21.2802(3) to be a claim "for which coverage and liability under the health insurance policy have become reasonably clear. . . ." and deleting §21.2809(a) and renumbering §21.2809(b) and (c). The commenter stated that the language "for which liability. . . have become reasonably clear" is taken from Article 21.21-2, §2(b)(4), the Unfair Claims Settlement Practices Act, which provides severe penalties for committing an unfair claims settlement practice. The commenter stated that under the Unfair Claim Settlement Practices Act the Commissioner has broad authority to hold companies accountable when they do not process their claims in a timely manner.

Response: The department disagrees that the requirement in the proposed rule that an HMO or preferred provider carrier pay 85% of the clean claim whether it is liable or not in some instances is an unconstitutional "taking" that is prohibited by the U.S. Constitution and the Texas State Constitution. The rule is consistent with Article 3.70-3C, §3A(e) and Article 20A.18B(e) of the Insurance Code as enacted by House Bill 610. The facts of Marrs v Railroad Commission, 177 S.W.2d 941, 948 (Tex. 1944), the case cited by the commenter to support their position, concerned proration orders issued by the Railroad Commission (RRC) apportioning the allowable production of oil from a single pool. The operation under the RRC orders resulted in the drainage from petitioners' leases to adjoining leases in the pool from which larger proportion of oil had previously been recovered. The potential of petitioners' leases was several times that of the adjoining area. The petitioners owned practically all the mineral estate in the southern section of the McElroy Field known as the Inside McElroy area. A suit was brought to set aside the RRC orders as invalid because they were unreasonable, arbitrary, and discriminatory, and amounted to the confiscation of private property. The petitioners' suit was predicated on the theory that their production was so restricted by the RRC's proration orders that they were unable to recover their oil before it drained away to the more densely drilled section to the north, known as the Church-Fields area. In the Texas Supreme Court's analysis, the court cited the findings of the trial court:

Under the findings of the trial court the allowables as fixed by the Railroad Commission for the two areas are entirely out of proportion to the potentials thereof. They are not in proportion to the oil under the different areas. It is very evident that petitioners are not being permitted to mine their just proportion of the oil. There is several times as much oil underlying petitioners' land as there is under the land in the Church-Fields area, yet those in the Church-Fields area are being permitted to mine nearly as much oil as are petitioners. As the oil is taken from the depleted Church-Fields area it is replaced by oil drained from petitioners' property. If petitioners were free to fend for themselves they could mine the oil under their land and thus prevent its escape to the adjoining area. But the orders of the Railroad Commission here complained of prevent petitioners from so doing. As a result, petitioners are being forever deprived of their property. It is the taking of one man's property and the giving it to another. (emphasis added) (Marrs at 948)

The Texas Supreme Court affirmed the trial court's judgment (and reversed the judgment of the Court of Civil Appeals) holding the RRC proration orders invalid and permanently enjoining the RRC from enforcing the proration orders allocating and apportioning the allowable production of oil from the field in question between the producers therein for the months of March, April, May, and June 1941. In the opinion, the court stated:

This is not a case of mere waste to which the Commission has exercised the sound discretion invested in it to conserve our natural resources. As previously stated, the orders of the Railroad Commission have the effect of taking one's property and giving it to another under circumstances where the evidence shows that this is not necessary in order to conserve the natural resources. In Thompson v. Consolidated Gas Co. (citations omitted), it was said 'And this Court has many times warned that one person's property may not be taken for the benefit of another private person without a justifying public purpose, even though compensation be paid.' (Marrs at 949)

The department believes that the facts of Marrs are sufficiently different from the facts at hand that it does not follow that the requirement in Article 3.70-3C, §3A(e), Article 20A.18B(e), §21.2807 and §21.2809(a) that an insurer pay 85% of the claim whether it is liable or not in some instances is an unconstitutional taking that is prohibited by the U.S. Constitution and the Texas State Constitution. The department's position is based on the following analysis. (i) Unlike Marrs, the money that is to be paid by the preferred provider carriers and HMOs to the physicians and providers pursuant to the 85% requirement is not clearly the property of the preferred provider carriers or HMOs; it is money that is in dispute. After a clean claim is filed with the insured's preferred provider carrier or the enrollee's HMO, the amount owed on the claim is arguably an amount that is in dispute; it may belong to the physicians and providers who have rendered services, treatment, or supplies to the insureds/enrollees based on some evidence or action that has informed the physician or provider that the insured/enrollee is covered by that preferred provider carrier or HMO (i.e., health insurance card/health care plan card or contact with the preferred provider carrier or HMO via phone, fax, e-mail, or other contact), or it may continue to be held by the preferred provider carrier or HMO for payment on future claims if the services, treatment, or supplies are not covered. The preferred provider carrier and the HMO have agreed by contract to pay these physicians and providers upon the rendering of services, treatments, and supplies to insureds/enrollees. The premiums collected from insureds by the preferred provider carrier and from the enrollees by the HMO are held by the preferred provider carrier or HMO for the payment of claims incurred by its insureds/enrollees. The interim payment is a temporary shifting of monies to the insureds'/enrollees' physicians and providers while the preferred provider carrier or the HMO determines the actual amount owed under the policy or plan for the services, treatments, and/or supplies that have already been provided to the insured/enrollee. It is the department's interpretation that during the period in which the preferred provider carrier or HMO is investigating or reviewing the claim, collecting additional information, or taking other action to make a final determination of the amount owed on the claim (i.e., auditing) the intent of the statute is to partially shift the economic burden to preferred provider carriers and HMOs in lieu of the current situation in which the economic burden is borne solely by physicians and providers who have rendered services, treatments, and/or supplies to insureds of the preferred provider carrier or to enrollees of the HMO. In outlining the purpose of House Bill 610 to the House Insurance Committee at its March 30, 1999 hearing on the bill, Representative Kyle Janek of Houston, sponsor of the bill, stated:

Many times patients will be on the hook for a particular payment. The doctor may say, I can't get your folks to pay, I'm not going to continue to treat you if I'm not getting paid. The hospital may say the same thing. So, you know, I'm trying to get the patients taken out of the loop on this as well, get them out of the middle of the fire fight. We have some smaller operations, smaller physician's offices or groups, or smaller hospitals, particularly in the rural areas, that operate on narrow cash flows. And we see oftentimes when insurance companies, HMOs, PPOs, will drag out the payment process. And in doing so, they are able to sit on large sums of money for a longer period of time while they earn the interest on that. (Hearing on House Bill 610 before the House Committee on Insurance, 76th Leg., R.S., Tape 1A (March 30, 1999))

The statute is based on the concept that once a physician or provider has submitted a "clean claim" and thereby provided the information required of that physician or provider, pursuant to Article 3.70-3C, §3A and Article 20A.18B of the Insurance Code and department rules, on the service, treatment, and/or supplies provided to the insured/enrollee of the preferred provider carrier or HMO, the preferred provider carrier or HMO must pay an interim payment of 85% of the contracted rate on the clean claim to that physician or provider if the preferred provider carrier or HMO intends to audit the clean claim and cannot complete the audit within 45 days; the physician or provider is no longer required to wait to receive any payment for the services, treatments, and/or supplies that he/she has provided until the preferred provider carrier or HMO has fully resolved all of the issues related to the payment of the clean claim (e.g., pre-existing conditions, coverage limitations or exclusions, operative reports, medical records from other providers, medical necessity, experimental or cosmetic procedures, police reports, etc.). (ii) Unlike Marrs, the payment of the money is temporary if the preferred provider carrier or HMO determines after the completion of the audit that the payment of 85% of the contracted rate on the clean claim is overpayment; it only becomes a permanent payment if the preferred provider carrier or HMO determines after the completion of the audit that the clean claim is a covered claim. In Marrs, the trial court findings cited by the Texas Supreme Court stated that the petitioners were "being forever deprived of their property." (emphasis added) (Marrs at 948). The interim payment of 85% is not the end of the clean claims process but is rather an interim shifting of the economic burden from the physician or provider to the preferred provider carrier or HMO until the final determination of the actual amount owed on the clean claim. Upon this final determination, if the HMO or preferred provider carrier has overpaid the physician or provider, §21.2809(b) in accordance with Article 3.70-3C, §3A(e) and Article 20A.18B(e) provide for the refund of any overpayment due to the preferred provider carrier or HMO. There is a difference between an 85% payment which is a final payment with no refund in the event of overpayment and an interim 85% payment with the requirement of a refund in the event of overpayment. (iii) Unlike Marrs, the payment is not required unless the preferred provider carrier or HMO cannot complete the audit within 45 days; in Marrs, the petitioners could do nothing under the RRC proration orders to recover their oil before it drained away to the more densely drilled section to the north.

With regard to the commenter's recommended revisions to define "clean claim" in proposed §21.2802(3) to be a claim "for which coverage and liability under the health insurance policy have become reasonably clear. . . ." based on the language in Article 21.21-2, §2(b)(4) and to delete §21.2809(a), the department does not believe that these revisions would properly implement Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e) of the Insurance Code. The rule is consistent with Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e) as enacted by House Bill 610. The broad authority vested in the department in Article 3.70-3C, §3A(a) and Article 20A.18B(a) to define "clean claim" does not give the department the authority to promulgate a definition that is not supported by the language of the statute. To define "clean claim" to be a claim "for which coverage and liability under the health insurance policy have become reasonably clear. . . ." is not supported by the language or legislative history of House Bill 610. Article 21.21-2 (Unfair Claim Settlement Practices Act) was first enacted in 1973 and was last amended in 1993. Article 21.21-2, §2(b)(4) provides that, "Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims submitted in which liability has become reasonably clear" constitutes an unfair claim settlement practice that is prohibited by Article 21.21-2. Article 3.70-3C, §3A and Article 20A.18B, enacted by the 76th Legislature to be effective September 1, 1999, are the latest enactment of prompt payment laws for claims submitted by contracted physicians or providers for services or benefits provided to insureds of preferred provider carriers and enrollees of HMOs. To add the language "for which coverage and liability under the health insurance policy have become reasonably clear" to the definition of "clean claim," would, in effect, superimpose the requirements of Article 21.21-2, §2(b)(4) over the requirements of Article 3.70-3C, §3A and Article 20A.18B, would be inconsistent with the plain language of Article 3.70-3C, §3A and Article 20A.18B and would undermine the legislative intent of these statutes. It is the department's position that the legislature determined that the situation of delays in claims payments to contracted physicians or providers required a remedy, and that it enacted House Bill 610 as the remedy. Both the language and the legislative history of House Bill 610 indicate the intent to change the current method of processing claims. To make the determination of liability for the claim a "clean claim" element is simply a continuation of the status quo and not consistent with the intent of the legislature to change the law with regard to the current method of processing claims. In addition, to define "clean claim" to be a claim "for which coverage and liability under the health insurance policy have become reasonably clear" raises a question as to when the 85% requirement would be triggered. To provide that a claim is not clean until all the issues of coverage and liability have been resolved regardless of the amount of time needed by the preferred provider carrier or HMO to make such a determination would not only be a continuation of the status quo, but the 85% requirement in Article 3.70-3C, §3A(e) and Article 20A.18B(e) would have no meaning whatsoever. A cardinal rule of statutory construction is that effect is to be given to all the words of a statute and no statutory language will be treated as surplusage if possible. City of Amarillo v. Martin, 971 S.W.2d 426, 430 (Tex. 1998). The rules in §21.2807 and §21.2809(a) are consistent with Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e) as enacted by House Bill 610. The requirement in Article 3.70-3C, §3A(e) and Article 20A.18(e) that the preferred provider carrier and HMO pay 85% of the contracted rate on a claim that the preferred provider carrier or HMO intends to audit is one of five possible actions that may be undertaken by a preferred provider carrier or HMO upon receipt of a clean claim. The five possible actions under Article 3.70-3C, §3A(c) and (e) and Article 20A.18B(c) and (e) are: Within 45 days of the date the clean claim is received, (i) pay the total amount of the claim in accordance with the contract between the physician or provider and the HMO or preferred provider carrier (i.e., a covered claim); (ii) deny the claim in its entirety (i.e., not a covered claim); (iii) pay the portion of the claim that is not in dispute (i.e., a covered claim) and deny the remainder of the claim (i.e., not a covered claim); (iv) pay the portion of the claim that is not in dispute (i.e., a covered claim) and audit the remainder of the claim and if the audit cannot be completed within the 45 days, pay the physician or provider 85% of the contracted rate on the portion of the claim that is being audited (i.e., coverage of the claim not yet determined); or (v) audit the entire claim and if the audit cannot be completed within the 45 days, pay the physician or provider 85% of the contracted rate (i.e., coverage of the claim not yet determined). Under the statute, these five actions are the only actions available to the preferred provider carrier and HMO upon receipt of a clean claim. Thus, under the statute, if a preferred provider carrier or HMO does not pay the total amount of the clean claim in accordance with the contract, deny the clean claim in its entirety; or pay a portion of the clean claim that is not in dispute and notify the provider why the remainder of the claim is denied, the only other option available to the preferred provider carrier or HMO under the statute is to "audit" the clean claim or a portion of the claim if the preferred provider carrier or HMO is unable to determine within the statutory claims payment period whether it is liable for the clean claim or a portion of the claim.

Comment: Two commenters stated that developing and maintaining the process in proposed §21.2807 that requires an HMO or preferred provider carrier that intends to audit a claim to initially pay 85% of the contracted rate on the claim within the statutory claims payment period will be administratively cumbersome and costly. One commenter estimated that it will cost over $1 million to modify its systems for manual adjudication and interim payment of claims pended for investigation. The cost for auto adjudication is expected to be higher. The commenter also stated that the initial annual staffing costs to create a new department for tracking and recovering payments to Texas providers for subsequently denied claims is estimated at $300,000.

Response: The department acknowledges that developing and maintaining the process may increase administrative costs and processes. These requirements, however, are a result of the legislative enactment of House Bill 610 and not as a result of the adoption of these rules.

Comment: One commenter stated there is a concern about where to send the 85% payment because currently some of the checks sent to providers are being returned because the provider has changed addresses and the carrier is unable to locate the provider.

Response: An HMO or preferred provider carrier should send the payment to the last known address of the physician or provider. It is the physician's or provider's responsibility to keep the HMO or preferred provider carrier informed of any change in address.

Comment: A commenter objected to the wording in §21.2807(b)(1) to "pay the total amount of the clean claim in accordance with the contract between the physician or provider and the HMO or preferred provider carrier" and recommended that the requirement be changed "to pay the benefits payable for covered expenses," which may not be the same as the total amount because of deductibles, coinsurance, non-covered expenses, etc. The commenter also pointed out that it pays claims in accordance with the contract it has with the insured, subject to any discount in its contract with the PPO network. The commenter states that it does not have a contract directly with the provider.

Response: The department disagrees that a change is needed. First, the language in §21.2807(b)(1) "pay the total amount of the clean claim in accordance with the contract between the physician or provider and the HMO or preferred provider carriers. . ." tracks the language contained in both Article 20A.18B(c)(1) and Article 3.70-3C, §3A(c)(1) as enacted by House Bill 610. Secondly, the language "in accordance with the contract between the physician or provider and the HMO or preferred provider carrier" means the same as "benefits payable for covered expenses," i.e., that the amount paid will not include deductibles, coinsurance, and non-covered expenses. The department recognizes that the language "pay the total amount of the claim" may appear to imply that payment would have to be made for the "amount billed" which would not be based on the "contracted rate"; however, the modifying language "in accordance with the contract between the preferred provider and the insurer" has the same effect as stating "based on the contracted rate."

Comment: Two commenters recommended that §21.2807(c)(1), relating to a clean claim for a prescription benefit that is electronically adjudicated and electronically paid, be clarified to state that this rule only applies to a completely paperless and "non-mailed," except for e-mail, system in which payment is made by electronic funds transfer to the provider's account.

Response: The department agrees, and §21.2802(25)(C) and §21.2807(c) have been changed accordingly.

Comment: One commenter requested that language be added in §21.2809(a) to define how the carrier would designate a partial payment of a claim in audit on the Explanation of Benefits. Otherwise, it will be difficult for providers to distinguish these payments from full payments until they are able to audit the payment against their contract.

Response: The department disagrees. This is an internal decision for HMOs and preferred provider carriers and may be addressed in the contract between the physician or provider and the HMO or the preferred provider carrier.

Comment: A commenter stated that the provision in proposed §21.2809(a) that claims not paid by the payor within 45 days be paid at 85% of charges should be changed to require late payment at 100% of charges. There is no reason to discount charges for the payor's errors.

Response: The department disagrees. The 85% payment is required by Article 3.70-3C, §3A(e) and Article 20A.18B(e) of the Insurance Code. The department does not have the authority to change this requirement by rule.

Comment: One commenter recommended that the following requirement be added to §21.2809(a): "The HMO or preferred provider carrier will have 30 days from the date of notice to the physician or provider to complete the audit and make a final determination as to the liability of the claim."

Response: The department disagrees. The statute is silent on this matter. Article 3.70-3C, §3A(e) and Article 20A.18B(e) of the Insurance Code require the payment of 85% of the contracted rate on the clean claim if the preferred provider carrier or HMO intends to audit the clean claim and cannot complete the audit within 45 days. Article 3.70-3C, §3A(n) and Article 20A.18B(o) authorize the commissioner to adopt rules as necessary to implement the sections. The department does not believe that the recommended revision is necessary to implement Article 3.70-3C, §3A and Article 20A.18B. HMOs and preferred provider carriers have an interest in auditing claims as quickly as possible because they will have paid 85% of the contracted rate on the clean claim to the physician or provider, and the sooner they determine the actual claims payment the sooner they will receive any refund in the event of overpayment.

Comment: Nineteen commenters recommended changes to proposed §21.2809(b) relating to provider refunds in the event of overpayment. Four commenters raised concerns about the payor's ability to collect refunds from a provider in the event the claim should not have been paid. The commenters voiced concern that the department does not have any power or any mechanism to force any provider to refund any amounts to an insurer, and therefore any such provision as to a refund has no meaning whatsoever.

Response: Article 3.70-3C, §3A(e) and Article 20A.18B(e) as enacted by House Bill 610 specifically provide for any refund due a preferred provider carrier or HMO in the event of any overpayment to a physician or provider, and the rules are consistent with the statute. The department recognizes the commenters' concerns and agrees that the statute does not provide the department the power to require a physician or provider to refund any amounts to an HMO or preferred provider carrier. However, to assist HMOs and preferred provider carriers in receiving refunds, §21.2809(b) authorizes chargebacks as one possible method of refund.

Comment: One commenter stated that the ongoing cost of collecting refunds from providers is expected to be significant. Although allowed under the rules, the commenter's operations systems cannot offset refunds from future owed amounts. If providers refuse to refund payments, the only recourse is litigation or arbitration and these costs are expected to be considerable. Another commenter recommended that §21.2809(b) be revised to eliminate the carrier's ability to obtain a refund by chargeback because chargebacks create an "accounting nightmare" and make it impossible for a provider to reconcile and balance the patients' accounts especially for providers with multiple hospitals within their systems. According to the commenter, in many contracts the parties agree that no chargeback will be allowed, and thus, allowing a chargeback may be contrary to the contract between the provider and the carrier.

Response: At the January 25, 2000 hearing on the proposed rules, physicians and providers indicated that they currently refund any overpayments, and the department expects them to continue to do so. However, if this does not occur, the costs associated with collecting refunds are the result of the legislative enactment of House Bill 610 and are not the result of the adoption and implementation of these rules.

The department disagrees with the recommended revision to eliminate chargebacks because in some instances chargebacks may be the most efficient means of handling an overpayment. The rule as proposed did not require that a chargeback be used but rather allowed chargebacks as only one method of refund. Section 21.2809(b), however, has been changed to clarify that other methods may be used and that parties may agree by contract to methods other than chargebacks. The adopted rule recognizes the various payment systems of the different types of physicians and providers and allows flexibility to both the physicians and providers and HMOs or preferred provider carriers to develop the most effective and efficient method of handling any overpayments.

Comment: Five commenters recommended revising §21.2809(b) to require that prior to making a chargeback or recoupment, the HMO or preferred provider carrier shall provide the physician or provider with an invoice enumerating the specific claims and amounts that were incorrectly paid. One commenter suggested that the rule provide that "Chargebacks should be in the form of a reversed Explanation of Benefits (EOB) with corrected EOB data on the same document." One commenter stated that it would be very useful if notification to the patient was also made at the time that the chargebacks were made to the physicians.

Response: The department believes that the proposed rule cannot be revised to incorporate the requested changes because such revisions could be considered substantive changes in the rule which would require republication of the rule with another 30-day comment period before the rule could be considered for adoption. HMOs and preferred provider carriers are encouraged to employ the process of enumerating the specific overpaid claims and amounts as a normal business practice.

Comment: Two commenters recommended that §21.2809(b) be revised to require the physician or provider to repay via check or alternate payment method as agreed to by contract. Two commenters recommended that the rule allow the refund to be made by chargeback, recoupment or other method contractually agreed upon. Five commenters recommended revising §21.2809(b) to allow the physician or provider an opportunity to reimburse the HMO or preferred provider carrier though an alternative arrangement and to provide that nothing in this provision shall override existing contractual arrangements that already allow alternative payment arrangements in the event of overpayment to the physician or provider. One commenter recommended that the rule allow chargebacks if contractually agreed upon. Another commenter recommended that if chargebacks are not prohibited altogether, §21.2809(b) should be revised to provide that, "unless otherwise agreed in the contract between the HMO or preferred provider carrier and the physician or provider, the refund may be made in the form of a chargeback against the physician or provider."

Response: The rule as proposed did not prohibit refund via check, recoupment, or alternate payment method as agreed to by contract and specifically authorized refund by any method, including chargeback. The rule has been clarified to recognize the various payment systems of the different types of physicians and providers and allows flexibility to both the physicians and providers and HMOs or preferred provider carriers to develop the most effective and efficient method of handling any overpayments. Nothing in the rule overrides the existing contractual arrangements that allow alternative payment arrangements in the event of overpayment to the physician or provider.

Comment: One commenter recommended providing that if the invoice is not paid within 30 days, the HMO or preferred provider carrier may recover the overpaid amount in the form of a chargeback against the physician or provider.

Response: The department disagrees. Article 3.70-3C, §3A(e) and Article 20A.18B(e) as enacted by House Bill 610 require any refund due the preferred provider carrier or HMO to be paid not later than the 30th day after the later of the date that the physician or provider receives notice of the audit results or any appeal rights of the insured/enrollee are exhausted. The method of refund suggested by the commenter is not consistent with the statute.

Comment: A commenter suggested strong rules be developed regarding refunds of prepayments.

Response: The department disagrees. The rule as adopted allows flexibility to the physicians and providers and HMOs or preferred provider carriers to develop the most effective and efficient method of handling any overpayments.

Comment: Four commenters stated that there is no reference in §21.2809(b) to the appeal rights of the provider even though most providers have the contractual right to appeal an audit and invoke arbitration if necessary. The commenters recommended that §21.2809(b) be revised to add "or the exhaustion of any physician's or provider's rights to appeal or arbitration" to provide another means for determining when the refund shall be made.

Response: Article 3.70-3C, §3A(e) and Article 20A.18B(e) as enacted by House Bill 610 require any refund due the preferred provider carrier or HMO to be paid not later than the 30th day after the later of the date that the physician or provider receives notice of the audit results or, if an appeal was filed before expiration of the 30-day refund period, any appeal rights of the insured/enrollee are exhausted. Article 3.70-3C, §3A(n) and Article 20A.18B(o) authorize the commissioner to adopt rules as necessary to implement the sections. The department does not believe that the recommended revision is necessary to implement Article 3.70-3C, §3A and Article 20A.18B.

§21.2808. Effect of Filing a Deficient Claim

Comment: Twelve commenters objected to the published version of proposed §21.2808 relating to the effect of filing a deficient claim. Three of these commenters recommended that §21.2808 be revised to require the payor to furnish the reasons why the claim is deficient. The reasons for the suggested change included: (i) notice that a claim is deficient without notice of how it is deficient is useless information to the provider and causes the provider to have to guess what is wrong with the claim. (ii) If the HMO or preferred provider carrier knows the claim is deficient then it obviously must know what is missing from the claim and could easily include this information in the notice. (iii) By not requiring the HMO or preferred provider carrier to specifically identify the deficiency, the department is setting the clean claims rules up for abuse because HMOs or preferred provider carriers can repeatedly reject a claim as deficient (even if it is truly clean) just to prevent the 45-day statutory claims payment period from ever beginning.

Response: The department recognizes the commenters' concerns. Many HMOs and preferred provider carriers, however, already provide this information to their physicians and providers, and the department encourages them to continue to do so. The department also encourages other HMOs and preferred provider carriers that do not currently provide reasons for the claim deficiency to implement this practice. The rule in §§21.2803-21.2806 contains requirements for identifying the elements and attachments and for providing notice if any elements or attachments are changed, and thus, physicians and providers will have the information necessary to determine the deficiencies. The department does not have any information to indicate that this will occur and will monitor HMOs and preferred provider carriers for the practice of repeatedly rejecting a truly clean claim as deficient just to prevent the 45-day statutory claims payment period from ever beginning.

Comment: Three commenters objected to the omission of a means of notification that a claim is deficient. One commenter noted that currently the method of notification can vary from claim to claim. One commenter requested that §21.2808 be revised to require the HMO and preferred provider carrier to give written notice to the provider. Two commenters recommended that the method of notification be by contract between the HMO or preferred provider carrier and the physician or provider. Another commenter recommended that the notice be "in writing or by another means mutually agreed upon through contractual obligations." One commenter recommended that §21.2808 be revised to require that the 15-day notice shall be sent separately by certified mail, return receipt requested, or by courier delivery with a signed receipt. This provision is needed to resolve any disputes that arise over whether an HMO or preferred provider carrier complied with the notice requirements and to prevent the required notice from being "buried" in other documents sent to the physician or provider.

Response: The department disagrees that these revisions are necessary. The purpose of the rule is to allow flexibility to the HMOs and preferred provider carriers to determine the most effective and efficient means of notification. This flexibility is necessary because what is the most effective and efficient means may vary from claim to claim. In some instances where the deficiencies are few and/or minor and the information can be readily obtained (i.e., birthdate, address, etc.), a phone call may be the best notification while in other instances with several deficiencies or where the information is not easily obtainable, a written notice may be the best means of notification. Section 21.2808 as adopted is changed to provide for a 45-calendar-day notice that a claim is deficient in lieu of the proposed 15-business-day notice.

Comment: Eight commenters objected to the requirement that the HMO or preferred provider carrier notify the physician or provider that the claim is deficient within 15 business days of the receipt of the claim. The reasons for the objection included: (i) The requirement is unnecessary, duplicative, and of no benefit to the physician or provider. (ii) The requirement appears to be in conflict with the provision that an HMO or preferred provider carrier has 45 days to adjudicate a claim and would thereby significantly reduce the 45 days that the statute authorizes as a period for review of clean claims. This requirement appears to be conflicting or would, at a minimum, require handling the claims twice. (iii) There is no such provision in the statute. (iv) The provision creates an undue burden on payors that significantly deviates from the provisions of House Bill 610. Because the rule essentially requires that every claim be fully processed in 15 days, this time consuming process would require a significant increase in claims and adjudication resources which would have a significant economic impact on the cost of claims processing and would potentially result in premium increases. This conflicts with the department's determination that this provision would only involve minor costs for notification. (v) The filed version of House Bill 610 had the 15-day requirement, but this was removed from the enrolled version when health plans expressed concern about the additional resources necessary to administer such a requirement. (vi) The 15-day requirement can result in claims being deficient and thereby requiring a new submission and new 45-day timeline when all that is lacking are medical records or progress notes. (vii) The requirement could potentially lead to an increase in provider fraud going undetected because of the short time frame for reviewing claims for the required data elements and required attachments. One commenter stated that the section does not make clear what happens if the payor fails to identify a deficiency within the 15-day period. The commenters' recommendations included: (i) Increase the time to 30 business days which would give payors much needed time to make a thorough examination of claims and could greatly reduce the number of deficient claims returned to providers. (ii) Strike the 15-day requirement from the rule.

Response: The commenters' concerns are recognized, and §21.2808 is revised to provide for a 45-calendar-day period for notice of deficient claim with a provision that a different time period not to exceed 45 calendar days may be agreed to by the parties. Section 21.2808 is also revised to provide that notice of a deficient claim must be provided within 21 calendar days for prescription drug claims filed electronically.

Comment: Ten commenters responding to the staff's recommendation at the January 25, 2000 rule hearing to change from 15 days to 45 days the time of notice for a deficient claim indicated that they did not support the change. Their reasons included: (i) The change to 45 days unduly delays the claims processing to as long as 90 days before a claim payment. (ii) Fifteen days is enough time to determine whether a claim is deficient. (iii) The longer it takes for the plan to determine that they are not going to pay for the services, the harder it is for providers to collect from the patient.

Response: The department has revised the rule to change from 15 days to 45 days the time of notice for a deficient claim as a result of comments. The department recognizes that it may be harder to collect from patients, but the department believes that the 45 days is in accordance with the statute. The rule includes a provision that a different time period not to exceed 45 days may be agreed to by the parties; therefore, a shorter period may be negotiated. Also, deficiencies in a claim that are unnecessary to the processing of the claim should not necessarily delay the claim processing because there is nothing in the rule that prohibits the payment of deficient claims.

§21.2810. Date of Claim Payment

Comment: One commenter requested that the department consider establishing an acceptable process which payors can use as proof of claims payment within the required payment period for claims paid through the U.S. Postal Service. This is necessary because §21.2810 clearly speaks to compliance with the statutory claims payment period from the perspective of the person submitting the claim.

Response: The department disagrees. HMOs and preferred provider carriers should develop their own procedures for proof of claims payment. The rule allows HMOs and preferred provider carriers the flexibility to develop the most effective and efficient process.

Comment: Four commenters recommended changes to §21.2810(2) relating to the date of claim payment for electronic transmissions. One commenter recommended that §21.2810(2) be revised to "provide that if claim payment is made electronically, the claim is considered to have been paid on the first date following electronic transmission that the provider is able to verify that electronic payment has been received." The commenter stated that §21.2810(2), relating to date of claim payment for electronic transmissions, does not consider potential problems, such as the file not being readable or being corrupted. If this happens, the provider will not have received payment and may not receive payment for many days yet the HMO/preferred provider carrier has technically "paid" the payment. Dishonest HMOs/preferred provider carriers could use this mechanism to avoid the 45-day statutory claims payment period by intentionally corrupting the file. Four commenters recommended that §21.2810(2) be revised to provide that for claims paid electronically, the date of payment should be the date the electronic transmission is received by the provider or physician.

Response: The department disagrees that any of the recommended revisions are necessary. The department currently has no information to indicate that this potential problem will actually materialize. The department, however, will monitor complaint trends and take appropriate action if necessary.

§21.2811. Disclosure of Processing Procedures

Comment: One commenter stated that where a carrier has contracted with a preferred provider organization (PPO) rather than individual preferred providers, the carrier may have great difficulty in complying fully with the disclosure of processing procedures in §21.2811, and the proposed rules provide an inadequate methodology by which such carriers may themselves require or revise claims processing procedures.

Response: The department disagrees that any additional rules or methodology are needed to address those situations in which a preferred provider carrier contracts with a PPO rather than with individual preferred physicians or providers. Article 3.70-3C, §3A(m) and Article 20A.18B(n) of the Insurance Code, as enacted in House Bill 610, respectively, apply the prompt payment law, to a person with whom an insurer contracts to process claims or to obtain the services of preferred providers to provide medical care or health care to insureds under a health insurance policy and to a person with whom an HMO contracts to process claims or to obtain the services of physicians and providers to provide health care services to health care plan enrollees. Article 3.70-3C, §3(l), 28 TAC §3.3703(c) and Article 20A.18C(a)(5) also address the commenter's concerns. Article 3.70-3C, §3(l) provides that (i) an insurer may enter into an agreement with a PPO for the purposes of offering a network of preferred providers in which the agreement may provide that the notice and other insurer contracting requirements may be complied with by either the insurer or the PPO on the insurer's behalf; (ii) if an insurer enters into an agreement with a PPO, it is the insurer's responsibility to meet the requirements of Article 3.70-3C or to assure that the requirements are met; and (iii) all preferred provider insurance benefit plans offered in this state shall comply with the requirements of Article 3.70-3C. Section 3.3703(c) provides that an insurer may enter into an agreement with a PPO for the purpose of offering a network of preferred providers, provided that it remains the insurer's responsibility to meet the requirements of Article 3.70-3C and 28 TAC Chapter 3, Subchapter X (Preferred Provider Plans) or ensure that the requirements of Article 3.70-3C and 28 TAC Chapter 3, Subchapter X are met. Article 20A.18C(a)(5) requires an HMO that enters into a delegation agreement with a delegated network to execute a written agreement that contains a provision requiring the delegated network to comply with all statutory and regulatory requirements relating to any function, duty, responsibility, or delegation assumed by or carried out by the delegated network.

Comment: One commenter recommended that §21.2811(b) be revised to require that the notice be sent separately by certified mail, return receipt requested, or by courier delivery with a signed receipt. This provision is needed to resolve any disputes that arise over whether a carrier complied with the notice requirements and to prevent the required notice from being "buried" in other documents sent to the provider.

Response: The department disagrees that the method of delivery should be prescribed by rule. The rule allows HMOs and preferred provider carriers to develop the most effective and efficient method of delivery. The department currently does not have any information to indicate that the potential problem will actually materialize but will monitor complaint trends and take appropriate action if necessary.

Comment: A commenter recommended that the rules require that the physical address of the claims processing entity be provided to the physician or provider. This is necessary for delivery of certified mail or courier-delivered mail.

Response: The department agrees and §21.2811 as adopted includes this requirement.

§21.2815. Failure to Meet the Statutory Claims Payment Period

Comment: One commenter stated that proposed §21.2815 is problematic because carriers should not be required to pay a claim as required by §21.2815 if the claim is determined to not be a payable claim under the insured's policy.

Response: Section 21.2815 does not require that a claim be paid if the clean claim is not covered by the health insurance policy or health care plan. The penalty requirements in §21.2815 for failure to comply with the requirements of §21.2807(b) and §21.2809(a) and (c) are specifically provided for in Article 3.70-3C, §3A(f) and Article 20A.18B(f) of the Insurance Code, as enacted by House Bill 610, which provide that an insurer or HMO that violates subsection (c) or (e) of Article 3.70-3C, §3A or Article 20A.18B is liable to the physician or provider for the full amount of billed charges submitted on the claim or the amount payable under the contracted penalty rate, less any amount previously paid or any charge for a service that is not covered by the health insurance policy or by the health care plan. There is a specific provision in both the statute and §21.2815 that no payment is required for services not covered by the health insurance policy or the health care plan.

Comment: One commenter recommended that §21.2815 be revised to "provide that if full billed charges are less than the 'case rate' set forth in the contract between the provider or physician and the HMO or preferred provider carrier, the HMO or preferred provider carrier must pay the case rate." This is necessary because many specialty contracts do not have a contracted penalty rate but provide for a "case rate" payment that is actually a higher dollar amount than the full billed charges, and thus, if the provider submits a claim for the "case rate" payment and the carrier violates the claims payment period and is required to pay full billed charges, the carrier would actually be receiving a windfall rather than paying a penalty. Unscrupulous HMOs/preferred provider carriers might violate the statutory claims payment period in order to profit from the penalty provisions.

Response: The department disagrees that a revision is needed to §21.2815 but agrees that as a result of the comment the definition of "billed charges" in proposed §21.2802(2) should be revised and that a definition for "case rate" should be added to the rule. The rule is revised to add the following sentence to the definition of "billed charges": "In the event of a case rate agreed to between the physician or provider and the HMO or preferred provider carrier, billed charges shall be considered the higher of the case rate or billed charges." This change is in addition to the change discussed in the response to comments to proposed §21.2802(2) on "billed charges." In addition, the rule contains the following definition of "case rate" in §21.2802(3): "A method of compensation in which a physician or provider receives one negotiated payment for all care rendered for a particular procedure or a specific diagnosis." The department believes that these two changes address the commenter's concerns about §21.2815.

Comment: In response to the staff recommendation at the January 25, 2000 rule hearing to add a sentence to the definition of "billed charges" as a result of the comment that §21.2815 should be revised to take into account "case rate" payments, one commenter requested that the staff recommended addition to the definition be clarified so that there is no misinterpretation that billed charges could be "case rate." Another commenter stated at the January 25, 2000 hearing that they also did not agree with staff's recommended addition to the definition of "billed charges" because it would create a problem with their billing systems since providers do not bill based on case rates, but rather bill based on total charges. The commenter stated that submitting a case charge in lieu of billed charges would require a total redoing of its billing system.

Response: The department agrees in part and disagrees in part. The definition of billed charges in §21.2802(2) as adopted indicates that in instances of a case rate, billed charges are considered to be the higher of the case rate or the billed charges. This preserves the penalty aspect of House Bill 610 when a case rate is involved. The department disagrees that any revision is necessary to address the commenter's concern that a physician's or provider's billing system would have to be revised to account for a case rate billing. The recognition of the existence of a case rate would be left to the physicians and providers and HMOs and preferred provider carriers during the claims process and would not require a change in the method by which a physician or provider bills the claim, unless otherwise specified in the contract between the physician or provider and the HMO or preferred provider carrier.

The new sections are adopted under the Insurance Code Article 3.70-3C, §3(m), §3A(a), §3A(n), and §9; and Articles 20A.09(j), 20A.18B(a), 20A.18B(o), and 20A.22; and §36.001. Article 3.70-3C, §3(m) specifies that a preferred provider contract must provide for prompt payment to a physician or provider for covered services rendered not later than the 45th day after the date a claim for payment is received "with the documentation reasonably necessary to process the claim." Article 3.70-3C, §9 authorizes the Commissioner to adopt rules as necessary to implement the provisions of Article 3.70-3C regulating preferred provider benefit plans. Article 20A.09(j) specifies that HMOs shall make prompt payment to a physician or provider for covered services rendered not later than the 45th day after the date a claim for payment is received "with documentation reasonably necessary for the HMO to process the claim." Article 20A.22(a) authorizes the Commissioner to promulgate reasonable rules as are necessary and proper to carry out the provisions of the Health Maintenance Organization Act. The 76th Texas Legislature passed House Bill 610 (Acts 1999, 76th Leg., ch. 1343, p. 4556, eff. Sept. 1, 1999) which enacted new Article 3.70-3C, §3A(a), effective September 1, 1999, to provide that a "clean claim" means a completed claim, as determined under department rules, submitted by a preferred provider for medical care or health care services under a health insurance policy. New Article 3.70-3C, §3A(n) enacted pursuant to House Bill 610 authorizes the Commissioner to adopt rules as necessary to implement §3A of Article 3.70-3C. House Bill 610 also enacted new Article 20A.18B(a), effective September 1, 1999, to provide that a "clean claim" means a completed claim, as determined under department rules, submitted by a physician or provider for medical care or health care services under a health care plan. New Article 20A.18B(o) also enacted pursuant to House Bill 610 authorizes the Commissioner to adopt rules as necessary to implement Article 20A.18B. Section 36.001(a) provides that the Commissioner of Insurance may adopt rules for the conduct and execution of the powers and duties of the department only as authorized by statute.

§21.2802.Definitions.

The following words and terms when used in this subchapter shall have the following meanings:

(1)

Audit -- An instance in which an HMO acknowledges coverage of an enrollee under the health care plan or a preferred provider carrier acknowledges coverage of an insured under the health insurance policy but exceeds the statutory claims payment period while processing a clean claim or a portion of a clean claim.

(2)

Billed charges -- The charges made by a physician or provider who renders or furnishes services, treatments, or supplies provided the charge is not in excess of the general level of charges made by other physicians or providers who render or furnish the same or similar services, treatments, or supplies to persons in the same geographical area and whose illness or injury is comparable in nature or severity. In the event of a case rate agreed to between the physician or provider and the HMO or preferred provider carrier, billed charges shall be considered the higher of the case rate or billed charges.

(3)

Case rate -- A method of compensation in which a physician or provider receives one negotiated payment for all care rendered for a particular procedure or a specific diagnosis.

(4)

Clean claim -- A claim submitted by a physician or provider for medical care or health care services rendered to an enrollee under a health care plan or to an insured under a health insurance policy with documentation reasonably necessary for the HMO or preferred provider carrier to process the claim, which contains:

(A)

the required data elements set forth in §21.2803(b) of this title (relating to Elements of a Clean Claim);

(B)

the attachments of which the physician or provider has been properly notified as necessary for processing pursuant to §§21.2803(c) of this title (relating to Elements of a Clean Claim) and 21.2804 of this title (relating to Disclosure of Necessary Attachments);

(C)

any additional elements of which the physician or provider has been properly notified pursuant to §§21.2803(d) of this title (relating to Elements of a Clean Claim) and 21.2805 of this title (relating to Disclosure of Additional Clean Claim Elements);

(D)

the amount paid by the primary plan or other valid coverage pursuant to §21.2803(e) of this title (relating to Elements of a Clean Claim), if applicable; and

(E)

any revised data elements, attachments, and additional clean claim elements of which the physician or provider has been properly notified pursuant to §21.2806 of this title (relating to Disclosure of Revision of Data Elements, Attachments, or Additional Clean Claim Elements).

(5)

Condition code -- The code utilized by HCFA to identify conditions that may affect processing of the claim.

(6)

Contracted rate -- Fee or reimbursement amount for a physician's or provider's services, treatments, or supplies as established by agreement between the physician or provider and the HMO or preferred provider carrier.

(7)

Deficient claim -- A submitted claim that does not contain the required clean claim elements pursuant to §21.2803(a) of this title.

(8)

Delegated claims processor -- A licensed third party administrator to which an HMO or preferred provider carrier has delegated claims processing functions.

(9)

Diagnosis code -- The ICD-9-CM code number. Narrative diagnoses for non-physician specialties shall be submitted on an attachment.

(10)

HCFA -- The Health Care Financing Administration of the U.S. Department of Health and Human Services.

(11)

HMO -- A health maintenance organization as defined by Insurance Code Article 20A.02(n).

(12)

HMO delivery network -- As defined by Insurance Code Article 20A.02(w).

(13)

Institutional provider -- An institution providing health care services, including but not limited to hospitals, other licensed inpatient centers, ambulatory surgical centers, skilled nursing centers and residential treatment centers.

(14)

Occurrence span code -- The code utilized by HCFA to define a specific event relating to the billing period.

(15)

Patient control number -- A unique alphanumeric identifier assigned by the institutional provider to facilitate retrieval of individual financial records and posting of payment.

(16)

Patient-status-at-discharge code -- The code utilized by HCFA to indicate the patient's status at time of discharge or billing.

(17)

Physician or provider --

(A)

with regard to a preferred provider carrier, a preferred provider as defined by Insurance Code Article 3.70-3C, §1(10) (Preferred Provider Benefit Plans) or Article 3.70-3C, §1(1) (Use of Advanced Practice Nurses and Physician Assistants by Preferred Provider Plans).

(B)

with regard to an HMO,

(i)

a physician, as defined by Insurance Code Article 20A.02(r), who is a member of that HMO's delivery network; or

(ii)

a provider, as defined by Insurance Code Article 20A.02(t), who is a member of that HMO's delivery network.

(18)

Place of service code -- The codes utilized by HCFA that identify the place at which the service was rendered.

(19)

Preferred provider carrier -- An insurer that issues a preferred provider benefit plan as provided by Insurance Code Article 3.70-3C, Section 2 (Preferred Provider Benefit Plans).

(20)

Primary plan -- As defined in §3.3506 of this title (relating to Use of the Terms "Plan," "Primary Plan," "Secondary Plan," and "This Plan" in Policies, Certificates and Contracts).

(21)

Procedure code -- The HCFA Common Procedure Coding System (HCPCS) number, including CPT codes. In the absence of an existing HCPCS code or other commonly used code, this item may also apply to local codes developed specifically by Medicaid, Medicare, an HMO, or preferred provider carrier to describe a specific service or procedure.

(22)

Revenue code -- The code assigned by HCFA to each cost center for which a separate charge is billed.

(23)

Secondary plan -- As defined in §3.3506 of this title.

(24)

Source of admission code -- The code utilized by HCFA to indicate the source of an inpatient admission.

(25)

Statutory claims payment period --

(A)

the 45-calendar-day, or other time period not to exceed 45 calendar days set forth by written agreement between the physician or provider and the HMO or preferred provider carrier, in which claim payment or denial, in whole or in part, shall be made by an HMO or preferred provider carrier after receipt of a clean claim pursuant to Insurance Code Article 3.70-3C, §3(m) (Preferred Provider Benefit Plans), and Article 20A.09(j);

(B)

the 45-calendar-day period in which claim payment or denial, in whole or in part, shall be made by an HMO or preferred provider carrier after receipt of a clean claim pursuant to Insurance Code Article 3.70-3C, §3A (Preferred Provider Benefit Plans) and Article 20A.18B; or

(C)

the 21-calendar-day period in which claim payment or denial, in whole or in part, shall be made by an HMO or preferred provider carrier after receipt of an electronically submitted clean claim for a prescription benefit that is electronically adjudicated and electronically paid pursuant to Insurance Code Article 3.70-3C, §3A(d) (Preferred Provider Benefit Plans) and Article 20A.18B(d), and §21.2814 of this title (relating to Electronic Adjudication of Prescription Benefits).

(26)

Subscriber -- If individual coverage, the individual who is the contract holder and is responsible for payment of premiums to the HMO or preferred provider carrier; or if group coverage, the individual who is the certificate holder and whose employment or other membership status, except for family dependency, is the basis for eligibility for enrollment in a group health benefit plan issued by the HMO or the preferred provider carrier.

(27)

Type of bill code -- The three-digit alphanumeric code utilized by HCFA to identify the type of facility, the type of care, and the sequence of the bill in a particular episode of care.

§21.2803.Elements of a Clean Claim.

(a)

Required clean claim elements. A physician or provider submits a clean claim by providing the required data elements specified in subsection (b) of this section to an HMO or a preferred provider carrier, along with any attachments and additional elements, or revisions to data elements, attachments and additional elements, of which the physician or provider has been properly notified as necessary pursuant to subsections (c) and (d) of this section, and §§21.2804 (relating to Disclosure of Necessary Attachments), 21.2805 of this title (relating to Disclosure of Additional Clean Claim Elements), and 21.2806 (relating to Disclosure of Revision of Data Elements, Attachments, or Additional Clean Claim Elements), and any coordination of benefits or non-duplication of benefits information pursuant to subsection (e) of this section, if applicable.

(b)

Required data elements. HCFA has developed claim forms which provide much of the information needed to process claims. Two of these forms, HCFA-1500 and UB-82/HCFA, and their successor forms, have been identified by Insurance Code Article 21.52C as required for the submission of certain claims. The terms used in paragraphs (1), (2) and (3) of this subsection are based upon the terms used by HCFA on successor forms HCFA-1500 (12-90) and UB-92 HCFA-1450 claim forms. The parenthetical information following each term is a reference to the applicable HCFA claim form, and the field number to which that term corresponds on the HCFA claim form.

(1)

Essential data elements for physicians or noninstitutional providers. Unless otherwise agreed by contract, the data elements described in this paragraph are necessary for claims filed by physicians and noninstitutional providers.

(A)

subscriber's/patient's plan ID number (HCFA 1500, field 1a);

(B)

patient's name (HCFA 1500, field 2);

(C)

patient's date of birth and gender (HCFA 1500, field 3);

(D)

subscriber's name (HCFA 1500, field 4);

(E)

patient's address (street or P.O. Box, city, zip) (HCFA 1500, field 5);

(F)

patient's relationship to subscriber (HCFA 1500, field 6);

(G)

subscriber's address (street or P.O. Box, city, zip) (HCFA 1500, field 7);

(H)

whether patient's condition is related to employment, auto accident, or other accident (HCFA 1500, field 10);

(I)

subscriber's policy number (HCFA 1500, field 11);

(J)

subscriber's birth date and gender (HCFA 1500, field 11a);

(K)

HMO or preferred provider carrier name (HCFA 1500, field 11c);

(L)

disclosure of any other health benefit plans (HCFA 1500, field 11d);

(i)

if respond "yes", then

(I)

data elements specified in paragraph (3)(A)-(E) of this subsection are essential unless the physician or provider submits with the claim documented proof to the HMO or preferred provider carrier that the physician or provider has made a good faith but unsuccessful attempt to obtain from the enrollee or insured any of the information needed to complete the data elements in paragraph (3)(A)-(E) of this subsection;

(II)

the data element specified in paragraph (3)(I) of this subsection is essential when submitting claims to secondary payor HMOs or preferred provider carriers;

(ii)

if respond "no," the data elements are not considered essential if the claim is accompanied by a copy of a document signed by the enrollee or insured that there is no other health care coverage.

(M)

patient's or authorized person's signature or notation that the signature is on file with the physician or provider (HCFA 1500, field 12);

(N)

subscriber's or authorized person's signature or notation that the signature is on file with the physician or provider (HCFA 1500, field 13);

(O)

date of current illness, injury, or pregnancy (HCFA 1500, field 14);

(P)

first date of previous same or similar illness (HCFA 1500, field 15);

(Q)

diagnosis codes or nature of illness or injury (HCFA 1500, field 21);

(R)

date(s) of service (HCFA 1500, field 24A);

(S)

place of service codes (HCFA 1500, field 24B);

(T)

type of service code (HCFA 1500, field 24C);

(U)

procedure/modifier code (HCFA 1500, field 24D);

(V)

diagnosis code by specific service (HCFA 1500, field 24E);

(W)

charge for each listed service (HCFA 1500, field 24F);

(X)

number of days or units (HCFA 1500, field 24G);

(Y)

physician's or provider's federal tax ID number (HCFA 1500, field 25);

(Z)

total charge (HCFA 1500, field 28);

(AA)

signature of physician or provider or notation that the signature is on file with the HMO or preferred provider carrier (HCFA 1500, field 31);

(BB)

name and address of facility where services rendered (if other than home or office) (HCFA 1500, field 32); and

(CC)

physician's or provider's billing name and address (HCFA 1500, field 33).

(2)

Essential data elements for institutional providers. Unless otherwise agreed by contract, the data elements described in this paragraph are necessary for claims filed by institutional providers.

(A)

provider's name, address and telephone number (UB-92, field 1);

(B)

patient control number (UB-92, field 3);

(C)

type of bill code (UB-92, field 4);

(D)

provider's federal tax ID number (UB-92, field 5);

(E)

statement period (beginning and ending date of claim period) (UB-92, field 6);

(F)

patient's name (UB-92, field 12);

(G)

patient's address (UB-92, field 13);

(H)

patient's date of birth (UB-92, field 14);

(I)

patient's gender (UB-92, field 15);

(J)

patient's marital status (UB-92, field 16);

(K)

date of admission (UB-92, field 17);

(L)

admission hour (UB-92, field 18);

(M)

type of admission (e.g. emergency, urgent, elective, newborn) (UB-92, field 19);

(N)

source of admission code (UB-92, field 20);

(O)

patient-status-at-discharge code (UB-92, field 22);

(P)

value code and amounts (UB-92, fields 39-41);

(Q)

revenue code (UB-92, field 42);

(R)

revenue description (UB-92, field 43);

(S)

units of service (UB-92, field 46);

(T)

total charge (UB-92, field 47);

(U)

HMO or preferred provider carrier name (UB-92, field 50);

(V)

subscriber's name (UB-92, field 58);

(W)

patient's relationship to subscriber (UB-92, field 59);

(X)

patient's/subscriber's certificate number, health claim number, ID number (UB-92, field 60);

(Y)

principal diagnosis code (UB-92, field 67);

(Z)

attending physician ID (UB-92, field 82);

(AA)

signature of provider representative or notation that the signature is on file with the HMO or preferred provider carrier (UB-92, field 85); and

(BB)

date bill submitted (UB-92, field 86).

(3)

Data elements that are necessary, if applicable. Unless otherwise agreed by contract, the data elements contained in this paragraph are necessary for claims filed by physicians or providers if circumstances exist which render the data elements applicable to the specific claim being filed. The applicability of any given data element contained in this paragraph is determined by the situation from which the claim arose.

(A)

other insured's or enrollee's name (HCFA 1500, field 9), is applicable if patient is covered by more than one health benefit plan, generally in situations described in subsection (e) of this section. If the essential data element specified in paragraph (1)(L) of this subsection, "disclosure of any other health benefit plans", is answered yes, this is applicable unless the physician or provider submits with the claim documented proof to the HMO or preferred provider carrier that the physician or provider has made a good faith but unsuccessful attempt to obtain from the enrollee or insured any of the information needed to complete this data element;

(B)

other insured's or enrollee's policy/group number (HCFA 1500, field 9a), is applicable if patient is covered by more than one health benefit plan, generally in situations described in subsection (e) of this section. If the essential data element specified in paragraph (1)(L) of this subsection, "disclosure of any other health benefit plans", is answered yes, this is applicable unless the physician or provider submits with the claim documented proof to the HMO or preferred provider carrier that the physician or provider has made a good faith but unsuccessful attempt to obtain from the enrollee or insured any of the information needed to complete this data element;

(C)

other insured's or enrollee's date of birth (HCFA 1500, field 9b), is applicable if patient is covered by more than one health benefit plan, generally in situations described in subsection (e) of this section. If the essential data element specified in paragraph (1)(L) of this subsection, "disclosure of any other health benefit plans", is answered yes, this is applicable unless the physician or provider submits with the claim documented proof to the HMO or preferred provider carrier that the physician or provider has made a good faith but unsuccessful attempt to obtain from the enrollee or insured any of the information needed to complete this data element;

(D)

other insured's or enrollee's plan name (employer, school, etc.) (HCFA 1500, field 9c), is applicable if patient is covered by more than one health benefit plan, generally in situations described in subsection (e) of this section. If the essential data element specified in paragraph (1)(L) of this subsection, "disclosure of any other health benefit plans", is answered yes, this is applicable unless the physician or provider submits with the claim documented proof to the HMO or preferred provider carrier that the physician or provider has made a good faith but unsuccessful attempt to obtain from the enrollee or insured any of the information needed to complete this data element;

(E)

other insured's or enrollee's HMO or insurer name (HCFA 1500, field 9d), is applicable if patient is covered by more than one health benefit plan, generally in situations described in subsection (e) of this section. If the essential data element specified in paragraph (1)(L) of this subsection, "disclosure of any other health benefit plans", is answered yes, this is applicable unless the physician or provider submits with the claim documented proof to the HMO or preferred provider carrier that the physician or provider has made a good faith but unsuccessful attempt to obtain from the enrollee or insured any of the information needed to complete this data element;

(F)

subscriber's plan name (employer, school, etc.) (HCFA 1500, field 11b) is applicable if the health benefit plan is a group plan;

(G)

prior authorization number (HCFA 1500, field 23), is applicable when prior authorization is required;

(H)

whether assignment was accepted (HCFA 1500, field 27), is applicable when assignment under Medicare has been accepted;

(I)

amount paid (HCFA 1500, field 29), is applicable if an amount has been paid to the physician or provider submitting the claim by the patient or subscriber, or on behalf of the patient or subscriber or by a primary plan in accordance with paragraph (1)(L) of this subsection and as required by subsection (e) of this section;

(J)

balance due (HCFA 1500, field 30), is applicable if an amount has been paid to the physician or provider submitting the claim by the patient or subscriber, or on behalf of the patient or subscriber;

(K)

covered days (UB-92, field 7), is applicable if Medicare is a primary or secondary payor;

(L)

noncovered days (UB-92, field 8), is applicable if Medicare is a primary or secondary payor;

(M)

coinsurance days (UB-92, field 9), is applicable if Medicare is a primary or secondary payor;

(N)

lifetime reserve days (UB-92, field 10), is applicable if Medicare is a primary or secondary payor, and the patient was an inpatient;

(O)

discharge hour (UB-92, field 21), is applicable if the patient was an inpatient, or was admitted for outpatient observation;

(P)

condition codes (UB-92, fields 24-30), are applicable if the HCFA UB-92 manual contains a condition code appropriate to the patient's condition;

(Q)

occurrence codes and dates (UB-92, fields 31-36), are applicable if the HCFA UB-92 manual contains an occurrence code appropriate to the patient's condition;

(R)

occurrence span code, from and through dates (UB-92, field 36), is applicable if the HCFA UB-92 manual contains an occurrence span code appropriate to the patient's condition;

(S)

HCPCS/Rates (UB-92, field 44), is applicable if Medicare is a primary or secondary payor;

(T)

prior payments - payor and patient (UB-92, field 54), is applicable if payments have been made to the physician or provider by the patient or another payor or subscriber, on behalf of the patient or subscriber, or by a primary plan as required by subsection (e) of this section;

(U)

diagnoses codes other than principle diagnosis code (UB-92, fields 68-75), is applicable if there are diagnoses other than the principle diagnosis;

(V)

procedure coding methods used (UB-92, field 79), is applicable if the HCFA UB-92 manual indicates a procedural coding method appropriate to the patient's condition;

(W)

principal procedure code (UB-92, field 80), is applicable if the patient has undergone an inpatient or outpatient surgical procedure; and

(X)

other procedure codes (UB-92, field 81), is applicable as an extension of subparagraph (W) of this paragraph if additional surgical procedures were performed.

(c)

Attachments. In addition to the required data elements set forth in subsection (b) of this section, HCFA has developed a variety of manuals that identify various attachments required of different physicians or providers for specific services. An HMO or a preferred provider carrier may use the appropriate Medicare standards for attachments in order to properly process claims for certain types of services. Before any attachments may be required, the HMO or preferred provider carrier shall satisfy the notification procedures set forth in §21.2804 of this title (relating to Disclosure of Necessary Attachments).

(d)

Additional clean claim elements. Additional elements beyond the required data elements and attachments identified in subsections (b) and (c) of this section may be required. Before any additional clean claim elements may be required, the HMO or the preferred provider carrier shall satisfy the notification procedures set forth in §21.2805 of this title (relating to Disclosure of Additional Clean Claim Elements).

(e)

Coordination of benefits or non-duplication of benefits. If a claim is submitted for covered services or benefits in which coordination of benefits pursuant to §§3.3501 - 3.3511 of this title (relating to Group Coordination of Benefits) and §11.511(1) of this title (relating to Optional Provisions) is necessary, the amount paid as a covered claim by the primary plan is considered to be an essential element of a clean claim for purposes of the secondary plan's processing of the claim and HCFA 1500, field 29 or UB-92, field 54 must be completed pursuant to subsection (b)(3)(I) and (T) of this section. If a claim is submitted for covered services or benefits in which non-duplication of benefits pursuant to §3.3053 of this title (relating to Non-duplication of Benefits Provision) is an issue, the amounts paid as a covered claim by all other valid coverage is considered to be an essential element of a clean claim and HCFA 1500, field 29 or UB-92, field 54 must be completed pursuant to subsection (b)(3)(I) and (T) of this section. If a claim is submitted for covered services or benefits and the policy contains a variable deductible provision as set forth in §3.3074(a)(4) of this title (relating to Minimum Standards for Major Medical Expense Coverage) the amount paid as a covered claim by all other health insurance coverages, except for amounts paid by individually underwritten and issued hospital confinement indemnity, specified disease, or limited benefit plans of coverage, is considered to be an essential element of a clean claim and HCFA 1500, field 29 or UB-92, field 54 must be completed pursuant to subsection (b)(3)(I) and (T) of this section.

(f)

Format of elements. The required elements of a clean claim set forth in subsections (b), (c), (d) and (e), if applicable, of this section must be complete, legible and accurate.

(g)

Additional data elements, attachments, or information. The submission of data elements, attachments, or information by a physician or provider with a claim in addition to those required for a clean claim under this section shall not render such claim deficient.

§21.2804.Disclosure of Necessary Attachments.

For attachments described in §21.2803(c) of this title (relating to Elements of a Clean Claim) to be required as part of a clean claim, the HMO or preferred provider carrier shall comply with paragraphs (1), (2), or (3) of this section. If an HMO or preferred provider carrier requests such an attachment and fails to comply with paragraphs (1), (2), or (3) of this section, the request will not extend the statutory claims payment period.

(1)

Written notice. The HMO or preferred provider carrier may provide written notice to all affected physicians or providers that such attachments are necessary. The notice shall identify with specificity the attachment(s) required and must be received by the physician or provider at least 60 calendar days before requiring such attachment as an element of a clean claim.

(2)

Manual or other document that sets forth the claims filing procedures. The HMO or preferred provider carrier may provide updated revisions to the physician or provider manual or other document that sets forth the claims filing procedures. The revision shall identify with specificity the attachment(s) required and must be received by the physician or provider at least 60 calendar days before requiring such attachment as an element of a clean claim.

(3)

Contract. The HMO or preferred provider carrier may provide for such attachments to be required as part of a clean claim in the contract between the HMO or preferred provider carrier and the physician or provider. As a means of setting forth the attachments that are required as part of a clean claim, the contract shall either identify with specificity the attachments that are required as elements of a clean claim or reference the physician or provider manual or other document that sets forth the claims filing procedures. If the contract identifies with specificity the attachments that are required as elements of a clean claim, the additional written notice as specified in paragraphs (1) and (2) of this section is not required. If the contract references the physician or provider manual or other document that sets forth the claims filing procedures as a means of setting forth the attachments that are required as part of a clean claim, the notice specified in paragraph (2) of this section is required. If the contract provides for mutual agreement of the parties as the sole mechanism for requiring attachments, then the written notice specified in paragraphs (1) and (2) of this section does not supersede the requirement for mutual agreement.

§21.2805.Disclosure of Additional Clean Claim Elements.

An HMO or preferred provider carrier may require additional elements for clean claims beyond the required data elements and attachments identified in §21.2803(b), (c) and (e) of this title (relating to Elements of a Clean Claim). To require such additional elements as part of a clean claim, the HMO or preferred provider carrier shall comply with paragraphs (1), (2), or (3) of this section. If an HMO or preferred provider carrier requests additional elements as part of a clean claim and fails to comply with paragraphs (1), (2), or (3) of this section, the request will not extend the statutory claims payment period.

(1)

Written notice. The HMO or preferred provider carrier may provide written notice to all affected physicians or providers that such additional elements are necessary. The notice shall identify with specificity the additional required elements and must be received by the physician or provider at least 60 calendar days before the HMO or preferred provider carrier designates such additional elements as a requirement of a clean claim.

(2)

Manual or other document that sets forth the claims filing procedures. The HMO or preferred provider carrier may provide updated revisions to the physician or provider manual or other document that sets forth the claims filing procedures. The revision shall identify with specificity the additional required elements and must be received by the physician or provider at least 60 calendar days before the HMO or preferred provider carrier designates such additional elements as a requirement of a clean claim.

(3)

Contract. The HMO or preferred provider carrier may provide for such additional elements to be required in the contract between the HMO or preferred provider carrier and the physician or provider. As a means of setting forth the additional elements that are required as part of a clean claim, the contract shall either identify with specificity the additional required elements or reference the physician or provider manual or other document that sets forth the claims filing procedures. If the contract identifies with specificity the additional required elements, the additional written notice as specified in paragraphs (1) and (2) of this section is not required. If the contract references the physician or provider manual or other document that sets forth the claims filing procedures as a means of setting forth the additional required elements, the notice specified in paragraph (2) of this section is required. If the contract provides for mutual agreement of the parties as the sole mechanism for requiring additional clean claim elements, then the written notice specified in paragraphs (1) and (2) of this section does not supersede the requirement for mutual agreement.

§21.2806.Disclosure of Revision of Data Elements, Attachments, or Additional Clean Claim Elements.

An HMO or preferred provider carrier may revise its requirements for data elements, attachments or additional clean claim elements that have previously been properly included as elements of a clean claim pursuant to §§21.2803(b), (c), (d), and (e), 21.2804, and 21.2805 of this title (relating to Elements of a Clean Claim, Disclosure of Necessary Attachments, and Disclosure of Additional Clean Claim Elements). To revise the requirements for data elements, attachments, or additional clean claim elements, the HMO or preferred provider carrier shall provide advance written notice to all affected physicians or providers of such revisions. The notice shall identify with specificity the revisions to data elements, attachments, or additional clean claim elements, and must be received by the physician or provider at least 60 calendar days before the HMO or preferred provider enforces such revisions to the requirements of a clean claim. If the contract between the HMO or preferred provider carrier and the physician or provider provides for mutual agreement of the parties as the sole mechanism for requiring revised data elements, attachments or additional clean claim elements that have previously been properly included as elements of a clean claim pursuant to §§21.2803(b), (c), (d), and (e), 21.2804, and 21.2805 of this title, then the written notice specified in this section does not supersede the requirement for mutual agreement.

§21.2807.Effect of Filing a Clean Claim.

(a)

The statutory claims payment period begins to run upon receipt of a clean claim from a physician or provider at the address designated by the HMO or preferred provider carrier, in accordance with §21.2811 of this title (relating to Disclosure of Processing Procedures), whether it be the address of the HMO, preferred provider carrier, or a delegated claims processor. The date of claim payment is as determined in §21.2810 of this title (relating to Date of Claim Payment).

(b)

After receipt of a clean claim, prior to the expiration of the statutory claims payment period specified in §21.2802(25)(B) of this title (relating to Definitions), an HMO or preferred provider carrier shall:

(1)

pay the total amount of the clean claim in accordance with the contract between the physician or provider and the HMO or preferred provider carrier;

(2)

deny the clean claim in its entirety after a determination that the HMO or preferred provider carrier is not liable for the clean claim and notify the physician or provider in writing why the clean claim will not be paid;

(3)

notify the physician or provider in writing that the entire clean claim will be audited and pay 85% of the contracted rate on the claim to the physician or provider; or

(4)

pay the portion of the clean claim for which the HMO or preferred provider carrier acknowledges liability in accordance with the contract between the physician or provider and the HMO or preferred provider carrier, and:

(A)

deny the remainder of the clean claim after a determination that the HMO or preferred provider carrier is not liable for the remainder of the clean claim and notify the physician or provider in writing why the remainder of the clean claim will not be paid; or

(B)

notify the physician or provider in writing that the remainder of the clean claim will be audited and pay 85% of the contracted rate on the unpaid portion of the clean claim to the physician or provider.

(c)

With regard to a clean claim for a prescription benefit subject to the statutory claims payment period specified in §21.2802(25)(C) of this title (relating to Definitions), an HMO or preferred provider carrier shall:

(1)

after receipt of an electronically submitted clean claim for a prescription benefit that is electronically adjudicated and electronically paid pursuant to Insurance Code Article 3.70-3C, §3A(d) (Preferred Provider Benefit Plans) and Article 20A.18B(d), pay or deny the prescription benefit claim, in whole or in part, within 21 calendar days after the treatment is authorized; or

(2)

after receipt of an electronically submitted clean claim for a prescription benefit that is electronically adjudicated and electronically paid pursuant to §21.2814 of this title (relating to Electronic Adjudication of Prescription Benefits) pay or deny the prescription benefit claim, in whole or in part, within 21 calendar days after the clean claim is electronically transmitted.

§21.2808.Effect of Filing Deficient Claim.

If a submitted claim is determined by an HMO or preferred provider carrier to be deficient, the HMO or preferred provider carrier shall notify the physician or provider submitting the claim that the claim is deficient within 45 calendar days of the HMO's or preferred provider carrier's receipt of the claim. The HMO or preferred provider carrier and the physician or provider may agree to a different time period, not to exceed 45 calendar days, for notification that a claim is deficient. If an electronically submitted claim for a prescription benefit is determined by an HMO or preferred provider carrier to be deficient, the HMO or preferred provider carrier shall notify the provider within 21 calendar days of the HMO's or preferred provider carrier's receipt of the claim.

§21.2809 Audit Procedures.

(a)

If an HMO or preferred provider carrier is unable to pay or deny a clean claim, in whole or in part, within the statutory claims payment period specified in §21.2802(25)(B) of this title (relating to Definitions), the unpaid portion of the claim shall be classified as an audit, and the HMO or preferred provider carrier shall pay 85% of the contracted rate on the unpaid portion of the clean claim within the statutory claims payment period. Payment of 85% of the contracted rate on the clean claim is not an admission that the HMO or preferred provider carrier acknowledges liability on that claim.

(b)

Upon completion of the audit, if the HMO or preferred provider carrier determines that a refund is due from a physician or provider, such refund shall be made within 30 calendar days of the later of notification to the physician or provider of the results of the audit or exhaustion of any subscriber or patient appeal rights if a subscriber or patient appeal is filed before the 30-calendar-day refund period has expired, and may be made by any method, including chargeback against the physician or provider, or agreements by contract.

(c)

Upon completion of the audit, if the HMO or preferred provider carrier determines that additional payment is due to the physician or provider, such additional payment shall be within 30 calendar days after the completion of the audit.

§21.2811.Disclosure of Processing Procedures.

(a)

In contracts with physicians or providers, or in the physician or provider manual or other document that sets forth the procedure for filing claims, or by any other method mutually agreed upon by the contracting parties, an HMO or preferred provider carrier must disclose to its physicians and providers:

(1)

the address, including a physical address, where claims are to be sent for processing;

(2)

the telephone number at which physicians' and providers' questions and concerns regarding claims may be directed;

(3)

any entity along with its address, including physical address and telephone number, to which the HMO or preferred provider carrier has delegated claim payment functions, if applicable; and

(4)

the address and physical address and telephone number of any separate claims processing centers for specific types of services, if applicable.

(b)

An HMO or preferred provider carrier shall provide no less than 60 calendar days prior written notice of any changes of address for submission of claims, and of any changes of delegation of claims payment functions, to all affected physicians and providers with whom the HMO or preferred provider carrier has contracts.

§21.2815.Failure to Meet the Statutory Claims Payment Period.

An HMO or preferred provider carrier that fails to comply with the requirements of §21.2807(b) of this title (relating to Effect of Filing a Clean Claim) and §21.2809(a) and (c) of this title (relating to Audit Procedures) shall pay the full amount of the billed charges submitted on the clean claim or pay the contracted penalty rate for late payment set forth in the contract between the provider or physician and the HMO or preferred provider carrier. Any amount previously paid or any charge for a non-covered service shall be deducted from the payment. This section shall not apply when there is failure to comply with a contracted claims payment period of less than 45 calendar days as provided in §21.2802(25)(A) of this title (relating to Definitions), and Article 3.70-3C, §3(m) or Article 20A.09(j) of the Insurance Code.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on May 3, 2000.

TRD-200003121

Lynda Nesenholtz

General Counsel and Chief Clerk

Texas Department of Insurance

Effective date: May 23, 2000

Proposal publication date: December 17, 1999

For further information, please call: (512) 463-6327