HIPAA may affect state 'prompt pay' laws: 'clean claim' redefined?

Internal Medicine News, Nov 1, 2003 by Joyce Frieden

WASHINGTON -- State "prompt pay" laws could be affected by the "transaction and code set" provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) that took effect last month, Ann Leopold Kaplan said at a forum sponsored by the American Health Lawyers Association.

Prompt pay laws require insurers to promptly pay providers who have submitted "clean claims," said Ms. Kaplan, a lawyer specializing in health care policy. The question is, "Does a [HIPAA] compliant transaction equal a clean claim?"

HIPAA has specific instructions about how a claim must be formatted to be accepted by an insurance company, she explained. The transaction and code set rule still allows for decisions about what optional fields and attachments are needed. If meeting a state's clean claim requirement would result in a violation of HIPAA, then the state law will be preempted.

Idaho is the only state that has not enacted any prompt pay laws, said Keith Halleland, a Minneapolis health care lawyer. "As a result of these laws, there are some pretty strict restrictions on how long an insurer has [to pay] a claim."

Generally speaking, insurers must pay providers within a specified time period--usually 15 to 45 days--for any clean claim. If insurers don't pay within that time, they must add interest to the amount they owe; annual interest rates usually range from 9% to 18%, said Mr. Halleland, whose law firm has done research on prompt pay laws. Payment can be delayed in some states if there is a "legitimate" dispute.

Some aspects of prompt pay laws vary widely. Some states allow authorities to levy civil penalties on an insurer that violates prompt pay laws; the penalties can range from $500 to $5,000 per violation and from $10,000 to $200,000 in the aggregate, plus costs and attorneys' fees.

States also vary on whether their prompt pay laws include plans that fall under the Employee Retirement Income Security Act (ERISA); these are mostly self-insured plans that are funded by large employers. Only two states--Georgia and North Carolina--explicitly exclude ERISA plans from their prompt pay laws. A "handful" of others exclude plans that would likely fall under ERISA, he said.

The Arizona law has an unusual prompt pay provision: Private contracts between providers and insurers can override the processing deadline stated in the law.

Louisiana's law allows for delays due to "just and reasonable grounds for denial."

"There could be differences of opinion on that issue," Mr. Halleland said, adding that his firm's research showed more court cases related to payment denials in Louisiana than in any other state.