New Jersey may join a growing list of states in the East that have toughened standards for insurers' payments to providers.
Earlier this month, Pennsylvania Gov. Thomas Ridge signed a measure that would require HMOs to pay hospitals within 45 days of receiving a clean claim (June 15, p. 8). Connecticut and New York have similar laws.
One provider-backed mandate being considered in New Jersey would give insurers 30 days to pay clean manual claims. Electronic claims would have to be paid in 17 days. Another measure up for state Senate vote this week would establish a 30-day window for paying electronic claims. Currently, insurers in the state are supposed to pay claims in 60 days but some fail to do so, studies have shown.
The bill applies to health insurers, HMOs and provider-sponsored plans of every ilk.
The measure was introduced June 1 on behalf of the hospital industry. It is pending action by the state General Assembly's banking and insurance committee.
It defines a clean claim and creates real teeth for violations, said Peter Lillo, the New Jersey Hospital Association's vice president of government relations. Insurers who exceed the mandated deadlines could pay fines of $500 per claim for each day an uncontested claim or portion of a claim is late, up to a $10,000 per-violation maximum.
The HMO industry says there's nothing wrong with the current standards. In fact, 10 of the largest HMOs in the state entered a voluntary agreement last fall to pay 10% interest on claims that languish past 60 days and $1,000 per violation.
But providers still say insurers are frequently delinquent.
More than 50% of accounts receivable reported by members of Trenton-based University Health System of New Jersey are more than 60 days old, said Thomas Terrill, president of the statewide consortium of teaching hospitals. Thirty percent of their receivables are more than 120 days old, he said.
"Pulling those numbers from accounts receivable doesn't prove anything," said Paul Langevin, president of the New Jersey Association of Health Plans. He said many providers submit claims containing errors, preventing them from being paid quickly.
"The onus is on the plans to make the system to work perfectly," he said.
If providers want claims paid faster, there should also be a penalty for erroneously filing claims, he said.