The administration of Texas Gov. Rick Perry, who came under heavy fire from providers for vetoing legislation to strengthen the state's prompt-payment law earlier this year, has levied hefty fines against insurers for sluggish payments.
Industry observers say the penalties against seven companies, which amount to $9.25 million, could be the largest ever for that type of infraction (See chart). Enforcement of prompt-payment laws is becoming a priority in some states, as physicians and other providers press for relief from reimbursement denials and delays (July 9, p. 4).
In fact, in New Jersey, the state hospital association there urged regulators to step up scrutiny of health plans' compliance with that state's prompt- pay law, which was enacted in December 1999. The New Jersey Hospital Association earlier this month released the results of a member survey that showed rampant noncompliance with the law, with performance having worsened in some areas between October 2000 and March of this year.
Valerie Sellers, the association's vice president of health planning and research, said the figures "should raise a red flag."
Michele Guhl, president of the New Jersey Association of Health Plans, said the hospital association's survey was flawed and politically motivated. She added, "The regulations weren't completed until January of this year, and a lot of the (regulations) required plans to make a lot of systems changes." Guhl said an accurate measure of compliance won't be available until mid-2002, when the state is due to release an audited report based on data supplied by health plans.
Back in Texas, Jim Davis, spokesman for the Texas Department of Insurance, said "powerful interests" in both the state Legislature and the governor's office urged the department to take action. "We wanted to make the fines large enough to get their attention," he said. He said the department received more than 10,000 provider complaints last year.
The department said it expects to issue more penalties, with Aetna and PacifiCare specifically under review.
Texas law enacted in 1999 requires plans to pay providers with 45 days of filing a complete and accurate claim or face a fine of up to $1,000 a day per incident. This is the first time the department has levied penalties since August 2000, when the department established a definition of a "clean claim."
The companies have until the end of October to determine which providers were not paid within the required time frame and pay whatever restitution is prescribed by their contracts, Davis said. Restitution, which will be paid to providers in addition to the fines that will go to the state coffers, is expected to amount to millions of dollars for each plan.
Stiff enforcement could intensify the payment tug-of-war between providers and payers. Although provider groups generally applauded the fines, health plans said they failed to take into account a vast majority of claims that were paid on time.
"The true cost of these penalties and restitution, in terms of a higher cost of healthcare, is ultimately going to be paid by businesses and consumers in the state of Texas," said Tom Lucksinger, president of the Texas Association of Health Plans. Lucksinger is president and chief executive officer of Houston-based AmCare Health Plans.
In a written statement, the insurers' group blamed "lack of investment in technological resources by physicians and other providers" for payment disputes. Lucksinger said, "A great many of the claims problems we are experiencing would disappear overnight if physicians would file their claims electronically."
Teresa Devine, director of healthcare financing for the Texas Medical Association, said the fines could prompt insurers to scrutinize claims more closely and refuse to process those that aren't perfect. That could be a hardship for the roughly half of physicians in the state who don't file claims electronically and who are more susceptible to errors, she said.
"They're not going to be nice guys anymore," Devine said of the health plans.