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The House Insurance Committee met on March 30 to receive testimony on interim charges. The following report covers discussion of the interim charges listed below:
 
Review the implementation of HB 2929 (83R). Examine the bill's impact and compliance among affected health plans. Examine the costs incurred by the Employees Retirement System, Teacher Retirement System, and any other affected state health plans as a result of the legislation.
 
Evaluate the statutory penalty calculations under Texas's prompt payment laws regarding health care claims. Include an analysis of whether the proper benchmarks are used to establish penalties commensurate with an improper payment and the effect of the abolition of the Texas Health Insurance Pool on the use of funds collected under the statute.
 
Post-Acute Brain Injury Rehab
 
Robert Kukla, Employees Retirement System

  • Coverage under the health plans sponsored through ERS have always covered charges in connection with acquired brain injury so the impact of HB 2929 (83R) was negligible
  • There may be higher utilization as a natural trend but nothing directly related to the bill

 
Katrina Daniel, Teacher Retirement System

  • TRS Covered acquired brain injury prior to HB 2929; as a result, the bill did not increase TRS’ costs
  • Rep. Kenneth Sheets asked if TRS sees the same trend as ERS
    • Yes, maybe just an increase in utilization

 
Brent Masel, Neurologist

  • Runs a post-acute brain injury program
  • Was involved in the development of HB 2929
  • Texas was well ahead of the curve in funding rehabilitation
  • Without HB 2929 traumatic brain injury (TBI) is funded by the state through a number of different programs such as those at DARS; with the legislation, TBI is paid for the way it should be, through the patient and the insurance companies
  • Someone with TBI is twice as likely to develop Alzheimer’s disease; brain injury is a disease accelerant
  • Lots of self-insured companies to do not follow the law in relation to HB 2929; asks the body to take whatever steps are necessary to ensure the law is followed fairly for all Texans
  • Sheets asked how many patients come through the facility
    • Maybe 225 yearly
  • Sheets asked how many have insurance coverage
    • About half
  • Sheets asked how many of those insurance companies have to be battled to get the coverage
    • Insurance companies are sometimes so defiant that the patient never gets to the clinic
  • Rep. Sergio Munoz asked the witness to provide the names of the insurance carriers that are not following the law
    • Problem has been with United Healthcare
  • Chair John Frullo asked what the process is when an insurance company may be balking at providing coverage
    • The process starts when a patient is in the hospital and is referred to the facility; some patients are automatically referred to DARS or a nursing home by the insurance company; sometimes a lawyer needs to be hired to get the issue settled

 
Jane Boutte, Transitional Rehabilitation at Baylor Institute for Rehabilitation

  • Some specific reasons for denial include
    • Insurance companies saying there are no benefits for this level of service
    • Individual doesn’t meet the criteria for inpatient rehabilitation or doesn’t meet medical necessity criteria
  • Discussed a situation with a patient who could not receive services for thirteen months from a certain carrier then switched carriers and began receiving services within two weeks
  • Texas is a leader in this field and other states are trying to replicate Texas’ successes
  • Many people have been helped by HB  2929 so far but more needs to be done to ensure all insurance companies are following the law
  • Rep. Morgan Meyer asked how insurance companies can be compelled to comply
    • Maybe some better definitions for the continuum of care, maybe enforcement actions

 
Highland Family

  • Discussed the story of their son Blake who had a brain injury and was able to receive rehabilitation services through HB 2929
  • Complimented the care they received from Cook Children’s Hospital

 
Debra Diaz-Lara, Department of Insurance

  • TDI does not make determinations of medical necessity
    • Only review determinations made by health plans
  • Rep. Greg Bonnen asked which insurance products this statute applies to
    • The statute applies to fully funded insurance programs and ERS and TRS; does not apply to self-insured plans; applies to about 70% of policies
  • Bonnen asked about plans that state law does not apply to
    • There are a large amount of policies the law does not apply to; don’t believe the state has the authority to require those plans to comply
  • Bonnen asked what current enforcement procedures are
    • Starts with a management conference; after exhausting that TDI has the option of doing a market conduct exam

 
Prompt Pay
 
Jamie Dudensing, Texas Association of Health Plans

  • Will be focusing on main concern with the penalties for hospital billed charges
  • Prompt Pay Act was passed in 2003; health plans are required to report all late payment penalties to TDI on a quarterly basis; there has been an 85% decrease in late payments since passage of the act
  • Texas prompt pay law is considered to be the most punitive in the nation; there is a penalty based off of billed charges as opposed to an interest rate based penalty as in other states
  • Despite industry compliance and improvement in the system there has been substantial increase in litigation surrounding these issues; mostly because of the way hospital billed charges are structured
  • Prompt pay law applies to 100% of clean claims; since most claims are electronic now clean claims are a very large portion of the claims
  • Penalty is based on how late the claim is paid and the difference between the negotiated rate and what the billed charges are
  • There were 89 million clean claims in Texas in 2015; about 200,000 claims were paid late that year; that means about 99.75% of claims were paid timely
  • Texas has no exemption for fraud or misrepresentation; Texas is one of nine states that requires payment of attorney fees
  • Meyer noted if there has been such an improvement the system must be working
    • Hospital billed charges are substantially higher than negotiated rates and hardly anyone ever pays the full amount of hospital billed charges
    • For a certain service one hospital charges $11,000 and another charges $115,000; almost a 1000% increase
    • Even in Dallas between two hospitals for the same service the charge can be 3x higher
    • This creates a huge penalty for one day late and there is a huge variation; providers are getting to set the penalty themselves
  • Despite increased compliance, the penalty has now become a revenue source in the hospital world
  • Recommends moving toward an interest based penalty; these interest penalties are still very heavy handed but are not based on billed charges
  • Sheets asked about a bill like this last session
    • It was a bill that would reduce the statutory cap on penalties
  • Sheets made the point that the bill was authored by Rep. Smithee who was also the original author of the Prompt Pay Act
  • Munoz asked for examples of how much is paid in an average penalty
    • Not sure; TDI would probably know
  • Munoz asked for an example of how much a hospital would be making on these penalties
    • Not sure; in FY15 $100 million in penalties was paid
  • TAHP believes there needs to be a penalty; 18% annual rate would be a more fair system and still one of the most strict in the country
  • Billed charges are not based on any market forces
  • Frullo asked about the numbers of late payments increasing between 2011 and 2012 for a short period of time
    • It could be related to a company having a computer error that affected a large number of payments at once

 
Gary Stankowski, PPO Check

  • Works for hospitals to provide various consulting services
  • Have noticed a dramatic increase in hospitals being paid timely since passage of the prompt pay law
    • Attribute this to the meaningful penalty associated with noncompliance
  • Compliance in Texas is much better than in other states
  • Have a lot of access to actual claims data; get it from the payers; would be happy to share findings and clarify any issues that may be out there
  • Frullo asked for some information on when late claims are usually paid and what top causes for late payment may be
  • Late payments are very costly to hospitals; this has to do with the way hospitals finance the services they provide; having to wait for reimbursement beyond thirty days  can have serious negative consequences

 
Jeff Cody, Norton Rose Fulbright

  • Prompt pay tries to enforce the efficient billing and timely payment of insurance claims
  • It benefits the health plans because it incentivizes clean claims and it benefits the provider because they can expect prompt payment
  • Payers have shifted their practice from paying late to underpaying; then the provider has to go and fight for their full payment
  • Providers end up being the enforcers; taking away the penalty takes away the behavior modification device
  • Contracts between providers and health plans have a restriction on billed charges; it is disingenuous for payers to come in and complain about billed charges when they have agreed to those as a contract base
  • Meyer asked what the basis is for billed charges
    • The evaluate cost of supply, services, etc. on a very granular basis, then there is mark up; payers agree to billed charges and determine a percentage of that they will pay, then they agree to an inflation increase; providers do not have unfettered discretion to raise their billed charges
  • Meyer asked if the plans have the ability to negotiate billed charges
    • Dudensing replied that plans do not negotiate billed charges; just because billed charges cannot change in the middle of the year it doesn’t mean providers don’t have significant variations between their billed charges
  • Dudensing noted that the fairness issue is that if plans are doing better and paying more timely and the penalties are still getting higher it doesn’t make any sense
  • Meyer asked how many lawsuits have been brought to court and how much has been paid out
    • Will try to find that information
  • Meyer asked how bad the problem was before the legislation was passed
    • In 2005 there were only 42 million claims and only half of them were clean; the rate of late payment was around 2%
  • Cody noted this is a creature of arbitration; there are very few cases that actually make it to court and arbitration details are kept confidential
  • Still have to address the underpayment issue; the penalty is not big enough to make it economically viable to go after those
  • Sheets asked about the 5th circuit ruling
    • It basically determined that self-funded plans are not subject to the Texas Prompt Pay Act
  • Sheets asked if there are trends with certain payers who are offending the intent of the act more
    • It changes over time
  • Sheets asked if the current act provides any penalty for underpayment
    • Yes; the percentage difference between underpaid amount and the contracted amount is multiplied by the same penalty structure; so it is only a percentage of the prompt pay penalty
  • Sheets asked if Cody is opposed to the interest rate model because there aren’t attorney fees provisions
    • If attorney fees came out it would kill it completely; the attorney costs are very high because these are tedious cases
  • Sheets asked how many times arbitrations are successful
    • Cody noted he has only lost two cases in arbitration
  • Sheets asked if there are certain jurisdictions where more of these go to litigation
    • Not sure there is any geographical division among payment practices
  • Sheets noted it would be helpful to have these discussions with the defense attorneys because they typically have middle ground information
  • Sheets noted it appears a cottage industry has formed around this issue that is making a significant amount of money; the intent was just to ensure prompt payment
    • Believe the cottage industry is going to dissolve because of the 5th circuit ruling
  • Sheets noted both sides should come together to figure out a compromise between the late payment issue and the underpayment issue
  • Paul asked what the process is for paying a late claim
    • Dudensing noted for a vast majority of them the insurance company finds the missed payment and pays it automatically then reports that to TDI
  • Paul asked why attorneys are needed if the insurance company finds them
    • Dudensing replied that very complex billing issues that have very extensive claims generally have some issues and there may be a disagreement between a provider and the plan to ensure all items have been claimed correctly; for very simple issues the insurance company generally pays them so the penalty does not continue to increase
    • Cody noted many times a large number of claims are compiled to make it economically feasible to go after them
  • Paul asked if providers hold onto late payments to increase the penalty
    • That generally never happens; most of the time if a payment is not made when it is found, the insurance company has made a determination to underpay or to not pay and those are generally compiled and taken to arbitration
  • Bonnen noted the system is working so far; if it went to the 18% penalty it would probably gut the statute; there has to be some middle ground

 
Don McBeath, Texas Organization of Rural and Community Hospitals

  • Rural hospitals are very concerned about any adjustments to the current prompt pay law
  • Rural hospitals are struggling; rural hospitals receive $100 million less in payments from Medicaid and Medicare
  • Starting to see a lot of rural hospitals closing
  • These hospitals rely on cash flow to continue providing services; many of them take out loans to make payroll while they are waiting for payments to come in
  • If health plans are paying as well as they say they are, a change in the penalty would be a non-issue

 
Patricia Kolodzey, Texas Medical Association

  • Even after a decade of having prompt pay legislation passed, TMA still includes prompt pay hassles and payment issues as a top legislative priority
  • Discussed the history of the bills and laws that were worked on to get to the current system
  • In the past there was an issue of health plans pending claims for up to a year to keep from having to pay money as well as paying percentages of the amount they were supposed to pay requiring a provider to fight the payment
  • If health plans would make their provider representatives more available and helpful it would help the problem a lot; many times physicians do everything they are supposed to do and still cannot affect a good outcome
  • If a health plan doesn’t want to incur a penalty they just have to pay claims on time
  • Plans could increase the dollar threshold for claims that are automatically pended to help the issue as well

 
Bill Hammond, Texas Association of Business

  • Prompt pay penalties are a hidden tax on the people of Texas because half of them go to GR
  • Billed charges are a fictitious amount that have no relation to the cost of care that is provided
  • Cost of health insurance is the number one concern for business owners around the state; prompt pay penalties are passed along to consumers
  • In states that use an interest rate penalty compliance is nearly the same
  • Even an 18% penalty would be an enormously high penalty compared to the offense of late payment

 
Bryan Blevins, Texas Trial Lawyers Association

  • The 99.75% timely payment number is based only on self-reporting from health plans for fully insured plans
  • Doctors spend 14% of their revenue just to get compliance of their contract provisions
  • There is a very real cost that goes on top of services that the prompt pay legislation was put in place to counteract
  • Discussed the method for calculating late payment penalties and underpayment penalties
  • The argument the health plans made in 2003 was that claims aren’t made correctly or cleanly; the number of clean claims is significantly higher now but the health plans are making the same argument
  • Concerns about the cottage industry are probably going to come to a close with the 5th circuit decision
  • Bonnen noted his concern was more focused on hospitals; are there any different ideas between hospitals and physicians
    • Everything would apply equally; heard TAHP say they are only concerned with hospital billed charges; not sure how you could affect a change only for hospital billed charges and not also affect penalties paid to physicians
  • It should be much more of a concern that Texas prompt pay laws only apply to a small portion of claims; should go back into statute and clarify the intent to govern insurers broadly and independent of whether they are an insurer or a third party administrator
  • Sheets asked about the development of the cottage industry to sue for prompt payment
    • The law had already been around for ten years before this issue came to light; probably happened because people have the capability now to look at and analyze large amounts of data; a hospital has to be pretty desperate to get their payment for them to want to hire a lawyer over it
  • If the billed charge is such a huge issue why isn’t the industry taking advantage of the laws that are available to them; there are laws that say a provider can’t charge unreasonable amounts
  • Sheets noted he believes it is problematic that one party to the issue has the ability to determine the penalty they receive by setting their billed charges; there needs to be more consistency in the market
  • Sheets asked about the attorney fees
    • They are only awardable if they are reasonable; can be paid as a contingency fee, as an hourly rate or as an hourly rate plus premium
  • Sheets asked if there is a particular range of payments where the most problems are coming from
    • Blevins noted he represents doctor predominantly so the claims aren’t that large; see lots of fee schedule related issues
  • Sheets asked if the errors seem to be intentional or not
    • As late payments have decreased there has been more attention paid to underpayments; underpayments have always been there; as fee schedules and modifiers have become more complicated there will be growth in that area of underpayments; more carriers are going away from CMS edits; all of those things are trending toward more errors