Strengthen prompt-pay laws: Insurer payment still too slow

Physicians report that insurers are finding loopholes that, at the least, violate the spirit of such laws. States must pass stricter laws to make sure these loopholes are closed.

Posted July 3, 2006.

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Despite almost 10 years' worth of state legislation, physicians say insurers still find ways to slow down the payment process.

Every state but South Carolina has legislation laying out deadlines for insurers to process and either pay "clean" claims or explain -- in good faith -- why they aren't paying. Yet physicians all over the country are reporting that they struggle with insurers who find ways to game the system so that physicians don't get paid in a timely manner.

That's why the AMA continues to fight for strong prompt-payment legislation, including tweaking existing laws to close the loopholes that allow insurers to delay what should be prompt payments. Indeed, 16 state legislatures alone this year have taken up the question of tightening such laws. Even though most bills stalled in committee, the fact that so many bills were introduced -- following similar laws passed in other states in recent years -- shows that physicians aren't alone in believing that insurers are finding ways to get around existing prompt-payment laws.

Insurers, of course, don't see a problem. Health plans say that, to begin with, the legislation referred to only a few odd claims, mostly more complicated ones. America's Health Insurance Plans, an industry group, recently released a survey stating that 98% of all claims are paid (even most of the "unclean" ones) or otherwise responded to within 30 days, a common deadline in prompt-pay legislation, particularly for claims submitted by mail. AHIP says greater use of electronic claims, and not prompt-payment legislation, is key to physicians getting paid quickly.

But even as more physicians file electronically (75% of claims today, up from 44% in 2002, according to AHIP), the AMA's Private Sector Advocacy group, as well as state medical associations and specialty societies, continue to field complaints from physicians. They say plans have a remarkable ability to decide on day 29 (out of a 30-day deadline to pay a claim or dispute it) that an address was incorrect or some patient's middle initial was missing. Or the plans ask for additional documentation to justify the claim -- even if it's merely an office visit.

Plans say physicians themselves are often to blame for a lack of prompt payment, with AHIP stating that three in 10 claims are filed more than 30 days after service. But information recently presented by Athenahealth, a claims processing company, indicates that even when physicians are quick, plans aren't in a hurry.

Athenahealth, which says it files most physicians' claims within a few days of service, says the average lag time between when a physician treats a patient and when a large health plan processes the claim -- not necessarily pays it -- ranges between 29 days (Humana) and 37 days (UnitedHealth Group). The survey did not give extremes for how quickly or how slowly plans pay. But averages at least suggest that plans are not always following the 15- to 30-day deadlines most states impose.

How can plans get away with not following the deadlines? For one thing, in many states they can be eliminated if the plan and the physician agree in their contract to eliminate them. Given health plans' market power, physicians are "agreeing" because they have to, not because they want to. That's why at least one state, North Carolina, has a bill pending that would bar plans from putting such language in contracts.

The bill, passed by the North Carolina House and now under consideration in the Senate, attacks many of the loopholes that other state bills have sought to close. For example, the bill would cut the pay-or-respond deadline to 15 days, from 30, after receiving a claim; disallow insurers' right to deny or reduce claims practices filed more than 180 days after treatment; and require plans to include "good faith" reasons for denial of a claim.

Continued vigilance is necessary as long as insurers find ways to game prompt-payment laws. Legislators need to keep up their efforts to amend the laws to make sure that health plans are, indeed, consistently paying physicians in the timely manner called for by both the letter and the spirit of these necessary laws.

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