(a)(No change.) (b)The following examples demonstrate how to calculate penalty amounts under subsection (a) of this section: (1)If the contracted rate, including any patient financial responsibility, [owed by the HMO or preferred provider carrier ] is $10,000 and the billed charges are $15,000, and the HMO or preferred provider carrier pays the claim [is paid] on or before the 45th day after the end of the applicable statutory claims payment period, the HMO or preferred provider carrier shall pay, in addition to the amount [contracted rate] owed on the claim, 50% of the difference between the billed charges ($15,000) and the contracted rate ($10,000) or $2,500. The basis for the penalty is the difference between the total contracted amount, including any patient responsibility, and the provider's billed charges; (2) - (3)(No change.) (c)(No change.) (d)For the purposes of subsection (c) of this section, the underpaid amount is calculated on the ratio of the balance owed by the carrier [amount underpaid on the contracted rate] to the total contracted rate, including any patient financial responsibility, [ contracted rate] as applied to the billed charges. For example, a claim for a contracted rate of $1,000.00 and billed charges of $1,500.00 is initially underpaid at $600.00, with the insured owing $200.00 and the HMO or preferred provider carrier owing a balance of $200.00. The HMO or preferred provider carrier pays the [$800.00 and the] $200.00 balance [ is paid] on the 30th day after the end of the applicable statutory claims payment period. The amount the HMO or preferred provider carrier initially underpaid, $200.00, is 20% of the contracted rate. To [ In order to] determine the penalty, the HMO or preferred provider carrier must calculate 20% of the billed charges, which is $300.00. This amount represents the underpaid amount for subsection (c)(1) of this section. Therefore, the HMO or preferred provider carrier must pay, as a penalty, 50% of $300.00, or $150.00. (e)For purposes of calculating a penalty when an HMO or preferred provider carrier is a secondary carrier for a claim, the contracted rate and billed charges must be reduced in accordance with the percentage of the entire claim that is owed by the secondary carrier. The following example illustrates this method: Carrier A pays 80% of a claim for a contracted rate of $1,000 and billed charges of $1,500, leaving $200 unpaid as the patient's responsibility. The patient has coverage through Carrier B that is secondary and Carrier B will owe the $200 balance. If Carrier B fails to pay the $200 within the applicable statutory claims payment period, Carrier B will pay a penalty based on the percentage of the claim that it owed. The contracted rate for Carrier B will therefore be $200 (20% of $1,000), and the billed charges will be $300 (20% of $1,500). (f) [(e)] An HMO or preferred provider carrier is not liable for a penalty under this section: (1)if the failure to pay the claim in accordance with the applicable statutory claims payment period is a result of a catastrophic event that the HMO or preferred provider carrier certified according to the provisions of §21.2819 of this title (relating to Catastrophic Event); or (2)if the claim was paid in accordance with §21.2807 of this title, but for less than the contracted rate, and: (A)the preferred provider notifies the HMO or preferred provider carrier of the underpayment after the 180th day after the date the underpayment was received; and (B)the HMO or preferred provider carrier pays the balance of the claim on or before the 45th day after the date the insurer receives the notice of underpayment. (g) [(f)] Subsection (f) [ (e)] of this section does not relieve the HMO or preferred provider carrier of the obligation to pay the remaining unpaid contracted rate owed the preferred provider. (h) [(g)] An HMO or preferred provider carrier that pays a penalty under this section shall clearly indicate on the explanation of payment the amount of the contracted rate paid, the amount of the billed charges as submitted by the physician or provider and the amount paid as a penalty. A non-electronic explanation of payment complies with this requirement if it clearly and prominently identifies the notice of the penalty amount.
This agency hereby certifies that the proposal
has been reviewed by legal counsel and found to be within the agency's legal
authority to adopt.
Filed with the Office of
the Secretary of State on July
25, 2005
TRD-200503026 Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: September 4, 2005
For further information, please call: (512) 463-6327
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