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(a)An HMO or preferred provider carrier that determines under §21.2807 of this title (relating to Effect of Filing a Clean Claim) that a claim is payable shall: (1)if the claim is paid on or before the 45th day after the end of the applicable 21-, 30- or 45-day statutory claims payment period, pay to the preferred provider, in addition to the contracted rate owed on the claim, a penalty in the amount of the lesser of: (A)50% of the difference between the billed charges and the contracted rate; or (B)$100,000. (2)If the claim is paid on or after the 46th day and before the 91st day after the end of the applicable 21-, 30- or 45-day statutory claims payment period, pay to the preferred provider, in addition to the contracted rate owed on the claim, a penalty in the amount of the lesser of: (A)100% of the difference between the billed charges and the contracted rate; or (B)$200,000. (3)If the claim is paid on or after the 91st day after the end of the applicable 21-, 30- or 45-day statutory claims payment period, pay to the preferred provider, in addition to the contracted rate owed on the claim, a penalty computed under paragraph (2) of this subsection plus 18% annual interest on the penalty amount. Interest under this subsection accrues beginning on the date the HMO or preferred provider carrier was required to pay the claim and ending on the date the claim and the penalty are paid in full. (b)The following examples demonstrate how to calculate penalty amounts under subsection (a) of this section: (1)If the contracted rate owed by the HMO or preferred provider carrier is $10,000 and the billed charges are $15,000, and 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 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; (2)if the claim is paid on or after the 46th day and before the 91st day after the end of the applicable statutory claims payment period, the HMO or preferred provider carrier shall pay, in addition to the contracted rate owed on the claim, 100% of the difference between the billed charges and the contracted rate or $5,000; and (3)if the claim is paid on or after the 91st day after the end of the applicable statutory claims payment period, the HMO or preferred provider carrier shall pay, in addition to the contracted rate owed on the claim, $5,000, plus 18% annual interest on the $5,000 penalty amount accruing from the statutory claim payment deadline. (c)Except as provided by this section, an HMO or preferred provider carrier that determines under §21.2807 of this title that a claim is payable, pays only a portion of the amount of the claim on or before the end of the applicable 21-, 30- or 45-day statutory claims payment period, and pays the balance of the contracted rate owed for the claim after that date shall: (1)If the balance of the claim is paid on or before the 45th day after the applicable 21-, 30- or 45-day statutory claims payment period, pay to the preferred provider, in addition to the contracted amount owed, a penalty on the amount not timely paid in the amount of the lesser of: (A)50% of the underpaid amount; or (B)$100,000. (2)If the balance of the claim is paid on or after the 46th day and before the 91st day after the end of the applicable 21-, 30- or 45-day statutory claims payment period, pay to the preferred provider, in addition to the contracted amount owed, a penalty in the amount of the lesser of: (A)100% of the underpaid amount; or (B)$200,000. (3)If the balance of the claim is paid on or after the 91st day after the end of the applicable 21-, 30- or 45-day statutory claims payment period, pay to the preferred provider, in addition to the contracted amount owed, a penalty computed under paragraph (2) of this subsection plus 18% annual interest on the penalty amount. Interest under this subsection accrues beginning on the date the HMO or preferred provider carrier was required to pay the claim and ending on the date the claim and the penalty are paid in full. (d)For the purposes of subsection (c) of this section, the underpaid amount is calculated on the ratio of the amount underpaid on the contracted rate to the 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 $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 underpaid, $200.00, is 20% of the contracted rate. 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)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. (f)Subsection (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. (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 adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on September 15, 2003
TRD-200306012 Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: October 5, 2003
Proposal publication date: July 4, 2003
For further information, please call: (512) 463-6327
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