DEPARTMENT OF INSURANCE

18 DE Admin. Code 1310

Statutory Authority: 18 Delaware Code,

Sections 311, 2304(16) and 2312

(18 Del.C. §§311, 2034(16) and 2312)

FINAL

ORDER

1310 Standards for Prompt, Fair and Equitable Settlement of Claims for Health Care Services [Formerly Regulation 80]

Public hearings were held on March 3, 2005 and June 28, 2005 to receive comments on proposed amendments to Regulation 1310 relating to the prompt payment of health claims. Public notices of the hearings and publication of proposed Regulation 1310 in the Register of Regulations and two newspapers of general circulation for both hearings was in conformity with Delaware law. At both public hearings, the record was held open for more than the required thirty days to receive additional written comments. Forty persons attended the public hearing on March 3rd and nine persons attended the public hearing on June 28th. Thirty-three written comments were received by the Department in addition to the oral comments presented at the public hearings.

Summary of the Evidence and Information Submitted

By and large, the written and oral comments were favorable. The medical providers and consumer representatives were supportive of the changes. The insurers were primarily concerned about the limitations on their ability to obtain corrective information from providers, the impact of the three strike rule in section 7.0 and the definition of a clean claim in section 4.0. There were also a number of comments that suggested technical changes to the proposed regulation for purposes of clarity or internal conformity. The written and oral comments were varied and, in some instances, went beyond the scope of the published changes or recommended changes that would not fall within the jurisdictional authority of the Department of Insurance. While all of the comments are a part of the record in this proceeding, this summary will address the comments most pertinent to the proposed changes.

Section 6.1.4 refers to “subsections (a) through (c) of this Section” and it was correctly observed that the wording should be changed to “sections 6.1.1 through 6.1.3.”

Peter Shanley, Esquire, recommended clarifications to distinguish between individual providers and institutional providers as well as a clarification to assure that both network and non-network providers were treated equally. He also recommended additional provisions to assure that claims under an assignment of benefits would be treated the same as any provider claim and that there be a presumption of receipt within five business days for claims submitted by mail and within one day if submitted electronically. Professional Associates, a medical billing and management company, recommended that all carriers be required to accept electronic filings.

The Delaware Healthcare Association, the Delaware Developmental Disabilities Council, the Delaware State Council for Persons with Disabilities and the Delaware Governor’s Advisory Council for Exceptional Citizens recommended that providers offering benefits or services under Medicaid health plans not be exempt from the scope of the regulation. They were all concerned that section 2.0 excludes such coverage. However, it must be noted that Medicaid is, by definition, a government benefit program and not insurance as defined by Title 18.

The Medical Society of Delaware expressed its support for the proposed changes. Provider attendees included private medical offices, physical therapists and mental health professionals. The individual providers who testified supported the changes and discussed the problems they have had with delayed payments and the delays in payment caused by multiple requests for additional information by the insurers. Some providers were critical of insurers whose employees don’t provide accurate information internally when referring claims from one department of the insurer to another. A common request was to expand the regulation to cover the prompt payment of tort injury and workers compensation claims. The mental health providers were especially concerned that third party administrators be specifically covered.

The insurers expressed their support for the current regulation and stated that there is, for most insurers, only a small percentage or fractional percentage of claims that are not paid within thirty days. Sixteen of the thirty-three written comments were detailed submissions from various insurers or insurance trade groups. While the insurers were supportive of prompt payment, there were some concerns expressed about key provisions of the proposed changes. Those concerns are:

1. The limitation in section 6.1.4 of one request for supplemental information that can be made by an insurer to a provider. BCBSD, Inc. suggested three limited exceptions to this section: coordination of benefits, pre-existing conditions limitations and fraud and abuse.

2. The change to the “three strike rule” and the presumption that three violations of the regulation establish a rebuttable presumption of bad faith claims practices.

3. The change to the definition of a clean claim in section 5.2 is more restrictive than the Medicare definition yet the proposed regulation proposes to use the Medicare form for claims submissions.

4. The need to make allowances for situations that require discounts, co-insurance or a deductible that would affect the “total” claim.

5. Changing the date for the computation of interest in section 8.0 to the date the insurer first became obligated to pay the claim as opposed to the date the claim or bill for services first came due. If a claim is not clean or additional information were needed by the insurer, the obligation to pay would not arise until that information was provided and would affect the amount of interest to be applied to the claim.

6. Specifying that the interest to be assessed be at a set rate as defined by a statute or merely a defined factor over the prime rate of interest.

MetLife and AmeriHealth opposed the inclusion of dental coverage in the regulation noting that there were no complaints from dental providers that any problem exists and the fact that dental coverage is written much differently than general medical coverage. Dental plans are limited coverage and benefit plans have small benefit maximums. As a result virtually all dental policies are auto-adjudicated and are paid within a week.

Findings of Fact

I find that there is ample support for the proposed changes to this regulation. The following changes are technical in nature, do not substantively change the purpose or application of the regulation and do not require re-publication and re-hearing of the regulation:

1. The word “days” was not defined in the published version of the regulation. A new definition stating that “days” means calendar days is added to section 3 of the regulation.

2. The term “provider” has been changed to clarify that the term includes institutional as well as individual providers and that it applies to any provider irrespective of whether there is a written agreement between the provider and the carrier.

3. Section 4.3 has been amended to more accurately identify the forms that may be used by providers when submitting claims to carriers.

4. In section 6, the term “claim” is modified by the word “allowable” to assure that the carrier’s obligation is limited to the amount that would be allowable under the contract between the carrier and the provider as opposed to the charge the provider submitted for the claim.

5. Section 8 is modified to clarify that interest shall only run from the date the carrier was first obligated to make payment on the claim, not the date upon which the claim was submitted to the carrier by the provider.

6. The term “carrier” has been substituted for the term “insurer” for internal consistency in the regulation.

7. The effective date has been changed to November 1, 2005 to allow carriers sufficient time to make any necessary changes to their computer programs and internal operating procedures in order to carry out the provisions of the regulation.

The reasons given by the carriers to allow additional opportunities to request additional information from providers, to exclude dental coverage, to change the interest rate computation, to modify the three strike provision and the need to make allowances for discounts, co-insurance or deductibles are not sufficient to outweigh the public benefit and purpose of the regulation, namely to assure prompt payment of medical claims to the providers. Most of the carriers’ concerns relate to how they internally process claims. The purpose of this regulation is to benefit patients and providers, not to establish or to continue practices that tend to delay claims or cause providers to make repetitive requests for payment. While the carriers sought to include a provision that required that all filings be accurately completed as a condition of invoking the one request provision, I find that such a requirement would impose an unacceptable level of ambiguity in the regulation. The form, by its nature, requires certain information which is either correct or isn’t correct. The burden is on the carrier to inform the provider specifically of any corrections that are required under section 6.1.4 and issues of accuracy can be addressed at that stage.

While the carriers have expressed concerns that three violations of the regulation in a three year period is a rebuttable presumption that the carrier has engaged in a bad faith practice, the fact is that three violations is a rebuttable presumption. A rebuttable presumption does not constitute a finding and the regulation provides for no private right of action for a violation of the regulation. Given the carriers’ control over the claims payment process, public policy militates in favor of a strong incentive for regulatory compliance by the carriers on this issue.

Decision and Effective Date

A copy of the amended regulation and a clean copy of the final regulation are appended hereto. I hereby adopt Regulation 1310 as modified by the changes noted above to be effective on November 1, 2005.

Text and Citation

The text of the proposed amendments to Regulation 1310 last appeared in the Register of Regulations Vol. 8, Issue 8, pages 1077-80, February 1, 2003 and Vol. 8, Issue 12, pages 1657-60.

IT IS SO ORDERED this 7th day of July, 2005

Matthew Denn, Insurance Commissioner

1310 Standards for Prompt, Fair and Equitable Settlement of Claims for Health Care Services [Formerly Regulation 80]

1.0 Authority

This regulation is adopted by the Commissioner pursuant to 18 Del.C. §§311, 2304(16), and 2312. It is promulgated in accordance with 29 Del.C. Ch. 101.

7 DE Reg. 100 (7/1/03)

2.0 Definitions

2.1 For the purpose of this regulation, the following definitions shall apply:

“Carrier” or “Health Insurer” shall have the same meaning applied to it by 18 Del. C. 3343(a)(1).

“Clean Claim” shall mean a claim that has no defect or impropriety (including any lack of any required substantiating documentation) or particular circumstance requiring special treatment that substantially prevents timely payments from being made on the claim.

“Health Care Provider” shall mean any entity or individual licensed, certified or otherwise permitted by law pursuant to Titles 16 or 24 of the Delaware Code to provide health care services.

“Policyholder,” “Insured” or “Subscriber” shall be a person covered under a health insurance policy or a representative designated by such person and entitled to make claims on his or her behalf.

3.0 Scope

This regulation shall apply to all health insurers as defined in Section 2, and shall apply to all plans or policies of health insurance or benefits delivered or issued for delivery in this State and which cover residents of this State or employees of employers located in this State and their dependents. Exempted from the provisions of this regulation are policies of automobile and workers compensation insurance, hospital income and disability income insurance, Medicare supplement and long-term care insurance.

7 DE Reg. 100 (7/1/03)

4.0 Purpose

The purpose of this regulation is to ensure that health insurers pay claims to policyholders and health care providers in a timely manner. This regulation will establish standards for both determining promptness in settling claims and determining the existence of a general business practice for failing to promptly settle such claims under 18 Del. C. 2304(16).

7 DE Reg. 100 (7/1/03)

5.0 Prompt Payment of Claims

5.1 A health insurer shall pay the benefit due under a clean claim to a policyholder or covered person, or make payment to a health care provider no later than 30 calendar days after receipt of clean claim for services.

5.2 A claim is not a clean claim as defined in section 2.2 if any of the following circumstances exist:

5.2.1 Where the obligation of a health insurer to pay a claim or make a payment for health care services rendered is not reasonably clear due to a good faith dispute regarding the eligibility of a person for coverage, the liability of another insurer or corporation for all or part of a claim, the amount of the claim, the benefits covered under a contract or agreement, or the manner in which services were accessed or provided.

5.2.2 Where there exists a reasonable basis supported by specific information, available for review by the Department, that such claim was submitted fraudulently.

5.2.3 For claims properly disputed or litigated and subsequently paid.

5.3 In those cases covered by section 5.2.1, a health insurer shall pay all portions of a claim meeting the definition of clean claim in accordance with section 5.1. Additionally, a health insurer shall notify the policyholder in writing within 30 days of the receipt of the claim:

5.3.1 that such carrier is not obligated to pay the claim or make the medical payment, in whole or in part, stating the specific reasons why it is not liable; or

5.3.2 that additional information is needed and is being sought to determine liability to pay the claim or make the health care payment.

5.4 Upon receipt of the information required by section 5.3.2, or upon the administrative resolution of a dispute wherein the health insurer is deemed obligated to pay the benefit due under the claim or make medical payment, a health insurer shall make payment as required by section 5.1.

7 DE Reg. 100 (7/1/03)

6.0 General Business Practice

6.1 Within a 36 month period, three instances of a health insurer’s failure to pay a Claim or bill for services promptly, as defined in section 5 above, shall give rise to a rebuttable presumption that the insurer is in violation of 18 Del.C. 2304 (16)(f). In determining whether the presumption is rebutted the Commissioner may consider, among other things, whether the health insurer meets nationally recognized timeline standards for claims payments such as those applicable to the Medicare, Medicaid or Federal Employees Health Benefit Plan programs.

6.2 The 36 month time period established in section 6.1 shall be measured based upon the date the claims or bills became due. Each claim or bill, or portion of a claim or bill, pertaining to a single medical treatment or procedure provided to an individual policyholder that is processed in violation of this regulation shall constitute an “instance” as described in section 6.1.

7 DE Reg. 100 (7/1/03)

7.0 Penalties

In addition to the imposition of penalties in accordance with 18 Del.C. 2312(b), the Commissioner may order the health insurer to pay to the health care provider or claimant, in full settlement of the claim or bill for health care services, the amount of the claim or bill plus interest at the maximum rate allowable to lenders under 6 Del.C. 2301(a). Such interest shall be computed from the date the claim or bill for services first became due.

7 DE Reg. 100 (7/1/03)

8.0 Causes of Action

This regulation shall not create a cause of action for any person or entity, other than the Delaware Insurance Commissioner, against a health insurer or its representative based upon a violation of 18 Del. C. 2304 (16).

7 DE Reg. 100 (7/1/03)

9.0 Separability

If any provision of this regulation or the application of any such provision to any person or circumstances, shall be held invalid, the remainder of such provisions, and the application of such provision to any person or circumstance other than those as to which it is held invalid, shall not be affected.

7 DE Reg. 100 (7/1/03)

10.0 Effective Date

This regulation, as amended, shall become effective on August 1, 2003.

7 DE Reg. 100 (7/1/03)

2.0 Scope

This regulation shall apply to all carriers as defined herein. Exempted from the provisions of this regulation are policies of insurance that provide coverage for accident-only, credit, Medicaid plans, Medicare supplement plans, long-term care or disability income insurance, coverage issued as a supplement to liability insurance, worker's compensation or similar insurance or automobile medical payment insurance.

3.0 Definitions

The following words and terms, when used in this regulation, shall have the following meaning unless the context clearly indicates otherwise:

“Carrier” means any entity that provides health insurance in this State. For the purposes of this regulation, carrier includes a health insurance company, health service corporation, health maintenance organization and any other entity providing a plan of health insurance or health benefits subject to state insurance regulation. "Carrier" also includes any 3rd-party administrator or other entity that adjusts, administers or settles claims in connection with health benefit plans.

“Days” means calendar days.

“Institutional Provider” means a hospital, nursing home, or any other medical or health-related service facility caring for the sick or injured or providing care or other coverage which may be provided in a health insurance policy. An entity must be a Provider under this Regulation in order to be an Institutional Provider.

“Policyholder,” “Insured,” or “Subscriber” means a person covered under a health insurance policy or a representative (other than a provider) designated by such person and entitled to make claims on his behalf.

“Provider” means any entity or individual licensed, certified, or otherwise permitted by law pursuant to Titles 16 or 24 of the Delaware Code to provide health care services, irrespective of whether the entity or the individual is a participating provider pursuant to a written agreement with the carrier. When used alone, the term “provider” shall include individual providers and institutional providers.

4.0 Clean Claim Defined

4.1 A nonelectronic claim by a provider, other than an institutional provider, is a clean claim if the claim is submitted using the Centers for Medicare and Medicaid Services (CMS) Form 1500 or, if approved by the Commissioner or CMS, a successor to that form. Data for all relevant fields must be provided in the format called for by the form in order for the claim to constitute a clean claim.

4.2 A nonelectronic claim submitted by an institutional provider is a clean claim if the claim is submitted using the CMS Form UB-92, or, if approved by the Commissioner or CMS, a successor to that form. Data for all relevant fields must be provided in the format called for by the form in order for the claim to constitute a clean claim.

4.3 An electronic claim by a provider, including an institutional provider, is a clean claim if the claim is submitted using the appropriate ASC X12N 837 format in compliance with the standards specified at 45 CFR §162.1102.

4.4 If allowed by federal law, a carrier and provider may agree by contract to use fewer data elements than are required by the relevant form or format.

4.5 An otherwise clean claim submitted by a provider that includes additional fields, data elements, or other information not required by this Regulation is considered to be a clean claim for the purposes of this Regulation.

4.6 A claim by a policyholder that is submitted in the carrier’s standard form using information called for by said forms, with all of the required fields completed, is a clean claim.

4.7 Any claim submitted by a provider or policyholder that includes an unspecified, unclassified or miscellaneous code or data element to constitute a clean claim shall also include appropriate supporting documentation or narrative which explains the unspecified, unclassified or miscellaneous code and describes the diagnosis and treatment or service rendered.

4.8 A claim for the same health care service provided to a particular individual on a particular date of service that was included in a previously submitted claim is a duplicate claim and does not constitute a clean claim.

5.0 Means of Submission of Clean Claim

5.1 A provider or policyholder may, as appropriate, make delivery of a claim to a carrier as follows:

5.1.1 mail a claim by United States mail, first class;

5.1.2 submit a claim by delivery service;

5.1.3 submit a claim electronically;

5.1.4 fax a claim; or

5.1.5 hand delivery of a claim.

6.0 Processing of Clean Claim

6.1 No more than 30 days after receipt of a clean claim from a provider or policyholder, a carrier shall take one of the following four actions:

6.1.1 if the entire claim is deemed payable, pay the total allowed amount of the claim;

6.1.2 if a portion of the claim is deemed payable, pay the allowable portion of the claim that is deemed payable and specifically notify the provider or policyholder in writing why the remaining portion of the claim will not be paid;

6.1.3 if the entire claim is deemed not payable, specifically notify the provider or policyholder in writing why the claim will not be paid;

6.1.4 if the carrier needs additional information from a provider or policyholder who is submitting the claim to determine the propriety of payment of a claim, the carrier shall request in writing that the provider or policyholder provide documentation that is relevant and necessary for clarification of the claim.

6.2 The request pursuant to section 6.1.4 must describe with specificity the clinical information requested and relate only to information the carrier can demonstrate is specific to the claim or the claim’s related episode of care. A provider is not required to provide information that is not contained in, or is not in the process of being incorporated into, the patient’s medical or billing record maintained by the provider whose services are the subject of inquiry. A carrier may make only one request under this subsection in connection with a claim. A carrier who requests information under this subsection shall take action under sections 6.1.[2 1] through 6.1.3 within 15 days of receiving properly requested information.

6.3 A carrier shall be limited to one request on the same claim beyond that provided for in section 6.2 as may be necessary to:

6.3.1 administer a coordination of benefits provision; or

6.3.2 determine whether a claim is a duplicate.

7.0 Unfair Practice

Within a 36 month period, three instances of a carrier’s failure to comply with Section 6 of this Regulation shall give rise to a rebuttable presumption that the carrier has engaged in an unfair practice in violation of 18 Del.C. §2304.

8.0 Interest

The Commissioner may order a carrier found to have violated Section 6 of this Regulation to pay to a provider or policyholder the amount of the claim or bill plus interest at the maximum rate allowable to lenders under Delaware law. Such interest shall be computed from the date the claim or bill for services was first required to be paid. The remedy permitted by this Section is in addition to, and does not supplant, any other remedies available to the Commissioner or the provider.

9.0 Waiver

The provisions of this regulation may not be waived, voided, or nullified by contract.

10.0 Causes of Action

This regulation shall not create a private cause of action for any person or entity, other than the Delaware Insurance Commissioner, against a carrier or its representative based upon a violation of 18 Del.C. §2304(16).

11.0 Separability

If any provision of this regulation, or the application of any such provision to any person or circumstances, shall be held invalid, the remainder of such provisions, and the application of such provisions to any person or circumstance other than those as to which it is held invalid, shall not be affected.

12.0 Effective Date

This regulation, as amended shall become effective for all claims submitted for payment on or after November 1, 2005. All claims for payment submitted for payment prior to November 1, 2005 shall be governed by this regulation amended effective August 1, 2003.

9 DE Reg. 240 (08/01/05) (Final)