Understanding the Texas Prompt Pay Act

Texas health insurance companies and medical providers are most likely familiar with the Texas Prompt Pay Act.

The act, which was enacted in 2003, provides rules and deadlines surrounding claims paid by health care plans and providers. The purpose of the act is to make sure that claims are paid accurately and on time.

In the years since its passage, the act has apparently largely achieved its intended goal: Complaints about prompt payments have decreased significantly. Most health insurance companies and providers have made, and continue to make, good faith efforts to comply with the act.

What does the act do?

The act sets payment deadlines for payments to be made to providers. There are separate penalties assessed for each claim not paid on time.

Penalties are based on two things. One is how late the claim is paid and the other is the difference between the billed charges and the amount that the health care plan and provider agreed upon. It is easy to see how penalties can quickly add up and become substantial.

Texas is known for having one of the strictest prompt pay acts in the country.

The high penalties for non-compliance

Companies face major punitive penalties for non-compliance. Things such as missing a claim deadline by even one day can cost a health insurance company a great deal of money.

Texas is one of the only states where penalties are based on billed charges, which are the charges set by hospitals or providers. The problem with billed charges is that they vary widely based on the hospital.

If a hospital has an extremely high billed charge, this can substantially increase a penalty. Therefore, it is important for health insurance companies and medical providers to understand the act and do everything to ensure compliance.

Experienced health law attorneys can help with proactively taking steps to abide by the act and, if a violation occurs, provide guidance on minimizing the negative consequences.